Leave the world of work step-by-step with partial retirement
Partial retirement enables gainfully employed persons to gradually reduce their level of employment, provided that their employer allows this. Find out what you need to consider and why detailed planning is key if you intend to take phased 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 reference age.
Staggered retirement under the second pillar calls for careful planning
Employers have an important say in employees' requests for partial retirement. This means that your level of employment can often be reduced in several stages, although most pension funds only allow reductions of 20% or more. In each stage, insured persons can usually choose between drawing their retirement assets as a lump sum or pension. It may be possible to draw your pension in more than three stages depending on the regulations of the individual pension fund. However, withdrawal in the form of a lump sum may not be done in more three stages, with one step comprising all withdrawals within one calendar year. Please note that, in certain cantons, lump-sum withdrawals were previously only possible in a maximum of two steps. The AHV reform provides new options for partial lump-sum withdrawals. It's worth checking these and taking cantonal tax restrictions into consideration.
Complex questions can arise with regard to phased retirement, for example regarding the right moment to draw your pension if you are planning to draw both a pension and a lump sum in the individual steps. Should you draw a pension in the very first stage, because the pension fund's conversion rate might be lower in the future? Or should you wait until the final stage of retirement, because the conversion rate will increase as you age? Each partial step should be planned carefully.
Continue your second pillar for up to five years with partial retirement
If you decide to continue working after reaching reference age, you can keep paying in to your pension fund until you reach the age of 70. This will now be the case from the beginning of 2024 when the AHV 21 reform comes into effect. People who have reached the reference age who were previously not able to defer drawing their pension should now consider rejoining the pension fund.
Whether additional contributions to employee benefits insurance can be made depends on the employer and the regulations of the pension fund. It may also be possible to make voluntary purchases into the second pillar depending on the circumstances, but this must be clarified and planned in detail. As a guiding principle, taking into account the new laws: If a person is already drawing or has drawn a retirement benefit and now makes a pension fund purchase, the maximum purchase amount is reduced. Consequently, the amount is reduced in proportion to the retirement benefit that has already been drawn and must be reported via a form to the pension fund when the purchase is made.
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 from canton to canton. Due to flexible options, the pension and tax implications must be clarified carefully.
Partial AHV pension in the event of partial retirement
AHV contributions still have to be paid on the part-time income you earn until you reach the reference age and the retirement pension is then generally paid when you reach this age. It is possible to draw the AHV pension up to two years early but this will result in a life-long reduction in the pension amount. The reduction rate is currently 6.8% for each year that you draw the pension early. Lower rates are expected to apply in the future, but not before the start of 2027 at the earliest. If you are considering drawing your pension early shortly before new lower rates are due to enter into force, it may be worthwhile waiting so that you can take advantage of them.
In contrast to pension funds, it has not previously been possible to draw just part of your AHV pension. This will change from the beginning of 2024 following the AHV reform, under which the entire pension – or a proportion of between 20% and 80% thereof – can be drawn from the age of 63. Now, if you want to retire, you can apply to draw your pension early at any time with effect from the beginning of the following month. The proportion drawn early can be increased in one further step, after which the remaining pension must be drawn in full. It's therefore a good idea to check whether deferring a proportion of your pension makes sense if you are taking phased partial retirement. It should be noted here that those earning less than CHF 58,800 can expect reduction rates that are 40% lower from 2027 as a result of the AHV 21 reform. The percentages for the reduction are set down in the regulation and periodically adjusted for life expectancy.
Women from the transitional generation (born between 1961 and 1969) who are affected by the AHV 21 reform can draw their pension early from the age of 62. However, they are entitled to a pension supplement, the amount of which is based on the applicable average income. If they draw their pension before this age, they will lose this entitlement. Whether one or the other option is worthwhile depends on the individual's financial situation and should be checked carefully.
However, drawing the AHV pension can also be deferred by up to five years after reaching the reference age. This nevertheless means forgoing your pension for that period, and AHV contributions will still need to be paid on salaries in excess of the CHF·1,400 monthly personal allowance. 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
The assets saved in Pillar 3a can be withdrawn in full up to five years before you reach the AHV reference age. If you have several Pillar 3a accounts and safekeeping accounts, you also have the option of withdrawing assets from the third pillar in stages. This brings tax advantages, depending on which canton you live in. In addition, you can continue to pay in annual amounts at the same level as before in the event of partial retirement.
Those who work beyond the reference age can also continue to pay into Pillar 3a for up to a maximum of five years and deduct these contributions from 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 pay in to a pension fund. In this case, the maximum Pillar 3a contribution in 2023 is CHF 7,056.
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.