The Swiss Reform

A] Prelude

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B] The Issue

We have recently given attention to the planned reform of the Swiss retirement planning. Now we will include a critical view of the current system.

Switzerland's pension system is still largely based on the assumption of linear career paths. Those whose working lives do not follow this pattern are placed at a disadvantage when it comes to retirement provision. Women are particularly affected. While reforms to the system are needed, individual retirement planning also remains essential to at least partially offset these structural disadvantages.

Switzerland's pension system is coming under increasing pressure. The well-established three-pillar system is reaching its limits as demographic change, evolving lifestyles and political inertia expose its structural weaknesses. The result is a growing gap between the promises of the pension system and financial reality. Although reforms have addressed individual issues, they have done little to tackle the underlying causes.

C] New Life Models

The problem begins with a basic assumption that is no longer fit for purpose: the pension system continues to be designed around uninterrupted, full-time careers. In reality, however, working lives have changed significantly. Part-time employment and career breaks are now common, yet they continue to be penalised within the system. For employees working part-time, a significant portion of their income often remains uninsured.

Women are particularly affected. They still perform a large share of unpaid care work while also being expected to participate more actively and continuously in the labour market. This balancing act comes at a cost: lower incomes, lower pension contributions and, consequently, lower retirement benefits from both the state pension (AHV) and, in particular, the occupational pension system.

D] Pillar 2

One of the main issues is the coordination deduction within the second pillar. For employees working part-time, a significant portion of their income often remains uninsured. As a result, both employee and employer pension contributions are reduced. The power of compound interest, which could make a substantial contribution to wealth accumulation over decades, is therefore curtailed from an early stage.

E] Disadvantages Regardless of Income

Even women in senior management positions are not automatically better off. Higher salaries certainly provide greater opportunities to build wealth. However, career interruptions or reduced workloads have a disproportionately negative impact even at higher income levels. Many pension models and career structures are still based on uninterrupted employment histories. Professional qualifications and formal equality alone are therefore insufficient to eliminate these structural disadvantages.

The system requires reform. Key measures include adjusting the coordination deduction to reflect part-time employment, lowering the entry threshold for occupational pension schemes, introducing greater flexibility in the retirement age and offering more choice in investment decisions. Together, these reforms would reduce the disadvantages faced by part-time employees and enable them to build larger pension assets.

F] Individual Financial Planning

As long as such reforms remain outstanding, individual retirement planning becomes all the more important. Women should make full use of the available planning tools, particularly by maximising contributions to the tax-advantaged Pillar 3a and by starting to plan for retirement as early and systematically as possible.

Retirement planning decisions are complex. Whether to withdraw pension assets as a lump sum or an annuity, whether to make voluntary purchases into a pension fund, or which investment strategy to choose all have far-reaching consequences. Such decisions should never be viewed in isolation but always in the context of an individual's life situation, family model, life expectancy and personal objectives.

One frequently overlooked aspect is communication within relationships. Pension matters are often discussed too late—or not at all—particularly when it comes to the financial implications of separation or divorce. The consequences can be significant.

Responsibility does not rest solely with individuals. Employers can also play an important role by offering more flexible pension solutions, adjusting the coordination deduction, lowering entry thresholds or providing optional savings plans. Such measures are not only socially responsible but also strategically important. Attractive pension benefits are becoming an increasingly important factor in the competition for talent.

G] Raising Awareness & Implementation

The disadvantages women face in retirement provision are structural. Reforms such as adjusting the coordination deduction are long overdue. At the same time, meaningful progress requires coordinated action by policymakers, employers and individuals alike.

For women, today's pension system sends one clear message: retirement planning must become a priority at an early stage. Those who understand and make use of the options available to them can at least partially mitigate the structural disadvantages they face.

(Sources: Finews/T. Bamert/EPH)