Identify and close pension gap

Finally retired! But the long-awaited freedom after retirement is often overshadowed by financial worries, such as is there enough money to live on? This is how a pension gap can be calculated and closed.

Realize your long-held dreams, travel to faraway countries, have more time for hobbies, friends and family: many Swiss people look forward to a carefree time in financial security after they retire. But a different picture often emerges: pensions from OASI and pension funds are hardly enough to maintain the standard of living you’re accustomed to in retirement. Even if Pillar 3 is included, a pension gap often arises. To avoid financial bottlenecks in old age, you should consider your own retirement provision at an early stage and take targeted countermeasures. In this guide, you will find out how to identify, calculate and, above all, avoid your (potential) pension gap at an early stage. This will lay the foundation for a carefree future after you retire.

What is a pension gap?

A pension gap refers to the difference between your income in retirement and the amount you actually need to live on. Your income after retirement comes from the three pillars of retirement provision – state retirement provision (OASI), occupational benefits insurance (pension fund) and private pensions (Pillar 3). If, despite these three pillars, you don’t have enough money to cover your needs in retirement, you have a pension gap.  

In order to prevent a gap, it is important to understand how it occurs. In general, a pension gap arises if you planned to have too great a financial need and/or were unable to provide enough for retirement. The latter may be due, for example, to the following reasons: 

• Missing contribution years in OASI or pension fund, e.g. due to long trips or unpaid care work
• Lower salaries or part-time work, as a result of which less money was paid into OASI and your pension fund
• No additional Pillar 3, for example, if you have spent your available money instead of saving as a financial cushion
  

How to calculate your pension gap 

 Identifying any pension gap at an early stage is the first step to avoiding financial struggles in old age. You can work out your pension gap by calculating your expected annual pensions from OASI and your pension fund as well as the savings from your private pension. You can now compare the total amount with your estimated financial needs in retirement. To do so, proceed as follows: 

1. Final annual income
   Write down your (projected) gross annual income before you retire. This serves as the basis for the calculation. 
2. Projected OASI pension
   Request a statement from the OASI compensation office or use the OASI pension calculator to estimate your projected pension. 
3. Projected pension from your pension fund
   Study the personal pension certificate that your pension fund issues annually. 
4. Total income
   Calculate the OASI pension and the PF pension together – this shows your expected income from Pillars 1 and 2. 
5. Financial need in retirement
   Follow the rule of thumb that you need around 80 to 90 percent of your final annual income to maintain your standard of living. 
6. Difference (pension requirement)
   Deduct the expected pension income from Pillars 1 and 2 from your financial requirement in retirement to arrive at your pension requirement. 
7. Duration of pension
   Estimate how many years you can expect to be retired and multiply the pension requirement by the number of years. This gives you the total pension requirement for your pension.
8. Private pension
   If you have saved assets in Pillar 3a or 3b, you can deduct them from your total pension requirement. This is how you work out your actual pension gap.

Sample calculation of your pension gap

Many people underestimate how large their pension gap will be. To give you a better idea of how a pension gap is calculated, the following example will help: 

• Final income before retirement: CHF 90,720 per year 
  
• Income from Pillar 1 (OASI pension): CHF 30,240 per year 
  
• Income from Pillar 2 (pension fund): CHF 27,820 per year 
  
• Total retirement pension (Pillars 1 and 2 combined): CHF 58,060 per year 
  

Pensions from OASI and your pension fund thus cover 64 percent of your final income. However, the recommended annual replacement income in retirement is at least 80 percent of your final income, or CHF 72,576. A pension requirement of CHF 14,516 per year arises. If Pillar 3 is now also included, the actual pension gap can be determined.

How to close your pension gap

As soon as you know what your pension gap is, it’s worth taking action early. The sooner you take measures, the more targeted you can increase your retirement income. Forward-looking financial planning helps you to explore various options – first and foremost, how you can increase your retirement benefits. But alternative scenarios such as gradual retirement or continuing to work in old age can also be considered.

You should also include your mortgage in your considerations, such as what impact will it have on your liquidity over the long term? And how can tax advantages be used, such as a lump sum withdrawal, pension fund purchases, or staggered retirement?

Close gaps in Pillar 1

To avoid a gap in your Pillar 1, you should make sure that you pay OASI contributions without any gaps. For instance, if you only work part-time or not at all because of childcare, you are entitled to education and care credits. Make sure that these are credited to you. Contribution gaps lead to a lifelong reduction in your retirement pension. However, you can also close such gaps by, for example:

• Paying contributions for previous years: it is possible to pay any missing contributions for the last five years retrospectively. Contribution gaps that date back more than five years can no longer be closed.
  
• Having adolescent years taken into account: people who are gainfully employed pay OASI contributions from January 1 following their 17th birthday, while those who are not gainfully employed are only required to pay contributions from January 1 following their 20th birthday. The intervening years (18 to 20) are referred to as “adolescent years.” If you have made contributions during these years, these can be used to make up contribution gaps at a later date.
  

Our tip: in order to identify your contribution gaps, it is advisable to request a statement of your individual OASI account on a regular basis. This way, you can keep track of your contribution years and act in good time if necessary.

Close gaps in Pillar 2

If there is a contribution gap in Pillar 2, you also have a number of options for timely countermeasures. For example, you can

• also pay into the pension fund: you can voluntarily purchase pension fund benefits. This means that you pay in additional contributions to increase your retirement benefits. The maximum purchase amount depends on factors such as your age or income. You will find your personal maximum purchase amount in your pension certificate under “Maximum possible purchase amount”.
• choose another savings plan: some pension funds offer different savings plans. By choosing a higher savings plan, you increase your monthly contributions and thus your retirement assets, which leads to higher retirement benefits. It’s best to talk to your employer to find out if your pension plan offers such an option.

Closing gaps in Pillar 3

Pillar 3 plays a key role in avoiding a pension gap. To close any gaps, we recommend the following:

• Pay the maximum annual amount into Pillar 3a: for gainfully employed persons with a pension fund, this amount is currently CHF 7,258 per year. Self-employed persons or persons without a pension fund but with OASI-relevant income can pay in up to 20 percent of their income and a maximum of CHF 36,288 annually (as of 2025). These deposits are attractive because they can be deducted from taxable income, which significantly reduces the tax burden. In addition, you benefit from preferential taxation when the credit balance is paid out.
• Use flexible pension provision in Pillar 3b: a higher savings rate in Pillar 3b helps you accumulate additional capital for retirement provision. Since this form of pension provision is not tied to fixed payment limits, you can set aside individual amounts depending on your financial situation. This can be a useful addition, especially for people who want to save more flexibly or who have already exhausted the maximum amount in Pillar 3a. 
• 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 pension solutions such as the SmartFlex pension plan can be fully adapted to your own 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.

Frequently asked questions about pension gaps