How does working part-time affect retirement for women?
Over 70% of the people working part-time in Switzerland are women. This lifestyle choice does have consequences when people reach retirement. Typically, women calculate the effect it will have on their monthly and annual budget before deciding to reduce their working hours. They may also take account of the fact that their taxes will be lower. Taking a (very) long-term view and thinking about how this will affect their retirement is much rarer.
In order to earn the maximum retirement income, which is currently CHF 2,390 per month, you would need to pay in contributions for 44 years and have an average annual income for reference of CHF 86,040. Although working part-time (or stopping work for reasons such as maternity leave) has no effect on the number of years’ contributions required, it typically reduces the base reference salary, which results in a lower pension at the end of the day.
How does working part-time affect the 1st pillar of your pension?
How does working part-time affect the 2nd pillar of your pension?
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These contributions are calculated based on what is known as the ‘coordinated salary’ instead of the full salary (CHF 25,095). For example, a woman working full-time for a gross annual salary of CHF 100,000 will contribute based on an amount of CHF 74,905 (100,000 - 25,095). If that woman reduced her working hours to 60% of full time, she would receive a gross annual salary of CHF 60,000 but would then contribute based on CHF 34,905 only (60,000 - 25,095). By reducing her working time by 40%, this woman is reducing her LPP contributions by over 50%, creating an even broader pension gap.
Which solutions are available to reduce the impact of part-time work on your retirement?