Part-Time Work and Retirement: The Long-Term Financial Impact

More and more employees are voluntarily reducing their working hours. While the benefits of part-time work are often immediate, the long-term financial consequences tend to receive far less attention—especially at a younger age. In short: the less you contribute today, the less you will receive in retirement.

Let's start at the end. When people retire, their financial situation changes significantly. The key question then becomes: How much pension income and retirement savings have been accumulated? Or, put differently, how much has been paid into Switzerland's three-pillar pension system over the course of a working life? The answer depends largely on the level of employment income earned throughout one's career.

First Pillar: AHV, IV and EO

Anyone employed in Switzerland is familiar with payroll deductions. For the first pillar (Old-Age and Survivors' Insurance (AHV), Disability Insurance (IV), and Income Compensation Scheme (EO)), employees contribute 5.3% of their gross salary, with the employer contributing an equal amount.

Naturally, lower earnings or part-time employment result in lower overall contributions to the pension system. Over the long term, this directly affects the amount of the AHV pension received after retirement.

The pension amount is calculated based on the contributions made throughout an individual's working life. Consequently, the range of possible pensions is considerable. At present, the maximum AHV pension is CHF 2,520 per month, while the minimum pension is CHF 1,260 per month—exactly half as much.

Second Pillar: Occupational Pension Scheme

For employees, retirement savings under the occupational pension scheme (BVG/LPP) begin at the age of 25. From that point onwards, a percentage of the coordinated salary is paid into the second pillar as retirement savings.

These pension contributions are financed at least equally by employer and employee. While employers are legally required to pay at least half, many voluntarily contribute a larger share.

There are two important limitations to be aware of:

First, there is an entry threshold. Employees only become insured under the occupational pension scheme if they earn at least CHF 22,680 per year (2025).

Second, pension contributions are calculated only on the portion of salary exceeding the coordination deduction, which amounts to CHF 26,460 (2025).

For part-time employees, this means that the amount credited to the occupational pension scheme is generally lower. As a result, retirement savings accumulate more slowly, leading to lower retirement capital or a smaller pension than someone working full-time.

These rules apply to the mandatory BVG/LPP scheme. Employers are free to offer more generous pension arrangements beyond the statutory minimum.

A particularly critical situation arises when someone works two or three part-time jobs, with each individual salary remaining below the entry threshold or the coordination deduction. In such cases, no retirement savings are accumulated in the second pillar at all, which can lead to significant financial disadvantages after retirement.

Voluntary Retirement Savings (Pillar 3a)

The third pillar (Pillar 3a) is another important component of retirement planning.

Employees may contribute up to CHF 7,258 per year (2025) to a personal Pillar 3a retirement account. The accumulated savings, including interest, can generally be withdrawn upon retirement.

An additional advantage is that annual contributions can be deducted from taxable income, meaning that retirement planning and tax savings go hand in hand.

Individuals who are not affiliated with an occupational pension fund may contribute up to 20% of their net earned income, subject to a maximum of CHF 36,288 (2025).

However, when employees reduce a full-time position to part-time work, many no longer have sufficient disposable income to make regular Pillar 3a contributions. As a result, a retirement savings gap often develops—usually without people fully realizing it until after they retire.

Source: Treuhand | Suisse