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More and more people are working part-time in Switzerland. But working less has an outsized impact on retirement savings. If you don’t actively manage your retirement, you could end up with a massive gap. For this reason, individual retirement accounts are becoming more and more important.
Until recently it was primarily mothers who went from full to part-time. Today that’s changed. Besides childcare, there are many reasons why people work part-time, such as a time-intensive hobby, doing volunteer work, developing a side gig into a more serious venture or just maintaining a healthy work-life balance. There has likely never been a time when so many people have had the privilege of planning their days however they like.
But as attractive as part-time work is, it also comes with disadvantages. Particularly where retirement savings are concerned. The Swiss pension system has developed over time, so it is designed for full-time employees. Your part-time salary might be enough for you to live off of today. But what about your financial future? Likely the contributions you are making today will be too little for you to preserve your present standard of living when you get older. The best thing to do is to take a moment now to check how much your pension will be after you retire. This way you still have enough time to close any potential retirement gaps. One way to do this is to put aside additional retirement savings in Pillar 3 (Pillar 3a or Pillar 3b).
Part-time work has become very popular in Switzerland. 39% of the working population works part-time. This puts Switzerland in second place only behind Holland (51%) for the most number of people working part-time jobs. Three times more women work part-time than men, and six out of ten women work part-time (source: Swiss Federal Statistical Office, 2022). Mothers especially appreciate working part-time because a full-time job is often incompatible with taking care of a family.
If you work less, you earn less, so you pay in less to OASI (state pension fund = Pillar 1) and to the OPA pension fund (occupational benefits plan = Pillar 2). This will negatively impact your retirement later on. For this reason, the Swiss Conference of Gender Equality Delegates recommends that women do not work less than 70% for a significant period of time.
And the gaps grow even larger when women take career breaks, possibly to spend a year or two at home to devote themselves entirely to their children. Gaps also happen when people take a sabbatical to travel the world. These lost years of contributions will considerably reduce your retirement savings.
All employed persons in Switzerland have to pay into OASI, and most must pay into a pension fund. When you retire, this money will be paid out to you in the form of a pension. The size of the pension depends on how much you paid in while you were working. Together, the state pension and occupational benefits plan should ensure that you can maintain the standard of living you are accustomed to when you retire. For this, you will need 80% to 90% of your former income. However, nowadays OASI and OPA pensions only cover about 60% of your last salary. And in many cases much less than this. This difference between the retirement savings that are paid out and the actual cost of living is called a retirement gap.
If you want to receive the maximum pension of CHF 2,450 per month, then you will need to earn an average of CHF 88,200 a year. Many people working part-time fail to achieve this level of income. And retirement gaps have even more drastic consequences. Every missing contribution year leads to a pension cut of 2.3%. In order to avoid this, you will have to pay in the minimum OASI contribution of (currently) CHF 514 a year when you stop working. You can request a statement for your personal OASI account from the compensation fund. You can make up for these lost contributions within five years once you start paying in the minimum contribution.
In accordance with OPA (Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans), if you earn more than CHF 22,050 a year, your employer must enroll you in a pension fund. If you make less than this, you are not required to be enrolled in Pillar 2. For part-time employees, the coordination deduction presents an additional disadvantage.
Tip 1: Some employers have amended their pension fund rules to lower the coordination deduction for part-time employees. If your employer has not done this, ask if the coordination deduction can be adjusted for your salary. When you start a new job, ask your new employer about this.
Tip 2: If you have two part-time jobs, you may have to pay the coordination deduction twice. Ask whether you can have both salaries insured in a single pension fund so that the coordination deduction is only charged once.
Pay into the Pillar 3 account. Targeted saving lets you close any gaps you have in your retirement. If you want to save long term and also save on taxes, then the Pillar 3a restricted retirement account is a good choice for you. If you are enrolled in a pension fund, then you can pay in as much as CHF 7,056 a year (as of 2024). If you are not insured under OPA, then you can pay into Pillar 3b.
Start early. The earlier you start to save, the better. Paying in small, manageable amounts over a long period of time really adds up. This is how you build a solid retirement and also achieve your personal savings goals.
Invest profitably. Put your money to work for you by investing in funds or equities, for instance. Broad diversification and a long investment horizon minimize the risks. Our tip: Pillar 3a retirement solutions such as SmartFlex let you invest according to your needs. You determine what ratio of security to return opportunities suit you best. And you decide what to invest in – such as only in sustainable companies or only in Swiss companies.
Anina Sabourdy is an Online Editor at AXA. Her focus is on current health issues. But she also delves into other areas.
