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Pillar 3a: Women with children and women without children save differently for their retirement

According to a new pension study by Credit Suisse, women in dual-income couples are aware of the importance of their retirement provision. However, those with children are more likely to pay into pillar 3a than those without. This is the case even though on average the mothers have lower disposable income. What is the cause of this surprising finding?

Women's private retirement provision is influenced by their personal life and family situation. Having a family evidently enhances the awareness of providing for one's old age. This is illustrated by the recent study by Credit Suisse "Mind the gap: Part time, timeout, pension shortfalls". Among women in dual-income couples, those with children are more likely to invest in the third pillar than those without – who are sometimes referred to as DINKs (double income no kids) – even though the mothers have lower disposable income in many cases. For example, 70% of women with a tertiary education who have children, a group with an average income of CHF 58,000, contribute to a pillar 3a pension on a regular basis. However, only 63% of highly-educated DINKs, who have an average income of CHF 82,000, invest in a pillar 3a pension. In other words, in spite of their seemingly good financial situation, almost 40% of DINKs do not take the opportunity to secure their standard of living in retirement via pillar 3a.

Women with partners are more likely to pay into pillar 3a if they have children.

DINKs and women with children compared

DINKs have a higher average income than women with children, but are less likely to pay into pillar 3a.

Source: Credit Suisse, 2019 

Women with children do not always have sufficient funds for a private pension

Women living with their partner and children are aware of the need for private pension provision. However, in some cases they lack the financial resources to prevent pension shortfalls by saving towards a pillar 3a pension. There are a number of reasons for this. Following the birth of a child, some women reduce their working hours or take time off to look after their children. In some cases the commitment to family and children also holds back their career development. Both have a detrimental impact on income, which can make it more difficult to build up a solid pillar 3a retirement pot.

Women with children by educational level

Women with a family put less emphasis on their careers

Women with children often sacrifice their education to concentrate on their family, while around half of DINKs achieve a high level of educational attainment.

Source: Credit Suisse, 2019 

It is therefore all the more important for women with children to take full advantage of their opportunities to save for a pension. Even regular small amounts in the family budget can help to build up pillar 3a and fill gaps in provision.

3a pension profile: Women with children

Starting a family has an impact on pension saving. Women in dual-income couples with children are more likely to invest in the third pillar than women in dual-income couples without children. This is revealed by a new study by Credit Suisse on pillar 3a pensions. The study's co-author Emilie Gachet explains what this means both for women with and without children.

DINKs: 37% to 40% do not take out a pillar 3a pension

Financially speaking, many women in dual-income couples without children should be able to afford to contribute regularly to pillar 3a. Because, for example, they do not have the cost of bringing up children and are less likely to work part-time, on average they have higher disposable income than women with children. But even DINKs may not work full-time right through until retirement. If you are planning to reduce your working hours to improve your work-life balance or to do voluntary work, go on a round-the-world trip or take extended time off for other reasons, this will have an adverse impact on your pension provision. All the more reason to provide for this ahead of time – assuming you are financially capable of doing so – and save regularly towards pillar 3a. This ensures that you reduce gaps in your provision and minimize any reduction in your standard of living in retirement. Ideally you should take this opportunity as early as possible and avoid putting off your private retirement provision until some time in the future. Remember that you cannot make retrospective payments for past contribution years in pillar 3a.

3a pension profile: Women in dual-income couples

DINK stands for "double income no kids." Women in dual-income couples without children have the highest incomes compared to other groups of women. Nonetheless, these women pay less into pillar 3a than dual-income women with children. There is more on this from Jan Schüpbach, co-author of the Credit Suisse pension study, "Mind the gap: Part time, timeout, pension shortfalls."

An interesting benefit: Reduce your tax liability with 3a contributions

Saving towards pillar 3a is worthwhile from a tax perspective, too, in more than one respect. You do not necessarily need to pay the maximum amount into the third pillar to benefit. Even regular small amounts help to avoid pension shortfalls. From a tax perspective and in terms of the portfolio return, they can actually be more tax efficient than sporadic large payments depending on where you live in Switzerland. Moreover, those who begin saving towards a pension early benefit doubly. The long investment horizon strengthens the compounding effect and so increases the amount ultimately paid out.

Retirement provision for women

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