What Happens with AHV, BVG and 3rd Pillar in the Event of Divorce?
In the event of a divorce, the same principle applies to AHV, BVG and 3rd pillar: Entitlements and assets earned during the marriage are divided up. However, this is done differently from pillar to pillar.
Money worries and financial disagreements are among the most common reasons for divorce. In the event of a divorce, these conflicts are generally exacerbated further. This can lead to substantial disputes, specifically in terms of employee benefits insurance. In contrast to the first pillar/AHV (Old Age and Survivors' Insurance) and 3rd pillar (private pension), the distribution of the 2nd pillar/BVG (occupational pension provision) is a complex matter that is almost impossible to manage without the help of a specialist. Moreover, since January 1, 2017, a new law has applied in Switzerland which redefines some aspects of the division of the 2nd pillar in the event of a divorce. People who are already divorced may benefit from this under certain circumstances.
First Pillar: AHV
Divorced couples can contact the AHV compensation office to request that their assets are divided. If you do not fill out an application, the compensation offices will carry out the splitting automatically when the pension calculation is made, if not before. This means that all of the income earned by the spouses during the marriage is divided half-and-half between both. The only exceptions to this rule are the year in which the marriage took place and the year in which it ended in divorce. This means a couple must have been married for at least one calendar year for the purpose of splitting. If a couple is already receiving an AHV pension, they will receive two individual pensions after the divorce. The sum of the two individual's pensions is generally higher than the existing shared pension – especially if the couple is receiving the maximum retirement pension payable under the AHV.
Pillar 2: Employee Benefits Insurance
Unlike the AHV, couples must arrange the division of BVG assets in their divorce proceedings. That sounds simpler than it is. This is because, in addition to the accrued assets, it is necessary to consider several factors such as voluntary purchases, balances with several pension funds and advance withdrawals for the purchase of residential property. The assets saved in the employee benefits insurance reserves before the marriage are not taken into account in any case. Since 1995, the pension funds have been obliged to inform their insured clients when they marry how high their balance is. However, anyone who married before 1995 and has changed jobs several times would be best advised to consult an expert to determine the assets correctly.
It is also important that equalization payments made as part of the divorce must remain in the employee benefits insurance and cannot be paid out in cash.
Differences in the Case of Advance Withdrawals
Withdrawals for the purchase of residential property during the marriage will be included in the calculation of the division of pension assets. Additionally, it is necessary to consider which spouse retains the property following the divorce. Cash withdrawals, for example for starting self-employed activity, are not considered in the division of pension assets, because the other spouse would have to have agreed to the withdrawal. If these funds are still available, they will be considered in all cases within the framework of the marital property law when the disposable assets are divided up.
New Law since January 1, 2017
Since January 1, 2017, a new law has applied in Switzerland. It ensures that employee pension fund benefits are divided up more fairly. Particularly people who undertook care duties during the marriage may have been at a disadvantage in the past. Now, the assets will be divided up even if one spouse is already retired or registered disabled at the time of the divorce. For payment, there are two options: Either the hypothetical termination benefit is calculated and divided, or the existing pension is divided and converted into a lifelong pension for the non-disabled or non-retired person. Current pensions from previous divorce decrees can be converted into pensions in accordance with the new law under certain conditions until December 31, 2017. A further important change is that the time for the settlement is now the start of divorce proceedings and not the end. In the past, the date of settlement had to be as close as possible to the judgment date so that the financially weaker person would not be disadvantaged. Now that is no longer necessary.
3rd Pillar: Private Pension Provision
If a married couple has not agreed to a separation of property, assets held in pillar 3a that were saved up during the marriage will be divided up between the spouses. It does not matter whether the money is held in the form of a bank account or an insurance policy. The distribution of assets must be recorded in the divorce agreement. The divorce decree must in all cases be a summary judgment and declared to be legally binding. A draft is not sufficient. The money must remain within pillar 3a or be transferred to an employee benefits pension fund insofar as there is no reason for a cash payment pursuant to Art. 3 BVV3. Money in pillar 3b (flexible pension provision) is counted as part of the jointly acquired property and will also be divided up.