The essentials in brief:
- On average, women save 37 percent less than men in old-age provision.
- This has to do with the fact that the vast majority of women still do the caring work in the family and are not compensated for it in the BVG.
- Poverty in old age is female.
- The BVG revision envisages only a slight improvement in this situation.
- Women should therefore ensure that unpaid care in the family is compensated for in the private sphere.
the initial situation
According to a study commissioned by the Federal Social Insurance Office (BFS) in 2016, women receive 37 percent less pensions than men. This means that they receive 37% less money than men from the AHV and the BVG and the 3rd pillar when they retire. “Something about a “pension gap” – single women have overtaken men”, was the headline in the NZZ on January 24, 2022, accusing the left of propaganda in the discussion about the pension reform.
However, the NZZ compares single women and men in this article. The left, on the other hand, speaks primarily of women and men who have children. This is a large and important part of the population and there is a lot of trouble there: According to the Federal Statistical Office, children under the age of 25 live in 29 percent of the 3.8 million private households, which, according to the BFS, accounts for 40.5 percent of the population. 16 percent of these are single-parent households, and of these, single-parent households with mothers make up 83 percent.
What does this have to do with pension reform? The majority of all couples with children in Switzerland today live a family model in which the man works 100 percent, the woman looks after the children and works part-time for 20 to 40 percent. In most cases, as long as the couple stays together, there are no major financial problems after retirement unless they already existed. This was planned by the legislature and is still working.
But now the reality has changed a lot. It is a well-known fact that the divorce rate has risen sharply. The number of single-parent households with children under the age of 25 has increased by 166 percent since 1970, while the proportion of couple households with children has fallen from 42 to 24 percent during this period (Families in Switzerland, FSO 2021).
The situation of divorced mothers with children
And now it comes: If a couple with children separates, both are usually granted joint custody, but in fact the mother continues to look after the children, especially during the week. 83% of single-parent households are households with mothers. This means that these women are not fully able to work while the children are small. In addition, because of the children, they usually worked small part-time jobs, were less able to continue their education and very rarely advanced professionally.
In the event of a divorce, the court applies splitting to the accumulated retirement assets from AHV, BVG and the third pillar, i.e. both receive half of the accumulated retirement assets. The wife and mother is thus indirectly compensated for their family work up to the time of the divorce. That is fair and wanted by the legislature, which at the time still assumed that families usually stay together.
At the time, the legislature did not think about the time after the divorce and the courts have not yet taken it into account when it comes to pension provision. That’s where the main problem lies and that’s where the big gender gap arises: women who continue to look after the children after a divorce can save less or no pension fund assets at all because of their part-time work. The gender gap accounts for 44% in the BVG alone.
Legal reform proposals
The imbalance in the AHV is relatively small at 2.7 percent. That is why this discussion revolves primarily around financing and AHV retirement age. With the BVG, where the gender gap is 44 percent, it is hoped that women will be better off by reducing the entry threshold by half, which means that women can insure their income from a minimum wage of around CHF 12,548 and not only from CHF 21,510 as before. This measure alone will narrow the gender divide only marginally, but still. A parenting credit, with which the family work of women is taken into account in the AHV, is not being examined in the BVG revision because it contradicts the system of income-related old-age provision. Such would help to reduce the gender gap. Not much can be expected from the legislature in the ongoing revision negotiations.
Private solutions
Helena Trachsel, Equal Opportunities Officer of the Canton of Zurich, conducts regular workshops for women in training. Her mantra: women should consistently stay at least 50 percent in work, even if they have children. According to studies by the Equal Opportunities Office, an ideal division of paid work for a couple with children would even be 70 percent work each. That would lead to a sustainable old-age provision and would be optimal from a tax point of view. Above all, however, the women would not obstruct their professional development.
However, only 10 percent of all couples with children divide their gainful employment in this way. External childcare is often too expensive or the woman earns less than the man – due to her less good education or because wages are still not the same or because she works in low-wage jobs. The conclusion is the same in most families: She stays at home and takes care of the children, he works full-time because everything else would not be worthwhile financially. Even female students at the University of Zurich, i.e. well-educated women with career opportunities, admit that it might be difficult to live an equal family model. Even in their minds, the traditional patterns are still very present.
Very few women are aware of how much they are automatically at a disadvantage financially in the event of a divorce, unless they make out-of-court arrangements with their partners beforehand. There are various ways to reduce or eliminate the imbalance, but this requires the awareness and consent of the partner, who is often no better informed than the woman, or does not see the need.
Corinne Brecher is a financial advisor and is married to FCZ goalie Yanick Brecher. They recently had their second child. Since then, Corinne Brecher has been working independently and only 60 percent. Because this would open up gaps in her old-age provision, she has agreed with her husband Yanick that he will pay into the 3a pillar for her.
As a self-employed person, Corinne Brecher does not have her own pension fund at the moment. If she had one, her husband could also regularly pay her an agreed amount on it. This would result in sufficient retirement provision for both of them, regardless of whether they stay together or separate at some point. Thanks to her uninterrupted professional activity, she could support herself independently even in the event of a separation, and the children’s costs could be shared equally. Incidentally, the Federal Supreme Court also decided in 2021 that women will have to take care of themselves again immediately after a divorce. Support payments to ex-wives (rarely also to ex-husbands) will therefore only be given in exceptional cases in the future.
To invest money
Dealing with money is still a challenge for many women, as the statistics clearly show. Many simply do not dare to actively manage their money and, if they have their own savings, leave it in the account. 30 percent of women in Switzerland don’t care about their money, compared to 10 percent of men. There are also historical and social reasons for this. Until 1976, women were only allowed to open their own bank accounts with the consent of their husbands. To this day, many women have the idea that they have no idea about investments. Financial literacy is not taught in schools either.
Old-age poverty
The financial possibilities are very different, that is clear. If women are not aware of the stumbling blocks in their own life cycle, they risk becoming poorer and poorer as they get older. More than one in four divorced pensioners in Switzerland is dependent on supplementary AHV benefits (“Divorce is a major pension risk for women”, SwissLife study 2021). Financial advisor Olga Miler regularly runs women’s seminars together with the women’s center to improve financial skills. She often hears about difficult situations, especially in old age.
To ensure that young women do not experience this in the future, they are well advised to acquire financial skills early enough and, if they want children, to carefully examine the financial issues in the partnership. If a partner is not willing to share family work with you so that both can work part-time or, if this is not possible, to compensate you for the additional family work in a private law contract, for example by paying into pillar 3a or in pays into the pension fund, a woman should reconsider her desire to have children. If all women took personal responsibility for their finances, a lot would change in terms of equal rights at work and family models.