Tackling the pension issue

Low interest rates, increasing life expectancy, and falling conversion rates make pensions a major challenge for future generations – meaning it's all the more important to tackle the subject at an early stage. And that applies to women in particular.

December 16, 2021

"To govern is to plan ahead," said French writer Émile de Girardin in 1852. The second part of his maxim is less well known: "And not planning ahead puts you on the road to ruin." If we apply this to pensions, it means there's a need to start planning early on – and thus avoid a rude awakening. The first step is to get an overview of the spectrum of pension benefits: the 1st pillar – state retirement provision (AHV), 2nd pillar – employee benefits insurance (BVG), and 3rd pillar – voluntary private pension provision (Pillar 3a and 3b).

Since payments into Pillar 3a can be offset against tax up to the statutory maximum amount, this pension vehicle would seem particularly attractive to those who are gainfully employed. The reality is different, however: The proportion of working people paying into the 3rd pillar is just 60% or so. Two in every five gainfully employed persons between 18 and the ordinary retirement age of 64 for women and 65 for men cannot afford this tax-efficient pension solution or simply do not want to pay in to it (see chart).

Only 60% of all swiss people pay into pillar 3a

Only 60% pay into Pillar 3a

* The results should be treated with caution on account of the small sample size.
Sources Federal Statistical Office (Swiss Labor Force Survey – SLFS), Credit Suisse

The pension gap for women

The figure for women is no different than the average; indeed it can be assumed that not even women in the dual income, no kids ("DINK") category make full use of their pension options. Fact is, female DINKs may not work on a full-time basis all the way through to retirement. They may choose to reduce their working hours so as to improve their work-life balance, do more voluntary work, or spend extended periods traveling. It's therefore all the more important to make regular payments into Pillar 3a at a time when financial circumstances allow them to do so. As a result, working women can reduce the pension gap as well as limit the risk of experiencing a reduced standard of living in retirement. Given that it is not yet possible to make retroactive contributions into Pillar 3a to cover any missed years, this is a decision that should not be kicked into the long grass.

In other cases, women who live with their partner and children are aware of the need for private retirement provision but don't have the financial resources for voluntary provision. There are various reasons for this: Many women only work part-time following the birth of their child, choosing to put their career on the back-burner or give up work altogether in order to look after their children.

"AHV and pension fund cover 60% of income at best"

Désirée von Michaelis on pension gaps in old age.

Financial planning is planning for life

The financial plan should be closely looked at every five years – at a minimum – or during a big personal or professional change (e.g. starting a family or buying a home). Often, early and simple adjustments to the new situation are enough to prevent pension gaps.

Frühzeitige und einfache Anpassungen an die neue Situation reichen oft, um Vorsorgelücken zu vermeiden.

Raising awareness

How can things be changed? "By talking about the issues at stake – again and again," says Désirée von Michaelis, Head of Wealth Planning at Credit Suisse. The fact that the AHV and BVG reforms and their impact on women are the subject of a lot of debate at the moment is positive in her view – yet women still pay too little attention to the subject of pensions. Whereas people have in recent years become increasingly aware of the need to maintain a healthy lifestyle, the topic of financial provision in retirement is often either neglected or addressed too late in the day.

Therefore, when it comes to issues such as additional voluntary payments into a pension fund, choice of retirement date, lump sum or pension, and the staggered payout of retirement benefits, it is not advisable to view them as isolated topics; instead we should be looking at them from a holistic financial planning perspective. In particular, that includes analyzing interacting factors, anticipating the tax implications, and exploiting the potential for optimization.

Seven possible pathways to financial security in retirement


Maximizing Pillar 3a contributions


Aim for higher returns on 3a savings thanks to securities


Start paying into Pillar 3a at an early stage – even with small amounts


Paying into Pillar 3b (e.g. money market investments, equities, investment fund units, or home ownership)


Making voluntary purchases of pension fund benefits (2nd Pillar)


Making voluntary larger contributions to the pension fund


Work longer – beyond retirement age


In the long run

Environmental, social, and governance (ESG) criteria dictate investor behavior around the world. Their priorities and preferences can shift very dynamically. Long-term principles for decision-making and well-founded investment solutions are more important than ever.