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How else can I provide for the future?

Have you ever considered buying into your pension fund? Or checking for missing contribution years in your AHV account? Old-age pension provision is a broad topic. If you are familiar with the different options and potential obstacles, you can benefit in the best way possible.

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Have you had a baby in the last few years? Or just been divorced? Events like these can have a direct impact on your pension planning. Be vigilant so that you can make full use of your pension provision options.

Qualifying for a full AHV pension

 

You will only receive the full AHV pension if you have contributed over the full “contribution period”. That means you must pay AHV contributions from your 20th birthday until you reach the statutory retirement age.

 

 

  • If you are employed, your employer will pay the AHV contributions. These contributions comprise an employer’s share and an employee’s share. Your employer deducts your social insurance contributions, such as IV and AHV, directly from your salary. Then the employer transfers both your share and their own share of the contributions to the AHV compensation office.
  • If you are self-employed, you must register with the AHV compensation office and pay the contributions yourself. If you’re not employed, you can pay your own AHV contributions yourself. An exception is married couples: if one of the spouses does not work, his or her AHV contribution is covered by the partner’s AHV contribution.
  • If you are not gainfully employed, you are still required to pay AHV contributions. Your contribution may already be covered by your spouse’s AHV contribution.

 

If you miss contribution years

 

If you do not pay AHV contributions for one or more years, your pension will be reduced by 2.3% for each missing year. These missing contribution years can arise if you live abroad for a period of time for work. During this period, you would have to pay your AHV contributions yourself because you are no longer gainfully employed in Switzerland. Another reason for missing contribution years may be divorce: if you are not gainfully employed, you will no longer be covered by your spouse’s AHV contributions. In this case, you must pay the AHV contributions yourself after the divorce. 

 

A contribution year is deemed to have been paid if you have paid in the minimum amount of CHF 482 (as at 2019). This is the amount due on an annual income of approximately CHF 4,500.

 

 

Identifying and paying in missing contribution years

 

The AHV compensation office maintains an individual account (IK) in your name. Your income and the resulting AHV contributions are recorded there. By looking at this account you can see whether there are any contribution years missing in your past. If this is the case, you can pay the outstanding amounts retrospectively. Late payment is voluntary and applies retrospectively for the last five years. 

 

 

Tip: check your individual account (IK) as soon as you can. If you only discover missing contribution years once you retire, it’s too late to take corrective action. Your pension will be reduced accordingly. You can order the statement for your individual AHV account by submitting a form. The form is available at www.ahv-iv.ch. If you discover any gaps in your account, contact your AHV compensation office.

 

 

Advantages of paying into your pension fund

 

Your occupational pension, i.e. your pension fund (PF), is the second pillar in your pension provision. If your annual salary exceeds a certain threshold, you are automatically insured as an employee. Your employer is responsible for this pension. Your pension certificate will show how much money is in your pension fund and how big your pension will be. You’ll get an updated pension certificate every year.

 

You can also buy into your pension fund with additional funds. This is possible if you were not able to save the full amount in the past. Possible reasons for this are:

  • you did not work for a longer time after the birth of a child
  • you changed jobs and your PF now offers higher benefits
  • you had to transfer parts of your PF to your ex-partner in a divorce settlement.

 

You can purchase these missing benefits in your pension fund. This means you pay in the missing money to your pension fund later on. You can deduct a pension fund buy-in from your taxes and thus save a lot of money depending on your income and marginal tax rate. The maximum possible purchase amount is shown on your pension certificate.

 

Important: did you buy your own home and use money from the pension fund to pay for it? Then you must first repay this withdrawal in full before you can buy into your pension fund. Conversely, you may not withdraw any money from the pension fund for three years after you have made a purchase. This restriction also applies if you buy a home or retire.

 

 

Tip: tax savings are just one of the many advantages of buying into a pension fund. But you should do the necessary research beforehand. You will find everything you need to know in the checklist “Buying into your pension fund”.

More about the topic

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How do I close pension gaps through pillar 3a?

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How do I provide for my retirement if I’m self-employed?

First, second and third pillar – what do I have to be aware of?

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