It’s good to be there for your own children. However, it often comes at the expense of occupational provisions. That's something future parents should think about now so they can continue to enjoy financial freedom in the future and shape their lives in self-determination.
Lower salary = lower retirement savings
When a child has been, or is soon to be, born many couples consider reducing their level of employment. A Swiss Life study from 2019 shows that: almost all Swiss parents (92%), would like to work part-time. They hope for the best balance between job, childcare and household.
But be careful: if only one parent or both work less, it has a direct impact on retirement provisions. Every percent reduction in employment entails lower employee benefits. Retirement assets are reduced, the pension too.
However, there are plenty of opportunities to look to the future with financial confidence – for example a pension fund purchase. That will help close any gaps in coverage. A solution that pays off: this money is 100% tax-deductible. Another option is the pillar 3a. It is more than just a method of saving for old age, it also protects you against disability and death.
However, if a partner gives up working life entirely to stay with the children, there will be financial consequences for her or him. In the event of old age, disability or death, only the 1st pillar pays out benefits, for example in the form of the AHV and IV pensions. Financial relief is only available as vested benefit capital from the second pillar, deposited on withdrawal from employment.
If you work again, you improve your situation
When you go back to work, your vested benefits must be transferred to your new employer's pension fund. It is advisable to review your insurance situation now and make adjustments if necessary. It could be a disability annuity or accident cover in your health insurance, which the new employer will take over..
Single parents have a double burden
Raising children alone can be a challenge. Being well insured and saving capital for old age as well is even more difficult – especially on a rather limited budget. A detailed retirement savings plan creates security. It defines the type and sum of the investment, while also accounting for risks such as disability or death.
Regulations during maternity leave
Maternity leave does not affect occupational provisions if the mother is employed at the time of the birth. She is compensated through the ordinance on indemnity for loss of earnings (EO) or the maternity allowance. She is also insured through the 2nd pillar and can expect to receive pension fund benefits. Children are insured through the AHV/IV and the pension fund of their parents.
Children's benefit is paid out if a parent becomes disabled. If a parent dies, the descendants receive orphan's benefit. Children entail higher benefits, which makes other types of cover redundant to an extent. However, bear in mind that the young generation is not well insured against disability. Parents should always allow for that when providing for the future and take out additional cover where possible.
Image source: iStock, zimindmitry
Would you like to work part time as well? Find out quickly and easily what impact the reduced level of employment would have on your budget and on childcare.