Leave the world of work step-by-step with partial retirement.
Partial retirement enables people to gradually reduce their level of employment, where permitted by the regulations of their pension fund and made possible by their employer. We look at the key points that need to be considered, and at why detailed planning is important if you intend to stagger your retirement.
Gently ease out of working life with partial retirement
Do you want to go straight into retirement from full-time work? It's not the ideal solution for every employee. Many people therefore contemplate a phased withdrawal from working life. Partial retirement enables gainfully employed persons to reduce their working hours on a gradual, permanent basis from age 58 onward. Phased retirement also offers a potential solution for those wishing to carry on working part-time after reaching statutory retirement age.
Staggered retirement under the second pillar calls for careful planning
If the pension fund regulations allow for partial retirement, you are generally free to use this option. Thus your level of employment can often be reduced in several stages, although most pension funds only allow reductions of at least 20%. With each step toward partial retirement, many pension funds also allow you to draw a portion of your retirement benefits early. In this case, insured can usually choose whether to draw the balance in the form of a lump sum or pension. Depending on the canton, tax restrictions nevertheless need to be considered.
Complex questions can arise with regard to staggered retirement, for example regarding the right moment to draw your pension if you are planning to take a pension and lump sum with each individual step. Should you draw a pension during the first stage of retirement because the pension fund's conversion rate could be lower in future? Or should you wait until the final stage of retirement, because the conversion rate increases as you age? These gradual stages also need to be carefully planned.
Continue your second pillar for up to five years with partial retirement
If you decide to continue working after reaching retirement age, you can continue to be insured with your pension fund until the age of 70 if your pension fund regulations allow for this. In some pension funds, contributions continue to be made and additional retirement capital is built up. In others, only the payout is deferred.
Whether additional contributions to employee benefits insurance can be made depends on the employer and the regulations of the pension fund. Depending on the situation, it is still generally possible to make voluntary purchases of additional second pillar pension benefits, although this needs to be carefully clarified and planned. As a general rule, voluntary purchases during the period of deferred retirement are possible if there are pension gaps when the insured reaches normal retirement age.
Clarifying the consequences of partial retirement in advance
In terms of tax law, partial retirement with lump-sum withdrawals in particular must be reviewed carefully, because the tax regulations differ greatly by canton. Some cantons require a certain reduction in the level of employment, and the number of stages is limited. There may also be restrictions with regard to the maximum number of lump-sum withdrawals. More flexibility also means that the consequences under pension and tax laws must be clarified in detail.
Partial retirement does not allow you to draw part of your AHV pension
For employed persons, the changes in the first and third pillars are significantly less in the case of partial retirement. AHV contributions continue to be due on part-time income until normal retirement age is reached and the retirement pension is then paid when you reach this age. It is possible to draw your AHV retirement pension early by up to two years, but this reduces your life-long pension by between 6.8% and a maximum of 13.6%.
In contrast to the pension fund, there is no option to draw part of your AHV pension. However, the drawing of the AHV pension can likewise be deferred by up to five years after normal retirement age. This nevertheless means forgoing your pension for that period, and in addition AHV contributions still need to be paid on a salary in excess of the CHF 1,400 monthly exemption. Whether this is ultimately worthwhile needs to be calculated on a case-by-case basis.
Pay into Pillar 3a until age 70 with staggered retirement
By contrast, assets accrued in Pillar 3a can be withdrawn in full starting five years before normal retirement age. With several Pillar 3a accounts and safekeeping accounts, there is also the possibility of a staggered withdrawal of assets from the third pillar. This brings tax advantages, depending on the individual canton. In addition, you can continue to pay in annual amounts at the same level as before in the event of partial retirement.
If you continue to work beyond normal AHV retirement age you can go on paying into Pillar 3a for up to five years after this and deduct these amounts from your taxable income. The level of Pillar 3a contributions is independent of the level of employment. The only point of relevance is whether you continue to make contributions. If you do, the maximum Pillar 3a contribution in 2023 is CHF 7,056. If you are no longer a member of a pension fund, you can pay in 20% of your net income from employment, or a maximum of CHF 35,280.