Pension provisioning for under 30s – that’s how it works

class=”sc-3778e872-0 cKDKQr”>

In addition to the growth in health insurance premiums, old-age coverage is one of Switzerland’s biggest concerns. For women, the fear of poverty in old age even tops the anxiety barometer.

Conditions for professional savings have been worsening for years. Pensions reflect an increasingly smaller proportion of wages, as the minimum interest rate on pension fund assets has fallen and remains at a very low 1 percent for six years.

In addition, the conversion rate of pension capital decreases. Since 2005, this ratio has decreased from 7.2 percent to 6.8 percent in the compulsory part of old-age savings. A capital of 100,000 francs leads to an annual pension of 6,800 francs. However, insurers and pension funds are currently demanding that this rate be reduced to 6 percent. This means that the pension in the above example would be only 6,000 francs per year.

Pensions fell 30 percent in 30 years

Pension funds are also free to lower the conversion rate on the non-essential portion of assets. They use it. The usual rate in the non-essential part is now below 6 percent. For example, the Swisscom pension fund has set the conversion rate at 5.34 percent for 2023 and 5 percent for 2024. SBB has even decided to reduce the conversion rate from 2023 to 4.54 percent.

Overall, experts estimate that with the same contributions, pensions are about 30 percent lower today than they were 30 years ago. It is therefore clear: the pension must be added. Ideally, you should start preparing for your pension before you turn 30. There are different approaches for this.

The standard solution to support column 2 is monthly transfers to column 3. In retirement, this capital is paid, provided that it has not previously been used to purchase housing or other benefits. The amount paid can be freely chosen and deducted from taxes. Employees with a pension fund can pay a maximum of CHF 7,056 per year. Employees without a pension fund can pay up to 20 percent of their net earned income, up to a maximum of CHF 35,280.

Online simulators help calculate the ideal monthly contribution. Example: You were born in 1993 and receive a 3rd column contract on March 1, 2023. You pay 150 CHF per month. These 1800 francs per year will be converted to 50’429 francs when the contract expires when you are 65 (in this case 2057). Along with a realistic estimate of the surpluses—that is, interest that the insurer could pay at the end of the contract period, but which is not guaranteed—there is also more than 73,000 francs in it. However, column 3 offers relatively little added value.

The formerly popular savings account brings little. The savings rates offered by banks have not kept up with inflation and are below 0.5 percent and in some cases just above it. Also, the higher the balance, the lower the interest rate. This will not change for now: Banks adjust the savings rate as late as possible.

The pension can also be backed by federal bonds for a period of ten years. It’s a risk-free investment that currently pays 1.5 percent interest – more than just a savings account. Anyone considering riskier products can invest in mutual funds (stocks, bonds and cash) from banks for an investment of CHF 10,000 or more. A “balanced” fund has done much more than a savings account in recent years.

Source :Blick