Years with missing AHV contribution are painful: you should pay attention to this in column 1

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Whether you are working or not: If you want to receive an AHV pension, you must pay AHV contributions every year. The system is relatively simple for Swiss employees because AHV contributions are deducted directly from their salaries and any contributions paid are listed in the salary statement at the end of the year.

Anyone who pays into AHV every year after starting work has no deficit. Working Swiss citizens are required to pay taxes as of January 1 following their 17th birthday. Non-working individuals must also pay contributions starting from January 1 following their 20th birthday.

In order to receive full AHV pension after retirement, the contributions must be paid in full. It has been 44 years since the retirement age for men and women was equalized. Elisabeth Beusch explains: “For non-employed persons, contributions are deemed to have been paid if the husband and wife (this also applies to registered partnerships) have paid at least twice the annual minimum of 514 francs to the AHV together with the employer.” , retirement expert at UBS Chief Investment Office. In order to receive the maximum monthly pension of 2,450 francs, the average annual income per person must be at least 88,200 francs.

Reduces cost money

However, in the event of a benefit such as retirement, disability or death (when the amount of the AHV or IV pension is calculated), many people find that there are gaps in their contributions. As Stephan Wirz, member of the Swiss Broker Center management team, points out, more than ten percent of new Swiss pension recipients receive a reduced pension for this reason.

Gaps quickly lead to severe cuts in pensions, as for each year of missing income, women’s and men’s pensions are reduced by 1/44, or 2.3 percent. In case of a two-year gap, the maximum pension will be reduced by 111 francs, and with the missing five years of contributions it will be reduced by 278 francs per month. Even if one’s contribution difference is eight years, the maximum pension drops from 2,450 francs to 2,004 francs.

The first step to find out if there is a gap in contributions is to order the individual account statement. It can be requested from the compensation office and provides information about the contribution years and all contributions paid. You can find the link to order the AHV declaration here. The canton in which the insured resides or the AHV fund to which the insured is currently affiliated must be selected from the list.

If missing years are detected, it should be clarified immediately whether the gap can be closed. “Youth years up to the age of 21 are not taken into account in the normal pension calculation, but they can be used to close the differences. Likewise, contributions in the retirement year, more or less depending on the month of birth, are used to cover the gap,” explains Wirz. Beusch adds that additional payments can be made for a maximum of the last five years and can be made if the person is insured in Switzerland during this period.

This additional payment must be made after the vacancy has been determined, as this will no longer be possible at a later date. If the employer is responsible for missing premium periods, the contributions will be refunded by the fund if it is proven that employee contributions have been paid for this period.

According to Wirz, if additional payments are not possible, financial deficits must be covered by other means by the insured; for example by purchasing a pension fund or saving in column 3a.

Interest in abroad, education and divorce

Contribution gaps can arise for a variety of reasons. Staying abroad for a longer period of time, changing employers frequently, giving up a job, studying, accident or illness, and receiving daily wages, as well as spouse’s divorce and retirement, are also potential obstacles that everyone affected should be aware of.

AHV contributions must also be paid on any income earned, for example for cleaning ladies working in the private sector. The pension expert at UBS emphasizes that there are no insignificant amounts and adds that in most cases the minimum amount of 514 francs is reached due to low income and part-time workload, for example the applicable minimum of 20 percent. fees. 5 percent of the AHV contribution is deducted from the employee’s salary, and the other 5 percent is covered by the employer. The entire amount is then transferred directly to the AHV by the employer.

When students enroll at university, they receive a direct mail from the cantonal AHV or SVA office informing them that they must pay AHV contributions. If you are not sure when and how much has been paid, you should request a statement from the responsible AHV office as soon as possible. The minimum amount for students is 514 francs per year. However, these debts are not collected by AHV, the insured must make the payment himself. “If you don’t pay accordingly, you have a contribution gap,” Beusch explains.

It’s even better to proactively avoid contribution gaps. According to Wirz, anyone who no longer lives in Switzerland can join the AHV voluntarily from abroad outside the EU, under certain conditions and in accordance with the contribution and registration deadlines. In case of divorce or retirement of one of the spouses, non-working people must themselves participate in a compensation fund. In case of early retirement, AHV contributions for non-working individuals must also be paid in order to meet the contribution obligation.

Anyone embarking on a one-year trip around the world may also encounter a contribution gap. Therefore, it is important to pay attention to this early so that this important point is not forgotten.

No regular bank statements due to “Kantönligeist”

In other countries, for example in the USA, compensation funds regularly provide statements to all insured persons. Therefore, gaps can be quickly detected and eliminated.

The situation is different in Switzerland. Those who do not request a statement from AHV will not be given a statement. According to Harald Sohns, deputy head of communications at the Federal Social Insurance Office BSV, automatic delivery to all insured persons would be disproportionate, not tailored to their needs and would result in high additional costs. “AHV works very simply compared to pillar 2 insurance, but most active policyholders do not even know the address.” Moreover, retirement forecasts for AHV are naturally quite uncertain.

If necessary, the insured can request a summary (a list of contributions received) or an approximate pension estimate from the AHV from their individual account, Sohns says. This approach is effective and targeted. The fact that the AHV operates much more simply than a pension fund means that administrative costs are also significantly lower.

Source :Blick