Retirement shortfall in Switzerland: how to close your pension gap

Picture this: you’re 65, standing on a balcony with a spectacular view – but your pension barely covers the rent. Unfortunately, this is far from rare.

Many people in Switzerland assume their pension will be enough. The reality? The state pension system only replaces around 60% of your final salary. But to retire without financial worries, you’d need 80–90%.

That missing percentage is your pension gap – and it doesn’t just affect low earners. In fact, it’s often most significant for people with middle to high incomes. Without active planning, you may be forced to downsize, delay retirement, or cut back your lifestyle. But it doesn’t have to come to that.

How do I know if I have a pension gap?

Your pension gap is the difference between what you’d like to earn in retirement (usually around 80% of your last salary) and what you’re expected to receive from the AHV and your pension fund.

A simple example:

• Final salary: CHF 100’000

• Expected AHV + pension income: approx. CHF 52’000 (52%)

• Needed for comfortable retirement: approx. CHF 80’000 (80%)

• Annual pension gap: CHF 28’000

• Over 20 years of retirement: CHF 560’000

And that’s a conservative estimate. Depending on inflation, longevity and healthcare costs, the gap could grow. Higher earners are particularly exposed, as a significant portion of their income isn’t covered by the system at all.

Why do pension gaps happen so often?

They don’t arise from bad luck – but from systemic limitations, life choices, and a lack of planning. The good news? If you spot the gap, you can take action.

Part-time work and career breaks

Reduced working hours or career pauses – for childcare or training, for example – mean lower contributions to both the AHV and pension funds. Over 60% of Swiss women work part-time. Lower contributions = lower pension.

Inflation: the silent eroder

Even if pension payments remain stable, their purchasing power doesn’t. Just 2% annual inflation can dramatically reduce what your money’s worth over time. In 2024, savings accounts offered an average interest of just 0.8%.

Longer lives = longer retirements

Reaching 90 after retiring at 65? Wonderful – but financially challenging. Pension funds have been lowering conversion rates, meaning less income per saved franc, over longer time periods.

High incomes, low coverage

Surprisingly, high earners are among the most affected. Switzerland’s pension system is designed for average incomes. If you earn more than CHF 90’720, your second pillar doesn’t fully cover your salary. With an income of CHF 150’000, your pension might replace just 43% – leaving a significant shortfall.

What strategies actually help close the pension gap?

The best news? You can act now to reduce or even eliminate your shortfall. There’s no one-size-fits-all solution, but many proven building blocks. Start early and combine strategies like:

1. Tied pension (Pillar 3a)

A Swiss classic – tax-deductible and from 2025, catch-up payments will be allowed.

• Max for employees: CHF 7’258

• Max for self-employed: CHF 36’288 (or 20% of income)

2. Flexible pension (Pillar 3b)

No restrictions or limits – ideal for bonuses, inheritances, property savings, life insurance, ETFs or savings accounts.

3. ETF investments

Low-cost, diversified investments for the long term. ETF savings plans let you invest globally – even with small amounts. Better returns than savings accounts, but you’ll need to weather the ups and downs.

4. Bonds and term deposits

Safe, stable assets for pre-retirement years. With interest rates back on the rise, some term deposits offered over 1% in 2024 – perfect for smoothing returns near retirement.

Looking for expert investment advice? Schedule your free session with a wealth advisor today.

Book a call

How Alpian supports long-term retirement investing

Alpian is the Swiss bank for people who invest for the long term – with low fees, smart advice, and global ETF portfolios from CHF 2’000.

Your Alpian advantages:

• Professional portfolios from CHF 2’000

• Low management fee: from 0.75% p.a.

• Personal guidance from licensed experts

• Automatic rebalancing

• Sustainable investing options

• Fully digital – but still personal

Whether you’re just starting or growing your portfolio, Alpian adapts to your life. Simple. Transparent. Future-ready.

Real-life examples of Swiss pension gaps

Everyone’s situation is different. Here are three real-life scenarios from Switzerland showing how pension gaps arise – and how they can be resolved.

Case 1: Part-time work after parental leave

Cause of the gap: Due to reduced employment following the birth of her children, a 35-year-old mother has paid less into AHV and the pension fund. The pension fund’s coordination deduction applies equally to part-time and full-time work, meaning a large part of her lower salary is not insured. This results in a pension gap because her retirement income will be significantly lower than her previous earnings.

Solution: To close this gap, she consistently contributes the maximum amount to pillar 3a each year. Additionally, she considers voluntary purchases into the pension fund to make up for missing contribution years. These measures increase her retirement capital while reducing her tax burden, allowing her to gradually close the pension gap.

Case 2: High earner, underinsured

Cause of the gap: A 55-year-old employee with an above-average income finds that AHV and the pension fund will likely cover less than 80% of his final salary in retirement. His high income exceeds the mandatory insurance limit of the pension fund, so only a portion of his earnings is insured. This gap becomes more severe as he wants to maintain his standard of living in retirement.

Solution: He chooses to take proactive measures. By making voluntary purchases into the pension fund, he immediately increases his future pension capital. At the same time, he fully utilises pillar 3a every year and sets aside additional savings in pillar 3b (flexible pension provision). This combination of pension fund contributions and tax-advantaged private savings helps him close the pension gap and secure his accustomed standard of living in retirement.

Case 3: Self-employed with no second pillar

Cause of the gap: A forty-year-old woman who became self-employed now only contributes to the AHV (first pillar) and no longer has a pension fund. As a result, the crucial second pillar is missing, and the expected AHV pension alone won’t be enough to maintain her current standard of living. A significant pension gap arises due to the lack of occupational pension contributions.

Solution: To counter this, she sets up a disciplined retirement plan. She opens a pillar 3a account and, as a self-employed person, contributes the maximum amount each year. This not only builds retirement savings but also reduces her tax burden. In addition, she regularly invests in flexible pension solutions (pillar 3b) such as funds or ETFs to accumulate more capital for retirement. With this private pension strategy, she closes the gap left by the missing pension fund and ensures she’s financially secure in retirement.

When should I start thinking about my pension?

Now. The earlier you act, the more freedom you have. Catching up later is harder – and more expensive.

The pension gap isn’t a side issue – it’s one of the main reasons for financial stress in retirement. Planning today means saving yourself money and worry tomorrow. Start by reviewing your AHV and pension fund situation. Use digital tools like Alpian to invest with transparency. Think long term – but act now.

Conclusion: the pension gap is real – but not inevitable

Your pension planning is as personal as your life. But one thing is true for everyone: ignoring the gap won’t make it go away. So take action today – for a financially free tomorrow.