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:
- 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
- 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?
- 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.