Prevent pension shortfalls when working part-time
Part-time work can result in a significantly lower old-age pension. If you make proper provision early on, you will benefit when you retire. Our tips will help you do that.
17.08.2023
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1. Avoid OASI contribution shortfalls while working part-time
Part-time work usually entails a reduction in OASI benefits. Only people with no contribution gaps and an average annual income of 88,200 francs receive the maximum monthly pension.
The maximum pension is 2,450 francs per month. Couples receive a maximum of 3,675 francs. The minimum OASI pension is 1,225 francs. Note: each missing contribution year reduces the OASI old-age pension by about 2.3%.
Comparis tips
Always pay the annual minimum OASI contribution of 514 francs. This way, you'll avoid a reduced pension.
Ask the compensation office for a statement of your personal OASI account. Do you see a contribution gap? You may close this gap by making a retrospective payment within five years of its occurrence.
Are you raising children or looking after relatives in need of long-term care? Part-time employees can have their parenting or care credits credited to the OASI.
2. Company pension: check the coordination deduction
Part-time employees are often severely disadvantaged with regard to their occupational pension. For a start, an employer only has to enrol employees in its pension fund if their annual salary exceeds 22,050 francs. Moreover, the coordination deduction of 25,725 francs means the pension fund benefits fall disproportionately for lower employment percentages.
The minimum insured BVG/LPP wage is fixed by law at 3,675 francs. This is the minimum amount that must be credited to you (irrespective of the amount of the coordination deduction), provided that you reach the threshold of 22,050 francs.
Comparis tips
Choose an employer with a pension fund that allows a reduced coordination deduction. Large pension funds often apply a coordination deduction proportional to the employment percentage. For a 50% employment percentage, there is a coordination deduction of 11,025 francs.
Try to use one pension fund for all sources of income. That way, the coordination deduction is only applied once. If the accumulated wages are above the minimum contribution, you can insure your total income voluntarily.
If this is not possible, join the Substitute Occupational Benefit Institution. Granted, their benefits are not attractive, but it's still better than foregoing the employer's pension contributions.
3. Make up pension shortfalls with pillar 3a
You can make up any pension shortfalls by paying into pillar 3a. If you earn income subject to OASI contributions, you are eligible to pay into pillar 3a. Note: the amount you can pay in is limited and depends on your current insured salary. A purchase is usually no longer possible following a reduction in employment percentage.
The maximum annual amount depends on whether you are affiliated to a pension fund: part-time workers insured with a pension fund can pay in up to 7,056 francs per year. People who are not affiliated to a pension fund, on the other hand, can pay in up to 20% of their net earned income, up to a maximum of 35,280 francs.
Comparis tips
Start paying into pillar 3 when you are young. Working people without a company pension should contribute significantly to a restricted pillar 3 pension plan.
In addition to the classic interest-paying pillar 3a accounts, there are a number of other 3a pension products: pillar 3a funds, securities accounts or digital pension solutions. We recommend taking advice from an independent pension expert.
Remember: with this type of pension, the employer does not make any contributions. However, you can deduct the amounts paid into pillar 3a from your taxable income. You may withdraw your pillar 3a savings no earlier than five years before statutory retirement age. An early withdrawal of pillar 3a funds is only allowed in certain exceptional cases.
This article was first published on 14.05.2019
