Making financial and legal provisions

Pension provision Switzerland explained: Pension provision – you probably read this word a lot. But what does pension provision actually mean for me?

I divide the topic into financial provision and health and legal provision. I would like to give you some ideas here on what you can look out for. The explanations are not exhaustive and are different for every life situation.

You are in a position to take many things into your own hands. Take care of it early enough and stay true to your strategy. As a general rule, you should not have any major gaps in your income. This is the main reason for poverty in old age among women. You should therefore always have your own income so that you can pay into your nest egg, investments, 2nd pillar (employer), pillar 3a, etc. All these elements together will give you a financial cushion for old age.

Don’t rely on other people, your parents, your partner or your wife. Take care of your assets yourself. Always factor in the worst-case scenario (separation, unemployment, illness, accident, death, etc.). This allows you to enjoy life with fewer worries.

Pension provision Switzerland explained: Personal financial provision

Your own pension provision means creating a financial cushion for yourself so that you are in a good financial position in life and later in old age.It is important to have a broad base and build up various pillars. The first thing you should do is organize your current finances and draw up a budget. This will help you determine how much you can save and invest. Set yourself goals and work continuously on building up your wealth.

The basis is your cash balance. Build up a financial cushion so that you remain flexible. You should never invest all your money in shares and ETFs, but always have a nest egg ready, for example with neon or Zak.

Investments in shares and ETFs

If you start early enough, you can build up a large portfolio over the years. Invest for the long term and take advantage of the compound interest effect. If you’re smart about it, you can enjoy a passive income from dividends in old age.

Selma Finance (ETFs)
Findependent (ETFs)
Inyova (sustainable shares)
Swissquote
Yuh (incl. savings plans)
Degiro

Pillar 3a

Pillar 3a offers you tax advantages during the payment years. Taxes are due immediately upon withdrawal.It may therefore be worthwhile to open several pillar 3a accounts and then withdraw them in stages.
If you pay in the maximum amount of CHF 7056 (2023) each year, you will accumulate a considerable amount by the time you reach old age. It generally makes sense to invest your pillar 3a in ETFs to take advantage of the long investment period. Storing the money only in the bank is not expedient given the low interest rates.

Your employer pays these contributions for you. Pillar 2 does not apply if you earn less than CHF 21500 per year. You should therefore also earn at least this amount as the main parent of children in order to pay into the pension fund. Without these payments, you will miss out on an important part of your pension in old age!

Breaks for childcare leave women in particular with larger gaps. This means that the amount in your pension fund is smaller and you have less money available in old age. I advise women not to take on low part-time jobs.
Men should also make sure that their wives also pay into the pension fund. This will make a divorce expensive for the sole earner. The pension funds of both parties are “lumped together and divided by 2” in the event of a divorce. If one partner earns a lot more, they have to give a lot of money to their ex-partner. The situation is more balanced if both partners earn a similar amount.

Women with children should also not work mini-jobs. It is best to split the paid work and care work with the man. Both do their part in bringing up the children and earning money.

Childcare eats up the woman’s entire salary? Often no mixed calculation is made here and too little thought is given to the bigger picture. Perhaps there is little left over from the salary at the end of the month, but the wife pays into pillar 3a, AHV and the 2nd pillar and thus closes pension gaps.

Your own business

A major pillar of your retirement provision can be your own business, with which you generate additional income streams. I’m a fan of becoming self-employed on the side so that you don’t have to take on the full risk. Use the income from your business to invest in shares and ETFs.

Pension provision Switzerland explained: Health and legal provision
Marriage regulates legal matters and the order of succession is usually clear. If you are unmarried, it is essential to determine what should happen in the event of an emergency.

Lasting power of attorney

Is used: in the event of incapacity, etc.

Who should represent your financial, legal and personal interests if you become incapable of judgment? Make a note of this in an advance care directive and inform the designated person. If you do not have an advance care directive, the KESB can theoretically take over in an emergency, which will make it very difficult for your relatives.

Power of attorney

Is used: in the event of incapacity, etc.
Do you want your partner to be able to access your bank account and pay bills if you are incapacitated? Do you want your partner to represent you at government offices, insurance companies, banks, etc.? Then give them a power of attorney. In the event of death, however, this is not enough! When someone dies, the legal heirs must first be determined before the deceased’s bank account can be closed.

Living will

Is used: In hospital or at the doctor’s in medical cases
Inform your relatives how you would like to be treated in an emergency. Do you want life-prolonging measures? It is difficult for relatives to decide this in a stressful acute situation. The doctor will ask your relatives about this. If there is a document with your wishes, you will ensure that a medical decision is made in your interests. And you relieve your relatives of difficult decisions. In extreme cases and without a living will, your relatives could decide that you should be connected to life-prolonging machines for months, even though you never actually wanted this.

This also includes the organ donor card. Decide whether you want to have your organs donated or not. Otherwise the hospital staff will ask your relatives. It is a relief if you state your wishes clearly for or against.

Will

Comes into play: after the death
A will is particularly useful if you are unmarried and have no children. Or if you don’t want to follow the statutory succession rules. If you have more complicated financial circumstances, a joint company or house with your unmarried partner, it is essential to draw up a will. Otherwise your partner will be left completely empty-handed and the legal heirs will inherit everything!

The will must be handwritten. It is best to have it checked and filed by a notary. Otherwise, the heirs can contest it if there are formal errors.

The subject is complex, so I recommend the Swiss book “Ich bestimme” from Beobachter-Verlag. You can read everything in detail here.

Life insurance / disability insurance

Insurance companies often sell you a pillar 3b solution. With traditional fund solutions from insurance companies, you pay high purchase fees and ongoing costs reduce your return. It’s better to set up your own ETF savings plan. It makes little sense to mix insurance and investing.
Life insurance is valuable if relatives are financially dependent on you. Could your husband or wife get by without your current income? If not, be sure to look into life insurance!

Have you taken out life insurance with an insurance company, but aren’t sure whether everything is reputable and whether you’re not paying too much?
Then take a look at this online course and find out whether your life insurance is worthwhile for you.
Register your partner with the pension fund
Are you cohabiting without a marriage certificate? Then your partner will not inherit any money from your pension fund. Most pension funds offer the option of registering your partner with the fund. This is easy to do using a form that can be downloaded from the website of the relevant pension fund. The deposit costs nothing. In the event of death, the pension fund will check whether there really was a cohabitation and will request various forms (e.g. rental agreement, certificate of residence, etc.).

Depositing passwords and codes

Online accounts, forgotten accounts, logins, etc. are things that are often forgotten but can cost relatives a lot of stress.
Therefore, write down the most important logins for Facebook, Twitter, Instagram, e-banking, accounts such as Swissquote, yuh, Selma, etc. somewhere. The cell phone login should also be accessible. Do you have passive income on the internet? Make a note of it. Do your relatives know where you have money?

You can find many templates for living wills, powers of attorney, etc. on the Internet. Use these templates and decide what makes sense for you.

The Swiss pension system is geared towards full-time employees (AHV, Pillar 2, Pillar 3a). The fewer percentages you work, the more you have to provide for your pension privately. If you don’t work, you don’t pay into the 2nd pillar and can’t open a pillar 3a.

I fully understand that you don’t want to work 100% in one job. I also want to have enough time for my own interests and hobbies. However, this requires me to create other income streams and make private provisions with shares, ETFs, P2P loans, real estate and gold.