{"id":8652,"date":"2019-05-11T10:21:14","date_gmt":"2019-05-11T08:21:14","guid":{"rendered":"https:\/\/www.smolio.ch\/wissen\/financial-consequences-of-the-sabbatical-what-does-the-time-out-mean-for-my-pension\/"},"modified":"2024-09-17T08:34:10","modified_gmt":"2024-09-17T06:34:10","slug":"financial-consequences-of-the-sabbatical-what-does-the-time-out-mean-for-my-pension","status":"publish","type":"post","link":"https:\/\/www.smolio.ch\/en\/wissen\/financial-consequences-of-the-sabbatical-what-does-the-time-out-mean-for-my-pension\/","title":{"rendered":"Financial consequences of the sabbatical: What does the time out mean for my pension?"},"content":{"rendered":"Lesedauer<\/span> 6<\/span> Minuten<\/span><\/span>\n

Unwind, take a break, travel, chill out.\n3 out of 4 Swiss employees dream of taking time out.\nBut what are the financial consequences of a sabbatical? <\/p>\n\n

In the first article<\/a> in this series, we looked at how you can organize a sabbatical and what this means for your CV and job interview.\nThe second part looks at the financial consequences of a sabbatical<\/a> for your finances and insurance.\nIn this part, we take a closer look at the financial consequences of a sabbatical for your pension provision.\nSpecifically: what does a sabbatical mean for your pension? <\/p>\n\n\n\n

There is no legal entitlement to a sabbatical in Switzerland<\/h2><\/div>\n\n

The term sabbatical is derived from a Hebrew word.\nIn Judaism, the Sabbath is the seventh day of the week.\nAccording to our weekly calendar, the Sabbath is Saturday.\nThe Sabbath is a day of rest on which, according to the 10 Jewish commandments, no work may be done.\nThis gave rise to the term “sabbatical” in the working world. <\/p>\n\n

A sabbatical is a break from working life lasting several months, for whatever reason.\nSome want to use the break to travel and broaden their horizons.\nOthers want to realize a childhood dream, have more time for their family or simply do something good for themselves when changing jobs.\nHowever, there is no legal entitlement to a sabbatical in Switzerland.\nYour employer therefore does not have to comply with your request, except perhaps if a collective employment contract has a sabbatical provision.\nHow do you take your sabbatical anyway?\nWell, you can either arrange it with your boss at work.\nOr you can take a sabbatical when you change jobs. <\/p>\n\n

Avoid financial risk with a sabbatical<\/h2><\/div>\n\n

Both a sabbatical in your job and a job change will have financial consequences for your finances, insurance and pension situation.\nIt is best to deal with this beforehand <\/p>\n\n

The financial consequences of a sabbatical on AHV<\/h2><\/div>\n\n

If you only have no income for a few months (regardless of whether you are on sabbatical from your job or changing jobs), a sabbatical will not have a major impact on your AHV pension<\/a>.\nSimply put, your AHV pension is calculated on the basis of your contribution periods, your income subject to AHV contributions and your qualifying periods between the ages of 20 and 65. <\/p>\n\n

Contribution periods are defined as the number of years for which earned income or credit periods are recorded in your AHV account.\nThe average AHV earned income is an arithmetical figure based on the income reported to the AHV.\nCredit periods include periods spent looking after children or relatives in need of care. <\/p>\n\n

Years of absence lead to significant pension cuts<\/h3><\/div>\n\n

If you do not receive a salary for a few months due to your sabbatical and therefore no AHV contributions are paid, your income subject to AHV will be reduced.\nHowever, this does not result in a contribution gap (so-called missing years<\/a>) that leads to a reduction in pension.\nThe rule of thumb is that one year of missing contributions reduces the maximum AHV pension by 2.3 % – for life.\nBased on the maximum AHV pension of CHF 2,450 per month(as at 1.1.2024<\/a>), this is around CHF 56 less each month. <\/p>\n\n

Average income determines pension amount<\/h3><\/div>\n\n

Depending on your income, the financial consequences of the sabbatical may not affect your AHV pension.\nThis is because with an average AHV income of currently CHF 88,200 (as at 1.1.2024), you will reach the individual maximum AHV pension with a full contribution period.\nIf your AHV income is regularly above this limit, you contribute to solidarity in the AHV system.\nHowever, this does not increase your AHV pension entitlement. <\/p>\n\n

