Part-time work, children, career breaks: What five years without a pension fund really cost
April 7, 2025
10 min read
Part-Time, Children, Career Break — What 5 Years Without a Pension Fund Really Cost
Children, sabbatical, or part-time are often among the best decisions you'll make in your life. But the Swiss pension system penalises every interruption. Here's the honest math of what five years without pension fund contributions really cost — and a concrete plan for closing the gap later.
Few decisions in life are as valuable as time with children, a conscious sabbatical, or a part-time phase that gives you room for a project. These decisions are almost never purely financial. But they have financial consequences — and the Swiss pension system, as good as it is in many aspects, penalises every interruption. Pension fund contributions stop, the Pillar 3a deduction option disappears (no earned income = no 3a), and the compound interest effect you lose over the next 30 years is often greater than the forgone salary itself.
This article shows you exactly what five years without pension fund contributions cost over a lifetime on an average Swiss salary. The numbers are calculated conservatively and based on 2026 BVG data. Then we'll show you the re-entry plan with which you can fully close the gap within 10–15 years. And finally a double penalty that few people know: the coordination deduction at low workloads.
CHF 26'770
Missed BVG contributions over 5 years of break
CHF 60'400
Lifetime pension loss over 25 pension years
CHF 36'290
Lost 3a deductions over 5 years
Contents
01The honest math: 5 years of break
Let's calculate with a realistic Swiss case. A 35-year-old employee with a gross salary of CHF 80'000, full-time, good pension fund. She takes a five-year complete break for her children and returns to work at age 40.
At a gross salary of CHF 80'000, the insured salary (after the coordination deduction of CHF 26'460 for 2026) is CHF 53'540. In the age range 35–44, the BVG prescribes a mandatory retirement credit of 10% on this insured salary — i.e. CHF 5'354 per year, split between employee and employer. Many good employers pay more than the minimum (13–15%), but we calculate conservatively.
The base numbers — 5-year break at CHF 80'000 salary
Annual retirement credit: CHF 5'354 × 5 years = CHF 26'770 missed BVG contributions
At a pension fund interest rate of 2% over the next 25 years, these missed CHF 26'770 grow to around CHF 43'920. Had the contributions been invested in securities (6% expected return, as in a modern 1e plan with equity allocation), they would have become around CHF 114'800.
The lifetime effect: If these missing CHF 43'920 in retirement capital were paid out at a conversion rate of 5.5% (a typical blended rate for 2050+), the person would be missing CHF 2'416 per year in pension. Over 25 pension years, that's around CHF 60'400 in lost lifetime pension — from the pension fund side alone.
| Scenario | Missed credits (5y) | Loss @ 2% interest, 25y | Lifetime pension loss @ 5.5% |
|---|---|---|---|
| CHF 60'000 salary | CHF 16'770 | ~CHF 27'500 | ~CHF 37'800 |
| CHF 80'000 salary | CHF 26'770 | ~CHF 43'920 | ~CHF 60'400 |
| CHF 100'000 salary | CHF 36'770 | ~CHF 60'330 | ~CHF 82'900 |
| CHF 130'000 salary | CHF 51'770 | ~CHF 84'940 | ~CHF 116'800 |
Retirement credit 10% on insured salary (age 35–44), coordination deduction CHF 26'460, 25 years compound @ 2% BVG interest, conversion @ 5.5% blended rate. Pension × 25 years. Illustration.
And that's just the pension fund calculation alone. The 3a side makes things even worse.
02The double penalty of the coordination deduction
Here hides one of the meanest quirks of the Swiss pension system: the coordination deduction is absolute and not proportional to workload. This means: if you work 50% and earn CHF 45'000, the full coordination deduction of CHF 26'460 is deducted — and your insured salary shrinks dramatically.
The double penalty in numbers
Full-time CHF 90'000: insured salary = CHF 90'000 − CHF 26'460 = CHF 63'540 (= 71% of gross salary)
80% CHF 72'000: insured salary = CHF 72'000 − CHF 26'460 = CHF 45'540 (= 63% of gross salary)
60% CHF 54'000: insured salary = CHF 54'000 − CHF 26'460 = CHF 27'540 (= 51% of gross salary)
50% CHF 45'000: insured salary = CHF 45'000 − CHF 26'460 = CHF 18'540 (= only 41% of gross salary)
Someone working 50% doesn't just have 50% of the salary — they effectively have 50% of the salary AND only 41% of the gross salary base insured in the pension fund. That's the double penalty: less salary + lower insurance ratio = dramatically less BVG savings capital.
