Gender pension gap: pension shortfalls among women
Women are more often affected by poverty in old age than men. Comparis explains why and offers precautionary tips for women.
05.07.2024
iStock/fizkes
1. The higher proportion of women working part-time affects pensions
Women often have lower pensions than men. This phenomenon is also known as the “gender pension gap” and is a consequence of the traditional division of labour. This is because women are less likely to work than men (not available in English).
In addition, around 60% of women in employment work less than 90%. Among men, only about 20% work part-time.
Although part-time work is better for pension provision than unemployment, the pension situation for part-time workers is usually inadequate. The main factors are the entry threshold and the high coordination deduction with the occupational pension. This means that people who work part-time often have to apply for supplementary benefits in old age.
The entry threshold means that only annual incomes of 22’680 francs or more must be included in occupational pensions. In addition, only the salary minus the coordination deduction of 26,460 francs is insured.
2. Pensions for women: disadvantage due to lower salaries
In Switzerland, women earn an average of 18% less than men. According to the Swiss Federal Office for Gender Equality (FOGE), only around 50% of this income difference can be justified. Known factors include education and industry. There is no conclusive explanation for the other 45% of women’s lower incomes.
Generally speaking, those who earn less are able to build up less pension capital through mandatory pensions. An additional private pension solution is therefore important to prevent pension shortfalls.
3. Consequences of separation for old-age pensions
In the event of a separation, the assets generated during the marriage are usually divided. This also includes occupational pensions and pillar 3a funds. Therefore, after a divorce, funds are often not sufficient to maintain the usual standard of living in retirement.
The separation of unmarried couples is subject to barely any regulation. Cohabiting partners must actively protect themselves in the event of separation. This is important, for example, if you have reduced your workload in order to care for your children. A cohabitation contract can provide clarity about who has the right to what.
4. How do I protect myself financially?
To ensure poverty does not occur in old age, you should bear the following in mind:
Find out about your pension as early as possible. Start building up your pension capital when you are young.
Here it is important to combine all three pillars (OASI, occupational pension and voluntary pension). You should start making detailed plans for retirement and seek expert advice when you reach the age of 40.
Do you fall short of the annual minimum OASI contribution of 514 francs? If so, you can pay any missing contributions within five years. After all, for each missing contribution year, the OASI pension is reduced by 2.3%.
Pay into your pillar 3a on a regular basis. This is one of the most important ways to address pension shortfalls. Start as early as possible, even if you can only make low deposits. As a result, you’ll benefit from the compound interest effect.
Good to know: if you earn income subject to OASI contributions, you are eligible to pay into pillar 3a.
Consider the long-term effects of part-time employment. For example, you could increase your working hours to reach the minimum income for the occupational pension. You can also extend how long you work beyond the age of 65.
Possible shortfalls in the occupational pension can be compensated by what is known as a buy-in. In particular, women with reduced or interrupted employment can often pay relatively high sums to buy into the second pillar.
5. Women’s pensions after part-time employment: minimum income thanks to supplementary benefits
Supplementary benefits help you if you don’t reach the minimum subsistence level with your pension. The subsistence level varies from person to person.
For supplementary benefits, the assets of an individual may not exceed 100,000 francs. For married couples, the limit is 200,000 francs.
Do you need help planning your pension? Our brokerage partner Optimatis and its contracting companies will be happy to help you.
This article was first published on 18.01.2023
