We moved to CH last summer and started contributing to AHV.
Now, reading specifics about the pillars. In 1e, IIUC you’re penalized by 2.3% for every non-contributed year.
Backfilling seems to be permitted for the last 5 years. Effectively, this would be only 3 years for us.
Given this, if you have a sizable pensionable income, it should always be worth backfilling if you stay for the long term, right? Even if you end up not retiring in CH
AHV is the state-wide minimum pension scheme, known as the first pillar. If you earn anything at all in Switzerland, you contribute to it.
2nd pillar (also know as BVG in German) is a professional pension/insurance scheme linked to the employer. The contribution is obligatory for everyone earning above a certain limit. Most employees in Switzerland qualify.
1e is an extra part of the second pillar for very high earners. First time I ever heard about it was around a year ago in this forum.
Since you are talking about 1e (and writing in this forum), I assume you earn very well. In this case, I don’t think you mean a back contribution to AHV scheme, which maybe will give you an extra 1000 francs per year after you turn 60+ or 70+.
So, let’s get your story straight.
P.S. Unless with 1e you mean “première”, which doesn’t make things clearer.
Thanks! I assume my employer will have to sign up for such a service. As an employee with a government backed pension, unfortunately not much hope for my pension situation to switch to this 1e
Also interesting that this never came up during the recent vote on pension reform (or at least I never stumbled accross).
Oh, thanks for the link. 1e and pillar 1 were interchangeable in my head.
I’ve read the article, they make it clear that this is only an add-on for the above X amount. I’m earning above that threshold, however, I think my company uses some default, or at least I wasn’t asked what strategy would I follow. Will ask them for details.
I actually did. I’m in the process of evaluating if it’s worth backfilling BVG. That led me to the topic of backfilling AHV.
More context on BVG. I’m 34, I have 20k in contributions. AXA is telling me that I could backfill ~700k CHF in total.
Because we’re in CH for less than 5 years, they would allow us to do a yearly maximum of 28k backfill. Now. I’m wondering if it is legal or would be logical/beneficial to backfill this year and the next, and buy a property pledging BVG.
For the current year, I’ve paid 12.807 for AHV (the employer is matching this right?). By the end of the year, projecting from this number, it will be around ~16k.
Is my current number taken into account for backfilling? I was under the impression that I could backfill with the minimum ~500CHF/year, to avoid having the penalty of a missing year.
The 500 a year are the minimum for students or other people with no income that otherwise would be in the scope of AHV.
If you moved here, I doubt you can backfill missing AHV years. Have you double-checked whether you’d qualify in the first place?
It’s different for pillar 2. You can pay up to your buy-in limit, but I’ve read it seems to be restricted to 20% of your income in the first 5 years. That’d be the 28k limit instead of the full 700.
I did not. Read an article, which led me to search through the forum. Didn’t find a match, hence the topic.
This 28k was the output of the AXA online calculator. Not sure how they got to the number, had to input multiple parameters. Its around 11% of my income
AHV -: only allowed to be back filled if you couldn’t contribute when you were eligible. If you are not Swiss and you lived outside CH, then your clock starts when you join CH. If you are Swiss and were living outside then you should check with AHV how to back fill.
2nd pillar and 1E -: can accept voluntary contributions based on the fund regulations. Will vary case by case
The calculations are often based on „insured salaries“ which is not the same as total salary. Insured salary is a lower number after certain reductions. It must be written on the pension statement
OASI contributions are mandatory in Switzerland. However, there may be gaps in your contributions, if for some reason you did not pay them regularly.
This might be the case for those who did not pay their OASI contributions during their studies.
Failure to regularly pay OASI contributions will reduce your OASI pension. For example, one year of unpaid OASI contributions will reduce your pension by about 2.3**%.**
You can buy back missing contributions, but only from five years prior. It is not possible to pay for older gaps.
Contact your local OASI office for more information on buying back missing contributions.
As others have already suggested, you may only be able to backfill for the years that you were AHV-pflichtig in Switzerland but did not pay AHV (e.g. as you didn’t make any money) – if you moved to Switzerland last summer last year would be the first year that you were obligated to pay AHV.
You can check with your local OASI office as suggested in the quote above.
who are “not employed” in the rather … ahem, inclusive? … definition* of the AHV, and
their partner is also “not employed” (in the same AHV definition*), and
their wealth (Vermögen in the sense of the Steuererklärung) plus 20 x any Renteneinkommen p.a. they may already get does not exceed CHF 340k
If you are “not employed”, but your spouse is employed (in the sense of not falling into AHV category “not employed”), you don’t have to pay any AHV contributions.
