Am I correct with the following understanding, assuming retirement at 65 (not requesting any early retirement):
1) For pillar 1, any missing year of contribution would reduce the state pension by 1/44th (about 2.3%)? There's no additional penalty for gap years, on top of that linear deduction?
2) Likewise for pillar 2, if I stop contributing for various reasons (no more employed), the "pot" remains unchanged till the day I retire, with no additional penalty for not having contributed to it?
Apologies for what may seem like dumb questions –coming from abroad where some penalties exist, I wanted to double check my understanding of the system here. Thank you!
For 2) if you are not employed the pension money will go to a vested benefits account (not sit in a pension plan) and these have different conditions/insurance etc
For the 1st pillar (AHV in German, AVS in French and Italian, OASI in English) , missing years of contribution can - under certain circumstances - be caught up. As far as I know, one can pay in, retrospectively, to fill any gaps, but only within the past 5 years and only if one was resident in Switzerland during those years.
As the amount of contributions are based on income, filling the gaps can sting if one has a high income, but can be a very good idea for those with a lower income and especially for younger people.
There's another way to avoid gaps: if one falls outside of the regular way of contributing to the AHV, there are some circumstances in which it is permitted to continue to pay voluntarily, in order to enjoy the full cover. This is set out here: https://www.zas.admin.ch/zas/en/home...cultative.html
Yes, you're right. Some sorts of cover can be continued in another plan separate from the employer, for anyone. Employees over 58 can remain with the same employer's pension plan, as long as it was the employer who terminated the employment contract .
The relevant paragraphs of the law on the 2nd Pillar (BVG in German, LPP in French and Italian) are here:
Very good point and a good reminder if you have kids at Uni/further education past the time when you can start contributing ( 1st January of the year after you reach the age of 20). I never paid for my years when I was at Uni and it would have cost relatively little, when I discovered this it was too late. So if you have kids at Uni who are residents here do look into it.
I didn't know about the pillar 2 going to a vested benefits account (before 58) if no longer employed.
As for pillar 1, yes, I was indeed aware of the possibility to make contributions for gaps in the previous 5 years. My question was rather about whether, assuming no contribution for those gaps, there would anything more than a proportional deduction (1/44th)?
Yes, indeed. Except the age is the 1st January after turning 17, so those early years are usually particularly cheap to buy. And yes, parents should definitely look out for those.
OP, perhaps you'd find more of the answers you need here
I read here ( https://www.ahv-iv.ch/p/2.03.e ) that the obligation starts 1st January of the year after you reach the age of 20 - is one allowed to contribute earlier as an early contribution?
I learnt - thanks to your post - that there's a distinction: if you are employed *, then the obligation to contribute starts on 1st January after your 17th birthday if you are not employed , then the obligation to contribute starts on 1st January after your 20th birthday.
*As far as I know, apprenticeships count as employment.
I'm not sure about voluntarily contributing, earlier.