Two employers: important points regarding pension funds

Part-time work is becoming increasingly popular with many Swiss people. In 1990, the proportion of part-time jobs was 25 percent; by 2023 it had risen to 38 percent. Part-time work is particularly frequent among women as it allows them to improve the balance between work and family life. In 2023, as many as 72 percent of all part-time employees in Switzerland were female. However, working part-time does not always mean working fewer hours. Many people divide the hours of a full-time position between several jobs.

Part-time work often causes a pension gap, as the salary is likely to be quite low. There can be a particularly large gap in the pillar 2 pension, because little or no money is paid into the pension fund. This is because you are only subject to compulsory insurance and obliged to pay contributions if your annual income is CHF 22,050 or more per job (as at 2024). For all amounts below this, it depends on whether your employer offers you the possibility to take out supplementary insurance. You are free to do so if you earn an overall salary in excess of this amount from several jobs with a low workload. If you choose not to, it will be reflected in your pension when you retire.

Does working part-time for several employers inevitably put you at a financial disadvantage later in life? Not necessarily. There are various regulations that allow you to pay into pillar 2 even if you work part-time.

Do you have two employment contracts and earn a total amount that is above the OPA entry threshold of CHF 22,050 per year? If so, you are not subject to compulsory insurance, as the salary from each employer is taken into account separately. However, you have two options for contributing to pillar 2 after all.

Firstly, you can take out voluntary insurance with the Substitute Occupational Benefit Institution, which is supervised by the federal government (Federal Social Insurance Office) and tasked with ensuring the stability of the old-age and survivors’ insurance system.

Alternatively, in consultation with your employers, you can voluntarily insure both salaries with one of the employers’ pension funds. You must check whether this is possible in your particular case. If so, you should definitely take advantage of the opportunity in order to keep your pension gap as low as possible. You are still very likely to have a pension gap anyway if you have two low salaries. You should always consult your employers and keep them informed of any steps you are taking. This is the only way to ensure that they will be obliged to pay their share of the contributions.

If one of your salaries is above the OPA entry threshold of CHF 22,050, you are subject to compulsory insurance with the relevant pension fund. Then all you have to do is plan whether and how you want to insure the salary you earn from your other employer. This is definitely recommended, as low contributions can quickly lead to a pension gap that you will have to find another way to fill.

Again, you can either insure the remaining amount via the Substitute Occupational Benefit Institution, or, if permitted by the pension fund regulations, insure it with the same pension fund as your first salary.

Of course, there are also employees whose part-time salary exceeds CHF 22,050. In principle, they are then insured in two pension funds, which can be a disadvantage. This is because a fixed coordination deduction applies to each salary. Sometimes the amount left after the deduction is not very high – which can again lead to the risk of a pension gap.

However, they too have the option of taking out insurance with one employer’s pension fund and cumulating both salaries. In this case, the coordination deduction will only be due once. Depending on the pension fund regulations, they may also be able to choose which of the two pension funds they wish to be insured with.

Example

Sarah has a 50 percent position as a client advisor and receives an annual salary of over CHF 60,000. She also earns an additional CHF 30,000 a year as a graphic designer in a start-up. Both salaries are above the OPA entry threshold – so she is insured with two pension funds. This also means that the coordination deduction of CHF 25,725 will be deducted twice, which is financially disadvantageous for her.

However, she has the option of having both salaries insured with one of the two pension funds. The coordination deduction will then only be due once.

Working for several employers can quickly lead to the risk of a pension gap, as important contributions intended for retirement planning are not being paid in, particularly for pillar 2. Experts talk about a pension gap when the benefits from pillars 1 and 2 are not sufficient to maintain your standard of living in old age.

You can find out whether you have a pension gap by looking at your pension certificate or by obtaining advice. You can compensate for a possible loss in old age by making pension fund purchases under certain circumstances. These purchases will enable you to make up for pension gaps, and even benefit from tax advantages. You can find out whether you still have the potential to make voluntary purchases by checking your pension certificate or asking for information from your pension fund.

As a rule, pension fund purchases are particularly worthwhile if you earn a lot, because you will also enjoy particularly high tax benefits. It is also advisable not to opt for voluntary purchases until you have paid the maximum amount into pillar 3a. This is because you can usually achieve better returns with pillar 3, for instance by investing in securities. For 2024, the maximum amount for individuals in employment is CHF 7,056, or CHF 35,280 or 20 percent of net earned income if you are self-employed.

You should only make voluntary pension fund purchases if the coverage ratio is at least 100 percent. This shows how financially stable your pension fund is. In the event of underfunding, i.e. a coverage ratio of less than 100 percent, the pension fund is required to take restructuring measures and, in the worst-case scenario, you could even lose some of the money you have saved up. It should also be noted that it is not worth making voluntary purchases if you want to withdraw capital again within three years. This is because there is a three-year vesting period, during which you are not permitted to withdraw the capital paid in. Otherwise, you will have to pay back any tax you had saved.

The Swiss pension system offers most people a good level of protection in old age. However, if you have more than one job, you should take a closer look at your pillar 2 pension options. Many part-time employees are not insured, and fail to take out voluntary insurance or to insure their various salaries cumulatively via a pension fund.

This can quickly result in a pension gap that will be difficult to fill when they reach retirement age. That makes careful planning important when it comes to pillar 2 – especially for anyone with more than one employer. This is the only way to detect a potential financial gap in old age while there is still a chance to make up for it by making voluntary pension fund purchases or saving assets in pillar 3a.