Pension

Loss of earnings needn't pose a risk to the family

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Alongside unemployment, there are other reasons for loss of earnings - for example. Sickness or accident. If a spouse suffers a loss of earnings, the whole family is usually affected. What does this mean for the family members and what can be done?

What does it mean for the family if a spouse (principal earner) becomes unemployed due to occupational disability?

Pierre Morel: Whether the partners are married or not is not critical. The statutory coverage is the same in both cases: In Switzerland, Pillars 1 and 2 are designed to cover approximately 60 percent of the earnings loss. If the couple has joint children, they may also be entitled to a disabled person's child's pension. If a disability ensues, the benefits very much depend on the employer's Pillar 2 (BVG) solution. If the latter covers only the legally prescribed Pillar 2 minimum, there will be a significant loss of income – and thus a painful reduction in the family budget.

What benefits can be expected if a partner dies?

In cases of death, a different law applies: Here, the legislator differentiates between marriage and concubinage. A widow's or widower's pension under Pillar 1 is only paid if the couple was married. And even here, there are still restrictions: The surviving spouse is only entitled to a pension if he/she has to take care of at least one dependent child, or was at least 45 years old on becoming widowed and the partners were married for at least 5 years. But co-habiting partners are not left entirely without benefits: If the employer was notified about the co-habiting partner, he/she may be entitled to payments from Pillar 2.

In the event of a divorce: Is the surviving partner entitled to a widow's or widower's pension?

In certain cases, the divorced partner is indeed entitled to a widow's or widower's pension. The conditions for entitlement to these benefits differ between Pillar 1 (AHV) and Pillar 2 (BVG). That is why it is very important to carry out a personal pension analysis in the event of a change of family status. Your pension advisor can assess what you / your children are entitled to and how you can close any pension gaps.

How are the children of a decedent protected?

For children there is an orphan's pension entitlement under Pillars 1 and 2. This entitlement applies until the child reaches the age of majority, i.e. up to the age of 18. If the young person is still in education/training, the payment continues up to a maximum age of 25. This applies regardless of the pension entitlement of the surviving parent. In the tragic event that both parents die, there is an entitlement to two orphans' pensions.

What financial risks can still arise that you should cover through private pension plans?

As already mentioned, in the event of disability, you can only expect to be paid 60 percent of your last salary. For homeowners, this income may no longer be sufficient to cover ongoing living expenses. An annuity insurance for disability as part of your private pension provision would generate an income that continues to cover these items in your budget while still meeting mortgage guidelines. A private pension in the event of death can also be important for dependants. For example, there are pension products that ensure that the children can continue their studies and that other financial obligations can be met.

  • Teaser Image
    Pierre Morel

    is Head of the General Agency for Pensions and Assets in Lausanne. He answers our questions on the topic of retirement provision and gives helpful tips on how to best protect your family.

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Pillars 3a and 3b. What do they cover?

  • As well as the state pension (Pillar 1) and the occupational pension (Pillar 2), private pension provision is available (Pillar 3). It is voluntary and is sub-divided into Pillar 3a and Pillar 3b.
  • The tied Pillar 3a pension offers long-term retirement provision and attractive tax benefits of up to CHF 2,000 per year. Furthermore, the payout on maturity is taxed not as regular income but at a special, lower rate.
  • Every year, an employee can voluntarily pay up to CHF 6,883 (current maximum) into Pillar 3a.
  • Pillar 3a is designed to enable the maintenance of one's accustomed living standard in old age and acts a safeguard in case of occupational disability.
  • Flexible pension provision under Pillar 3b has no legally prescribed term or conditions relating to deposits, availability and benefits. Tax relief is granted if certain requirements are met.
  • The amount that can be paid into Pillar 3b is unrestricted. The payouts can also be chosen freely. Beneficiaries in the event of death can be chosen freely and can be changed at will.
  • Pillar 3b can be used to close gaps in pension provision, or as the basis for safe capital accumulation 

 

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