Deferred retirement. Why it pays off.
If you are in good health and enjoy your work, you may want to work past the reference age. How deferred retirement works and what the concrete financial advantages look like.
Defer your AHV pension and benefit from a larger pension
As part of the flexible options for drawing a pension under the Old Age and Survivors' Insurance (AHV), insured persons can shape their retirement according to their own needs and desires. For example, Pillar 1 regulations allow you to defer drawing your AHV pension by a maximum of five years even after you have reached the reference age.
The financial advantage to this is that, if you defer your AHV pension and postpone retiring for a while, you will receive a lifelong percentage-based supplement when you do start drawing your pension. This supplement is based on the length of the deferral period and increases for every month that you do not draw your AHV pension. However, to benefit from a higher pension, drawing the AHV pension must be deferred by at least one year. If the insured person decides to draw their pension in the normal way before this period ends, the amounts deferred since the entitlement began will be paid retroactively, without a supplement and without any interest.
As of 2023, insured persons who defer their retirement by one year will receive a 5.2% supplement on their monthly AHV pension. Deferring for five years will result in a supplement of 31.5%. With a maximum pension of CHF 2,450 per month, this translates into a supplement of CHF 772; with the minimum pension, the supplement would be CHF 386.
Deferring the AHV pension: How the pension increases per deferred year
Starting point: Normal AHV reference age 65, maximum AHV pension of CHF 2,450.
Source: AHV information centre, Credit Suisse
Register for deferred retirement
You must register for your AHV pension deferral within one year of reaching the reference age. A form known as a deferral declaration is required. To generate this form, check the yes box when asked if you would like to defer your pension withdrawal in the "Flexible annuity on retirement" section of the Old-age pension application form. You do not have to definitively indicate the length of your deferral period in advance. Once the minimum period of one year has elapsed, you may request your AHV pension on a monthly basis. To do so, you must submit the Cancellation of old-age pension deferral form.
Gainfully employed persons must continue to make AHV contributions during the deferral period. There is however an exemption of CHF 1,400 per month, or CHF 16,800 per year. For incomes greater than this, the normal AHV, IV, and income compensation contributions will be deducted. The AHV 21 reform will make it possible to waive the personal allowance and make contributions on your full salary in order to close contribution gaps or increase the AHV pension. Whether this is worthwhile in individual cases must be discussed with the AHV compensation office.
Deferral of your BVG pension
It is also possible to defer payment of your pension under employee benefits insurance. With the entry into force of the AHV reform, all pension funds must allow a pension deferral of this nature. This means that gainfully employed persons can request to remain insured with the pension fund until the end of gainful employment, but at the latest until the age of 70. Contact your pension fund in good time if you would like to take up this option. People who have reached the reference age who were previously not able to defer drawing their pension are advised to consider rejoining the pension fund.
Deferring your BVG pension also has financial benefits. Some pension funds allow you to continue making contributions during the deferral period, thus enabling you to accrue additional retirement capital. Since the period in which benefits have to be paid out is shorter, the conversion rate always increases. The assets paid out at the end of the employment relationship – in the form of a pension, lump sum, or a combination of both – are higher than in the case of normal retirement.
Deferred retirement in Pillar 3a
If you are employed, you may defer withdrawal of retirement benefits from your tied pension provision and continue to make tax-privileged contributions for a maximum of an additional five years. As soon as you are no longer gainfully employed, all Pillar 3a pension capital must be withdrawn. The balance is paid out as a single lump sum and taxed at a reduced rate separate from normal income. In order to save money, we recommend opening several Pillar 3a accounts from which you can make staggered withdrawals over several different tax years prior to your planned retirement.
When deferred retirement is worthwhile
Whether it's worth deferring retirement will depend on various factors. The greater your life expectancy, the more sense deferred retirement makes – as long as your employer allows for this. In addition to your health, your personal tax situation also plays a role. This is because deferring pension payment, whether of the state pension or employee benefits, is particularly worthwhile for high earners who plan to work beyond the reference age: By deferring payment of their pensions until they finish gainful employment, insured persons can avoid a higher tax burden as a result of the combination of income and pension.
