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Created on 29.10.2020

Retirement planning for women: how to avoid shortfalls

Even though women have a higher life expectancy than men, their retirement provision is often worse. Follow these steps to maintain your accustomed living standards in retirement.

An endless amount of free time and at long last an opportunity to fulfil our long-cherished wishes and dreams – this is what we all hope our old age will be like. But for women, retirement can be challenging. Part-time jobs, breaks to have babies and lower salaries mean that many women accumulate less retirement capital than men. Added to this is the fact that women have a higher life expectancy than men.

As a result, the three pillars of the Swiss retirement provision system – AHV, pension fund and private retirement provision – often do not provide enough coverage for women to enjoy a care-free life in retirement. But that does not have to be the case. Take the following steps to guarantee your financial security in old age and enjoy your retirement without any financial concerns.

Start when you are young

Plan for your retirement as early as possible by starting to build up your pension capital when you are young. To do so, you should make use of all three pillars, i.e. the AHV, your occupational pension fund and a private retirement solution. As a young person, you can already benefit from the latter in particular because pillar 3a deposits are fully tax-deductible. Even small deposits are worthwhile for young people, and as an employee with an occupational pension fund, you can pay in a maximum of CHF 6,826 per year (as of 2020). This amount changes every few years so check the current situation each year.

Would you like to get more out of your money with your private 3a retirement planning? Then you should consider investing in a retirement fund. An investment in a retirement fund offers you the opportunity (along with the corresponding risks) to get more out of your pension capital instead of leaving it in a low-interest pillar retirement savings account 3a or a vested benefits account. The tax advantages continue to apply and you can deduct whatever you pay in from your taxable income at the end of the year. Want to save tax and benefit from the opportunities offered by the capital markets? You can! The same is true here: the earlier you start, the better. This means that quite a lot of capital can be accrued over a long-term investment horizon.

Find out more about the differences between a retirement savings account and a retirement fund in our article “How to get more from your retirement planning”.

The closer you get to retirement, the more specific your retirement planning should be. The best thing to do is seek advice from an expert, who will be able to assist you on your journey. Get an overview of your asset and retirement planning situation together.

Close any gaps in your AHV contributions

As more women reduce their working hours or have extended breaks from work than men, gaps can arise in their AHV coverage. The result is that their lifelong AHV pension is reduced and they have less money at their disposal in retirement. For that reason, it is essential to avoid these shortfalls. To put it specifically, gaps will arise in your AHV coverage for every year that you fail to pay in the minimum contribution of CHF 496. Retroactive payment is possible up to five years in the past. To be on the safe side and maintain an overview, it is best to order a free statement for your individual account every four to five years and make payments for any shortfalls that have occurred. You can request a statement on The link will open in a new window the website of the AHV compensation fund that manages your account.

Focus on private retirement planning

Building up your private retirement provision is an important way of increasing your retirement capital, especially if your pillar 2 contributions are relatively low. To pay into pillar 3a, you have to have an income that is subject to AHV. You should therefore begin as early as possible and regularly increase the amount you pay in as your income goes up. As already mentioned above, you can deduct everything you pay in up to the maximum amount from your taxable income in your tax return. Your savings are therefore two-fold: you pay less tax and save for your retirement at the same time. Alongside a retirement savings account 3a, you can also pay into a life insurance policy or a retirement fund, either as a supplement or in full.

Invest your retirement assets? That’s right – nowadays you can combine your retirement capital with attractive solutions. Thanks to retirement funds, you can benefit from the opportunities presented by the capital markets and thus get more out of your capital over the long term. Read more about retirement planning with retirement funds in our article “Retirement planning – your first step to becoming an investor”.

In contrast to fixed pension plans (pillar 3a), in which you give up your flexibility in exchange for tax advantages, you can use a flexible pillar 3b retirement planning solution instead. This option gives you more freedom than fixed pillar 3a products, but deposits are not tax-deductible. So if you maintain a securities custody account or a savings account with your bank, both are already part of your pillar 3b provision.

Increase your second pillar coverage

The term “second pillar” refers to occupational pension provision, which supplements AHV/IV benefits and is income-dependent. If you are not employed, then you are not insured under the second pillar. If you stop working temporarily or permanently, your pension fund capital will be deposited in what is known as a vested benefits account. As interest rates on vested benefits accounts have fallen to very low levels in recent years, it may be advisable to invest all or part of your vested benefits assets in retirement funds. Here, too, an investment in a retirement fund will enable you to benefit from a higher return on average over the long term than you would get with a standard vested benefits account. If you choose this option, however, you must be prepared to accept price fluctuations and, depending on market performance, bear the risk of loss.

Do you work but earn a low salary, or is your job part-time? If the answer is “Yes”, then the coordination deduction will put you at a disadvantage. For women, this often results in gaps in their occupational pension coverage – and leaves them with little for their retirement. You can close the gap in your pension fund by purchasing additional second pillar benefits. This option depends on the balance you have accumulated and the provisions of your pension fund.

Another way of increasing your assets in your pension fund is to continue working beyond the age of 64.

The safest option is to ask yourself the following question at an early stage: If I work part-time or take a complete break from work in order to devote time to my child and my family, what implications will this have? Find out more about occupational retirement planning in our article “Pension fund – what you need to know”.

Start early to enjoy peace of mind about the future

Long breaks from work and part-time jobs – for instance in order to look after a child – can have quite an impact on your old-age pension. As a woman, it is therefore vital to begin taking care of your financial security in your old age at an early stage. That way, there will be nothing to stop you from enjoying a care-free life in retirement.

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