You cannot choose whether or not to pay into the AHV. As the first pillar of the Swiss pension system, AHV is compulsory. And yet it is an interesting question as to whether the AHV is of any benefit to you or not? In this article, we would like to explore this question by comparing AHV pensions and AHV contributions.
Calculation of the «return» from the OASI
+ AHV pensions
The minimum pension is CHF 1,225 and the maximum pension is CHF 2,450 (2024). We assume an average pension duration of 20 years. Life expectancy is higher for both men and women, which is why we are on the “safe” side with 20 years. This leads to the following pension payments over 20 years:
for a minimum pension: CHF 294,000
for a maximum pension: CHF 588,000
How much AHV you receive depends on your average income. Parental and care credits are added to the average income. In our example, we assume an average of CHF 10,000 in education and care credits, CHF 8,000 for children and CHF 2,000 for caring for relatives. You do not have to pay AHV contributions on these credits. However, they lead to a higher pension.
– AHV contributions
We calculate using the currently valid contribution rates (2024) throughout. Currently, 8.7 % of the gross salary is paid into the AHV (employer and employee together). For low incomes under CHF 6,000, we have calculated with the minimum AHV contribution of CHF 514 (2024).
Result: From an income of CHF 159,000, AHV is a loss-making business
The result of the calculation is as follows:
- Incomes from 0 to 88,200 francs benefit from the AHV throughout. The return (pensions minus contributions) is between 270,000 and 300,000 francs (figures have been rounded).
- From an income of CHF 88,200, the benefit of the AHV for the individual decreases steadily. The reason is relatively simple. Even with increasing income, you no longer receive a higher pension, but you pay contributions on your entire income.
- From an income of around CHF 159,000, you pay more AHV contributions than you get back as a pension.
- With an average income of CHF 1 million, you pay more than six times as much into the AHV as you receive as a pension.
Other pensions, which are listed in the last chapter, were not taken into account. Of course, these additional pensions also have a benefit, but this is difficult to quantify.
Other sources of OASI funding
In addition to the redistribution from rich to poor, there are other sources of funding that allow the OASI to maintain its current level of benefits. These other sources of revenue are:
- Value added tax
- Taxes on tobacco and alcohol
- Casino taxes
- General federal contribution
The additional contributions to the OASI account for around 25 % of the OASI’s revenue.
Other pension claims from the OASI
The OASI not only pays an old-age pension, but also other pensions.
Child pension
People who have reached the regular retirement age and still have children under the age of 18 (in education up to the age of 25) receive a child’s pension of 40 % of the old-age pension.
Orphan’s pension
Children up to the age of 18 (in education up to the age of 25) receive an orphan’s pension if their father or mother has died. It amounts to 40 % of the old-age pension. If both parents have died, the orphan’s pension is 60 % of the old-age pension.
Widow’s and widower’s pension and helplessness allowance
There are also widow’s and widower’s pensions, as well as compensation for helpless persons.
You can find more information on OASI benefits here.