It’s fairly complicated …
Details as already linked above:
2.02.d (ahv-iv.ch) – Beiträge der Selbständigerwerbenden an
die AHV, die IV und die EO
2.03.d (ahv-iv.ch) – Beiträge der Nichterwerbstätigen an die AHV, die IV und die EO
Not relevant for the topic of this thread, but my guess is that this might catch a few people planning to FIRE in Switzerland off guard. You’ve amassed a nice pie to withdraw from before the official retirement age, maybe stop working completely, maybe do a part time side gig … well, you’ll still have your AHV obligations, and you’ll pay for those based on the size of your nice pie.**
* “Not employed” are people who are:
not employed, or
employed for less than 50%, or
employed for less than 9 months per year
** I looked this up in detail just a couple of months ago not because I am a masochist, but because I’ll fall into the “not employed”* category starting next year (despite then still working but less than 50%) and possibly my wife will, too.
According to my calculations I’ll have pay several k per year into AHV, possibly also my spouse (but likely a little less, as she will make a little more than me from AHV-plichtigem salary income, which you can deduct from the full amount that you would pay if you were truly not employed [in the common sense]) …
Well, here you go, the perks of FI and having a large pot of gold … … don’t cry for me, though. I feel with my wealth amassed I do have a responsibility towards society.
Since you looked into it in detail, do you have any conclusions in terms of if this is eventually a good thing or bad thing in terms of what you get out of the contributions.
Every year you contribute based on „assets“ would also add to the final AHV pension that would be paid to you.
Oh, I think I haven’t looked into in it the detail you were expecting?
For now I just kind of concluded for myself that I’ll just pay whatever you’re supposed to pay according the Merkblätter that I have cited, instead of doing the rational tax-optimizing calculation of what I expect to pay in if following the Merkblätter versus how my / our AHV payout will be reduced if I / we don’t pay in and whether / when there’s a break even in terms of life expectancy.
Maybe I’ll do the calculation. I’m already pretty sure that I’ll pay in more as a “non-employed” than I will “loose” from not getting the entire AHV I would get otherwise, but as mentioned, for now I kind of feel that pillar 1 is a social contract I’m in essence willing to honor.
Maybe I’ll run the calculations and will update accordingly if I come to a different conclusion.
And yes, the table you cite is the one I’m using (and the one I cited in my previous post).
5 million assets (just a random number I picked for someone from ex-small search company ) will attract AHV contributions of 14000 CHF per year
If one retires at 50 and not 65, this means 210 K of AHV contributions over 15 year period.
BUT -: 15 years of additional contribution would also mean 15 x 2.3% of full AHV payout. I think full AHV pension is 30000 CHF, so 10,350 CHF per year as extra payment.
Assumption -: this so called AHV contribution for non-employed counts towards maximum AHV contribution and hence makes the person eligible for maximum payout. I couldn’t understand this from the document clearly
It’s hypothetical as long as it’s mandatory. To calculate how much you’ll pay is easy and relevant to have on the radar. Whether it’s beneficial to do it when it’s not mandatory depends on personal factors and assumptions.
Keep in mind if it’s only about one spouse, only part the free (no VB) assets count.
For a quick, back of the head calculation, I’d start with a single year of contribution, e.g. age 50 and go with 1k AHV rent per year for that.
You’d need
Voluntary AHV contribution
Opportunity cost of those (if 0, contribution year doesn’t matter)
Years of rent received. For simplicity, I’d assume it keeps up with inflation
If I didn’t get anything wrong, with no opportunity cost considered, there’s a good chance to break-even in an average life time if you don’t have too many assets:
2.5m assets (6k contribution) after some 6 years
5m assets (15k) below 15 years
7.5m (22k) above 20 years
With 2% opportunity cost, starting 15 years before this becomes
2.5m assets some 10 years
5m assets some 40 years
With 5%, there’s no break-even even with 2.5m. Break-even will shift downwards if you pick 55 or 60 instead, obviously.
Now I’ll really have to run the exact numbers for myself!
(just kidding – yeah, that’s the kind of calculation I might run. Throw in life expectancy, return on capital not contributed to AHV, etc …)
It’s more like 55 (60 for my spouse) instead of 65 and between 3-4 million in taxable assets (which you can conveniently divide by 2 if you’ve been married long enough), so back of the napkin sketch says it’s more like 30-40k of additional total AHV pay-in … but, as said, I think I’ll need to actually run the numbers.
On the contributions necessary for maximum payout: I’m also not entirely clear on this and might dig in further. As I’ve – just myself – already contributed well of 7 figures to AHV with ordinary deductions, I kind of just assumed I’ll be eligible for the maximum payout … and I think I remember the financial advisor saying so at the time (but I’m not at all sure) …?
Maybe just another wrench thrown into my already somewhat compllicated calculations …
(ok, sshh, please don’t tell anyone: it’s actually fun to run the exact numbers as it gives me more confidence in my plans that things will actually work out as planned. Or, if the numbers don’t pan out, I might add a little more employment than previously planned)
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