AHV (pillar 1) pension planning

Hello, I wanted to start this topic as there is not much discussion on it. I realize that many people don’t like to rely on the state pension, but given that most of us will pay into it for several decades, it makes sense to me to take it into account (even if partially to account for any future changes). During retirement, I think I will appreciate the stability of having a pension based annuity to fall back on if my investments are going through a rough period.

I guess we all more or less know about the basics of pillar 1. It is based on solidarity so there is re-distribution of wealth going on (not the point of this thread). The amount of pension you can get depends on two components: Number of years you paid in (maximum of 44 years for men and 43 for women) and the average contribution over those years. Assuming you paid in for all 44 years, you quality for a minimum (1195 chf for singles) and maximum pension (3585 chf for married couples, 2390 chf for singles) depending on your average contribution. To qualify for the maximum amount, you must have paid in 85’320 chf on average. For every N years that you missed paying into the system (relevant for people who moved to Switzerland in middle of their career), you have to reduce the pension by N/44.

There are potential pitfalls (or opportunities?) for FIRE here and this where I have questions because I have not been able to find answers to simple questions. If you become unemployed (early retirement without pension counts as unemployment), you have to pay into the system based on your assets unless your partner/spouse is employed and is making above minimum payments (1002 chf/year in 2021) for 2 people. Additionally, early retirement even with AHV pension requires you to pay in to the system

So here are my questions:

  1. Say that I retire at 55 and make the minimum payments into the system based on my assets (or my partner is still employed and can cover both of us), do these payments give me credit towards the number of years contributed? I would think so, but I have not found any place where it explicitly states this
  2. If point 1 is true, how does it work when you also decide to start your AHV pension early at age of 63 instead of 65 (for men). Does your pension still increase based on those 2 years of contribution?
  3. Obviously, my minimum payments will lower my average contributions. However, since it is average that counts and if I have 22 years where my salary was double the average contribution, then I can get away with another 22 years of minimum payment and still get full maximum pension at the end of it. Is that correct?

If point 1 is true, then I see it as an interesting concept for me personally. My partner currently has no desire to retire significantly early and has a salary that is approximately at the maximum contribution threshold whereas mine is significantly higher than that. So, if I were to retire 10 years in advance and rely on my partner for my minimal contributions for AHV pension, it would not hurt our average but I would still be able to get credit for 10 more years of contributions without making any additional contributions. Also, my partner would not have to contribute any additional payments as he is already earning well above the minimum threshold. Does that make sense?

Looking forward to hearing some thoughts on this topic.

  1. Yes, it adds to your “years contributed”.
  2. I would imagine so.
  3. Yes, correct.
    (This all AFAIK, I’ve only looked into it for myself and some of my knowledge is based on my parents’ experience, who retired early.)
    I’m in the similar situation, where my partner is not interested in this RE-“nonsense” (at the mo’, at least).
    Are you married to the partner? (I’m not.) This is important to get his/her contributions to count for you too. This is a topic where married couples have a significant advantage to unmarried couples IMO.
    Interesting on my side, if I may slip it in, is that I have a young child, being unemployed (FIRE) with a child gets one “free credits”, although I think I still have to pay the amount based on my assets.
    For my situation, in my FIRE calcs I’ve been using the contributions based on my Assets worth, and paying this amount like a tax, till 67.

Yes, we are. Thanks for your input. This means I still have a shot at getting 10 more years of credit without having to pay in any more.

Q2 : NO. If you take your AHV pension at 63, your pension will not increase anymore even if you contribute 2 more years. Pension will be calculated based on your current contribution and decreased by 13.6% (6.8% per year of anticipation). “Le calcul des rentes ne tient pas compte des cotisations versées durant la période d’anticipation.” Source : https://www.ahv-iv.ch/p/3.04.f

Q3 : If I remember well, this is not an average but the sum of what you have earn during your working life in CH.

You can ask for information about your personnal situation here :slight_smile:

Statement of individual account
The income, the contribution periods as well as the assistance bonuses are recorded on the individual account (IA).

Pension forecast application form
This forecast is free only if you are more than 40 AND you did not ask for a forecast in the past 5 years.

Sum is equivalent to average depending on how you present it. 44 * 85,000 = Sum.

Thanks for the information about Q2. It makes sense.