Impending gap in needs in old age – what now?

After the summer break, we continue where we left off: with the needs-based BVG pension. But what if the full BVG pension, together with other sources of income, is not sufficient to cover the usual living expenses after retirement? Several measures can help close this financial gap.

Pillar 2 buy-ins: Voluntary purchases into the pension fund are an effective way not only to save taxes but also to increase the retirement pension. Information about your buy-in potential can be found on your pension certificate.

Working longer: If you continue working beyond the usual retirement age, your lifelong BVG pension increases by around 7% for each additional year worked. This increase results from three components. First, retirement savings earn interest for an additional year (assumed at 2%), which directly increases the pension. Second, retirement savings grow further through ongoing contributions. Assuming a contribution rate of around 18% of salary and a typical retirement savings-to-salary ratio of 10:1, this adds roughly another 1.8%. Third, the conversion rate itself increases by about 0.15% to 0.20% per year, which further boosts the pension.

Consuming assets: If you have accumulated assets at retirement (free assets plus pillar 3a and vested benefits), these can be used to finance the annual gap. The ratio of assets to the funding gap provides an approximate indication of how long this strategy may work. For example, assets of CHF 300,000 could finance an annual gap of CHF 10,000 for about 30 years.

State supplementary benefits (EL): Finally, there is the possibility of receiving state supplementary benefits. However, it is important to understand the eligibility requirements and conditions. These will be examined in more detail in the next Flash.