Why take early retirement?
Retiring before the legal retirement age allows you to make the most of your years in good health. It offers the opportunity to realize personal projects such as travel, hobbies or exploring new passions. This free time can also be used to spend more precious moments with loved ones, away from the constraints of work.
For those faced with difficult working conditions, retiring earlier can be a way of preserving their mental and physical well-being. Particularly to avoid long-term negative consequences on their health.
Impact on AHV pension (1st pillar)
Conditions for receiving an early pension
You can apply for an early pension up to a maximum of 2 years before the normal retirement age (65 for men and 64 for women). Applications must be submitted to your AHV fund at least 3 months before the desired date.
Disadvantages of an early AHV pension
Taking early retirement under the AVS framework has several disadvantages. During the anticipation period, no child pension will be paid. Additionally, your pension will be reduced throughout your retirement (for life).
Calculating an early AHV pension
To calculate the early pension, you must first determine the pension you would receive if you retired at the reference age. To find out your early AVS pension, identify the elements below, then consult the scale 44.
The elements taken into account in the calculation are as follows:
- The years of AHV contributions
- The bonuses for educational or care duties
- The income from gainful employment
- For married couples, the maximum pension is 150% of the maximum pension
- Apply the percentage reduction in the event of early collection
Percentage reduction for early receipt of AHV pension
- Anticipation period
- Reduction
- 6 months
- 1 year
- 1 year and 6 months
- 2 years
- - 3.4%
- - 6.8%
- - 10.2 %
- - 13.6 %
Impact on occupational benefits (BVG)
Conditions for receiving an early BVG credit
Under the 2ᵉ pillar (occupational pension provision), it is possible to collect your BVG credit before the legal retirement age under certain conditions:
- Withdrawal from 58 years old generally in accordance with your pension fund regulations.
- Each pension fund has its own rules, particularly concerning early access.
- An official request must be made to your pension fund, which is often several months before the desired date.
How do you calculate an LPP pension?
The LPP pension (2ᵉ pillar) is calculated based on the accumulated capital in your pension fund and the applied conversion rate.
First, you will need to determine your accumulated capital, which includes the contributions made by you and your employer up to the date of your early retirement, as well as the credited interest on this capital.
Next, you will need to apply the conversion rate, which is reduced for early retirement. The reduction depends on your pension fund's regulations and the gap between your retirement age and the legal retirement age. You can find all the necessary information in your pension certificate.
Choosing an annuity or a lump-sum withdrawal
The choice between a pension and a lump-sum withdrawal for your 2ᵉ pillar depends on your financial and personal priorities. A pension provides the security of a stable lifetime income, ideal if you seek financial stability without the risk of poor fund management.
On the other hand, a capital withdrawal gives you total freedom to invest, repay debts or carry out projects, while allowing unused funds to be passed on to your heirs. However, this option requires careful management to avoid premature depletion of resources. Before deciding, assess your long-term needs, your other sources of income, and your financial management skills.
Impact on the 3rd pillar
The 3ᵉ pillar can be withdrawn up to 5 years before the legal retirement age (60 for men and 59 for women). This early withdrawal is subject to a one-time tax at a preferential rate. Specific conditions may vary between private pension institutions.
How can I fill in the gaps?
Depending on your situation, there are a number of ways you can bridge the contribution gap once you retire.
Retroactive AHV contributions (1st pillar)
If you have periods when you have not paid AVS contributions (for example, during a stay abroad or a break in employment), you can regularize your contributions up to 5 years back. Contact your AHV fund to obtain a statement of your individual account (CI) and identify any missing periods.
Pillar 2ᵉ purchases (BVG)
You can make voluntary buy-ins to your pension fund to fill gaps caused by a late entry into the system, a career change, or a professional interruption. These buy-ins increase your accumulated capital and, consequently, your future pension, while providing a significant tax deduction.
Increase payments into the 3rd pillar
The 3ᵉ pillar allows you to save voluntarily for retirement while benefiting from tax advantages. Maximize your annual contributions (up to 7,056 CHF in 2024 for employees affiliated with a pension fund, and up to 35,280 CHF for self-employed individuals without a 2ᵉ pillar).
Combined life insurance (securities and risk portions)
A mixed life insurance policy helps fill pension gaps while offering financial protection and potential returns. This product combines a savings component invested in securities (stocks, bonds, funds) with risk coverage (death or disability).
The savings component helps build additional capital for retirement, while the risk coverage ensures financial support for your loved ones in case of unforeseen events.
Frequently Asked Questions
Are retirement pensions taxed?
Yes, AVS and LPP pensions are taxable as income. They are included in your annual tax return and subject to income tax rates, with variations depending on the canton. LPP (2ᵉ pillar) assets withdrawn as a lump sum are also taxed, but at a preferential and one-time rate.
When can I take early retirement?
AVS (1ᵉʳ pillar) : Early retirement is possible up to 2 years before the legal retirement age.
LPP (2ᵉ pillar): Pension funds generally allow withdrawals starting at 58 years, but the conditions vary depending on the regulations.
What is partial retirement?
Partial retirement allows you to gradually reduce your professional activity while starting to receive a portion of your pension. This provides a smooth transition to full retirement.
Do I still have to pay AHV contributions if I take early retirement?
Yes, if you take early retirement and no longer have income subject to contributions, you must continue contributing to the AVS as a non-employed person. Contributions are calculated based on your wealth and replacement income, with a minimum annual amount of 514 CHF.
Can I buy into my pension fund to increase my pension?
Yes, purchases in your 2ᵉ pillar are possible to make up gaps in contributions, for example due to career breaks.
These purchases increase your future pension and are tax-deductible, but must be carefully planned to maximize their tax benefits.
What happens if I live abroad after retirement?
If you live abroad, you can continue to receive your AHV and BVG pensions. However, the tax aspects depend on the tax treaties between Switzerland and your country of residence. Certain pensions may be subject to a double taxation.
Are annuities adjusted for inflation?
AHV card Pensions are periodically adjusted to reflect changes in prices and salaries.
LPP : The adjustment of 2ᵉ pillar pensions depends on your pension fund regulations and is not systematic.