Minimum amount possibly already paid<\/h3><\/div>\n\n

If you take a short sabbatical when you change jobs or take unpaid leave, you have usually already paid the minimum AHV contribution in the current year due to the AHV contributions on your earned income in the current year.\nIf not, as a non-employed person you are obliged to pay the minimum annual AHV contribution yourself if your registered (or married) partner does not pay at least twice the minimum contribution.\nTo do this, you must register with the AHV compensation fund<\/a> in your canton.\nThis will prevent you from missing years.\nYou can still pay the contributions backwards for the last 5 years.\nThis not only makes sense to avoid missing years, but is also a promising way to invest money safely<\/a>. <\/p>\n\n

Incidentally, if you travel abroad for a longer period during your sabbatical when you change jobs, this does not constitute foreign residence.\nFor this reason, and as long as you have your documents in Switzerland, you are still subject to compulsory OASI even if you have no earned income. <\/p>\n\n

Ensure AHV contributions are paid every year when taking time out<\/h3><\/div>\n\n

In summary, this means the following for you: If your time out includes a change of year, make sure that AHV contributions are paid for each year.\nThis can be a mix of contributions from one or two employers, from you (as a self-employed or non-employed person) or from your partner (in the form of double minimum contributions or parental credits). <\/p>\n\n

The financial consequences of the sabbatical on the pension fund pension<\/h2><\/div>\n\n

Essentially, four factors<\/a> determine how high your pension from the pension fund will be.\nOne of these four factors is your retirement assets.\nYour savings process in the 2nd pillar begins from the age of 25.\nFrom then on, your employer deducts a portion from your salary each year as a savings contribution for your pension and makes a contribution of at least the same amount itself.\nHow much you save for the 2nd pillar depends on your age.\nThe so-called retirement credits<\/a>, i.e. the contributions from you and your employer, increase with age from 7 % to up to 18 % in the 55+ age group. <\/p>\n\n

Duration of the sabbatical is decisive<\/h3><\/div>\n\n

So if you don’t receive any income during your sabbatical (whether at work or when changing jobs), neither your employer nor you will save for your retirement assets<\/a>.\nThe extent to which this affects your retirement assets and therefore your future pension fund pension depends on how long your sabbatical lasts and how old you are.\nYour age has two effects: if you are older at the time of your sabbatical, you will lose more retirement credits than a younger sabbatical participant, but younger sabbatical participants will lose the exponential effect of compound interest<\/a> on their retirement credits. <\/p>\n\n

Sabbatical at work has advantages<\/h3><\/div>\n\n

If you take a sabbatical from your job without a salary, it depends on the regulations of your pension fund whether voluntary savings contributions are possible or even mandatory.\nBy making voluntary contributions, you can avoid the negative financial consequences of the sabbatical resulting from a lack of contributions to your retirement assets.\nIf no savings contributions are possible, you can make up for this at a later date by buying into the pension fund.If you take your sabbatical when you change jobs, you will receive the vested benefits<\/a> from the pension fund.\nPlease note: you must inform the pension fund where it should transfer the money.\nIt will continue to manage it for a maximum of six months.\nOtherwise it will transfer it to the BVG Substitute Occupational Benefit Institution after two years at the latest.\nYou can then transfer it from there to your new employer’s pension fund. <\/p>\n\n

The financial consequences of a sabbatical in pillar 3a<\/h2><\/div>\n\n

The prerequisite for paying into pillar 3a is that you have an income subject to AHV contributions (as an employee or self-employed person) in the year of payment.\nEven if you have only worked part-time in a given year, you can still make full use of the maximum 3a amount for that year.\nThis means that you can also make maximum private provisions with pillar 3a in the year of your sabbatical.\nIn this way, you avoid the financial consequences of your sabbatical on your pillar 3a.\nPlease note: If you have your pillar 3a with an insurance company, you are normally obliged to pay in the contributions every year.\nTake this into account in your budget<\/a>.\nIn most cases, a pillar 3a with securities<\/a> is recommended, as this gives you much more flexibility than an insurance solution.\nYou can find everything you need to know about pillar 3<\/a> in this series of articles. <\/p>\n\n

Summary Financial consequences of the sabbatical<\/h2><\/div>\n\n

Taking a sabbatical is a dream of many.\nHowever, there is no legal entitlement to this in Switzerland.\nThat’s why you can either agree a sabbatical with your employer at work or plan a sabbatical yourself when you change jobs.\nThe financial consequences of a sabbatical for AHV are small as long as you avoid years of absence.\nIn the pension fund, you will miss out on savings contributions for your retirement assets if you do not pay in yourself or make up for this later by buying into the pension fund.\nIn pillar 3a, there are no financial consequences of the sabbatical on your pension provision if you do not change your private 3a pension routine. <\/p>\n\n

Now you know what financial consequences a sabbatical will have on your pension.\nNow we’ve covered one detail of your retirement provision.\nBut do you know the big picture?\nDo you have an idea of how much you will receive in retirement? <\/p>\n\n