“Things get really tough with kids,” UBS retirement research warns

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Part-time work is now trendy and not just for parents. This sometimes has important consequences for retirement planning, as a study by UBS shows. On the one hand, part-time work reduces payments into occupational pension schemes. However, this may also have a negative impact on future wage developments. Additionally, the increase in part-time work has a negative impact on pay-as-you-go AHV.

According to the Federal Statistics Office (BFS), in 2022, about 30 percent of single women without children worked part-time, compared to about 15 percent of men. Although fathers are no more likely to work part-time than childless men, motherhood does lead to employment changes among women. Approximately one fifth of mothers do not work. 80 percent of working mothers work part-time and the average workload is around 60 percent.

Daily care costs prevent full-time work

How large the provision gap will be depends largely on the type of household. To do this, UBS economists compared single people with no children to married couples with two children. Although part-time work for single people without children often leads to a disproportionate pension deficit compared to the reduction in workload, this is not always the case for couples. UBS economist Elisabeth Beusch explains: “Interestingly, part-time work linked to income-related nursery subsidies could mean virtually no pension gap.”

Beusch basically says, “Child care in Switzerland is indescribably expensive.” “In the city of Zurich, you pay almost 36,000 francs for full-time care of a child without assistance. Accordingly, children reduce the savings volume to a great extent.” This is true even if there is a small reduction in workload. They may save less if both parents work 100 percent and have to pay high daycare fees. “It gets really hard when you’re with kids and working full time,” Beusch says. This increases the incentive for parents to work part-time rather than full-time. Otherwise, for example, there will be no savings to form the third column.

AHV financing gap 600 billion francs

Part-time work increases the funding gap at AHV. Even after the AHV 21 reform, this figure is still around 600 billion francs. This gap can be easily closed, especially if the workload of women is increased. But UBS economist Jackie Bauer explains that if men who also earn more on average reduce their workload, the gap will widen again.

The employment rate is falling significantly, especially among those over 55. This does not always happen voluntarily. Many people can no longer find permanent employment at this age. However, from age 55 onwards, the higher workload will have only a small precautionary effect. Bauer says women benefit more from increased workload at a younger age, despite the higher wage contribution percentage in old age. Then you can expect a more positive wage development.

UBS economist Veronica Weisser says raising the retirement age to 67, for example, would make a much bigger difference in closing the pension gap. “Structural reforms are essential to finance AHV in the long term,” says Weisser. “This includes, for example, a higher retirement age.”

Younger generation as net payers of AHV

Although today’s retirees, on average, pay much less into AHV than they will later receive, this ratio is likely to change in the future. “Members of the younger generation are net payers of AHV,” says UBS economist Veronica Weisser. Tax increases are expected in the future to cover the increasing costs due to the financing gap. Added to this are high VAT and increased wage contributions.

Swiss people currently receive an average of 750,000 francs in net benefits from their pension plans. For singles, this figure is even 950,000 francs. This means that they receive much more in retirement benefits from the government than they have paid in their lifetime.

Source :Blick