How to prepare for retirement: the complete guide

In Switzerland, the retirement system is based on three distinct pillars: Old Age and Survivors' Insurance (AHV), Occupational Pension Plans (BVG), and Private Pension Plans.

The first pillar, AHV, is a mandatory basic system funded by contributions from employees and employers. It aims to cover the essential needs of retirees. The second pillar, BVG, is a mandatory occupational pension plan for employees whose annual income exceeds a certain threshold (CHF 22,050 in 2024). It is designed to maintain the standard of living achieved before retirement. Finally, the third pillar (private savings) is optional and allows individuals to build up additional savings to supplement their retirement income.

The retirement pension in Switzerland is crucial for ensuring a decent quality of life for the elderly. Its amount depends on several factors, mainly the number of years of contribution and the average professional income earned during one’s career.

Different types of pensions in Switzerland

In Switzerland, there are various types of retirement pensions, each catering to specific situations. Here are the main categories:

• AHV Old Age Pension: This is the basic pension paid by Old Age and Survivors' Insurance (AHV) from the legal retirement age, currently set at 65 years.
• BVG Old Age Pension: This supplementary pension is paid by Occupational Pension Plans (BVG) to those who have contributed to this scheme during their working life. Its amount depends on the accumulated capital and its returns until retirement.
• Widow/Widower Pension: This pension is intended for surviving spouses whose deceased partner contributed to AHV or BVG.
• Disability Pension: People suffering from a work-related disability can receive a disability pension, whether it is linked to AHV or BVG.
• Survivor's Pension: This pension is paid to orphaned children whose parent(s) contributed to AHV or BVG.
• Early Retirement Pension: In some cases, it is possible to retire early and receive a pension before the legal age, usually with a reduction in the amount.

The choice of pension type depends on the personal and professional situation of each individual. It is important to understand the various options to optimize retirement income.

Factors influencing the amount of the pension in Switzerland

The amount of the retirement pension in Switzerland depends on several key factors. Here are the main elements to consider:

• Contribution Duration: The longer the contribution duration to AHV and BVG, the higher the pension amount will be. Contribution years are crucial for calculating benefits.
• Professional Income: The income level during working life directly influences the BVG pension amount. People with higher income will generally receive a higher BVG pension.
• Retirement Age: Retiring before the legal age results in a reduced pension amount, while delaying retirement increases the amount received.
• Family Situation: The pension amount can vary depending on family situation, particularly if the spouse is also a pension beneficiary or not.
• Conversion Rate: The conversion rate is a technical factor used to calculate the BVG pension amount from the accumulated savings. This rate can vary according to pension funds.
• Pension Indexing: Pensions are generally indexed to account for inflation and the cost of living. The indexing rate can influence the amount received over the years.

It is essential to consider all these factors to better estimate the amount of the retirement pension one can claim in Switzerland.

Calculating your retirement pension in Switzerland

To estimate the approximate amount of your future retirement pension in Switzerland, you can use various online calculation tools. Here are the general steps to follow:

• Gather the Necessary Information: You will need to know your current annual income, your age, your family situation, your contribution duration to AHV and BVG, as well as the amount of your private savings.
• Use an Online Pension Calculator: Many websites offer free pension calculators. Some are provided by pension funds or financial institutions, while others are developed by independent organizations.
• Enter Your Personal Data: Carefully enter all the required information in the calculator, ensuring the accuracy of the data.
• Analyze the Results: The calculator will provide you with an estimate of your AHV old age pension, your BVG pension, and possibly your private savings.
• Adjust Your Projections: You can then modify certain parameters, such as the retirement age or the savings rate, to see how this affects your pension amount.

It is important to note that these online calculators only provide an approximate estimate. For a more precise calculation, it is recommended to consult a financial advisor or a pension expert.

Conclusion

Preparing for your retirement in Switzerland is a complex process that requires careful planning and a thorough understanding of the pension system. By taking into account the various factors influencing your pension amount, such as contribution duration, professional income, and retirement age, you can more accurately estimate the amount you are entitled to.

To optimize your retirement pension in Switzerland, it is advisable to consult a qualified financial advisor. An expert can guide you in creating a tailored strategy that suits your personal situation and goals. Do not hesitate to make an appointment today to start preparing your future with peace of mind.