The good news: The BVG21 reform, being phased in from 2025, provides for a flexible coordination deduction — adjusted progressively to income instead of being rigidly stuck at CHF 26'460. This substantially improves the situation for part-time employees. Some progressive pension funds have already voluntarily introduced a flexible or reduced coordination deduction. Ask your employer or check on your PK statement.
How to correctly interpret the coordination deduction and other numbers on your PK statement: Your Swiss pension fund statement explained.
03The 3a gap: the underestimated side effect
In a complete career break, you don't just lose the pension fund contributions — you also lose the right to contribute to Pillar 3a. Without earned income there's no 3a deduction right. This means: in 5 years of complete break you miss CHF 36'290 in possible 3a contributions (5 × CHF 7'258 for employees with a pension fund), and the corresponding tax deduction worth about CHF 11'000–13'000, depending on canton and marginal tax rate.
The 3a retroactive rule from 2026 — and why it only partially helps
Since 2026, employees in Switzerland may make up missed 3a contributions up to 10 years retroactively — but only if the gaps arose from 2025 onwards. That means: if you take a career break from 2027–2031 and re-enter in 2032, you can theoretically make up the missed 3a contributions retroactively until 2041.
The constraint: You need sufficient income in the catch-up years, and retroactive contributions are in addition to the current 3a contribution. Anyone who can barely pay the maximum 3a after re-entry has little room for retroactive purchases. For families with one earner and one part-time person, the retroactive rule often becomes the strongest lever — but it doesn't replace the lost compound interest effect.
04AHV: the silent effect on the 1st pillar
Often overlooked: the AHV (1st pillar) also reacts to career breaks — but not necessarily the way you think. If you have no partner with earned income during the break, you must pay the AHV minimum contribution yourself as a non-working person (2026: CHF 530/year). Anyone who doesn't has contribution gaps — and each contribution gap leads to a reduction of the later AHV pension of around 2.3% per missing contribution year.
The good news for married couples: If your spouse pays at least twice the AHV minimum contribution (i.e. is more than marginally employed), your AHV break years automatically count as paid. You have no contribution gap and no pension reduction. This is an important difference between married and unmarried couples — and one reason why many married couples in Switzerland don't experience a career break as an AHV problem, while unmarried couples must consciously address it.
For the maximum AHV pension you need 44 contribution years with an average lifetime income of at least CHF 90'720 per year. The 2026 AHV maximum pension is CHF 2'520 per month (CHF 30'240 per year) for single persons — and every gap in the lifetime income average pushes it down.
05The re-entry plan in 4 steps
The good news: the gap can be closed. Not with a trick, but with a disciplined plan over 10–15 years. Here are the four levers in order of tax optimality.
Step 1: Stagger pension fund buy-ins strategically
As soon as you're working again, your new PK statement will show a buy-in gap (see our PK statement article). This gap is your strongest tax lever. Instead of making a one-off buy-in, we stagger it:
The buy-in strategy
Assume your statement shows a buy-in gap of CHF 40'000 after re-entry, and your gross salary (after re-entry at 60% part-time) is CHF 54'000.
Years 1–5 after re-entry: buy in CHF 8'000 annually. At a marginal tax rate of ~22% in the City of Zurich, you save ~CHF 1'760 in taxes per year — so over 5 years about CHF 8'800 saved in taxes.
Caution Art. 79b BVG: Buy-ins are subject to the 3-year lock-up. If you want to retire early after 60 or finance home ownership via advance pension fund withdrawal, your last buy-in must be at least 3 years before. The Federal Supreme Court has strictly interpreted this rule in the leading decisions 2C_658/2009 and 2C_6/2021: the lock-up applies to the entire retirement capital.
Step 2: Maximise 3a immediately
From the first franc of earned income, you regain the right to make 3a contributions. Use it — with the maximum of CHF 7'258 per year (2026, employees with a pension fund). If you fall under the retroactive rule (gaps from 2025), you can additionally make catch-up payments up to 10 years back. Tax savings from 3a in Switzerland are typically 25–35% of the contributed amount — an immediate, risk-free "return" of over a quarter.
Step 3: Savings plan in free assets
Parallel to 3a and PK: an automatic savings plan in free assets. The tax advantages are smaller (capital gains are tax-free for private investors in Switzerland, but dividends are not), but the advantage is flexibility. The money isn't locked until retirement. A savings plan from CHF 200–500 per month, consistently over 15 years, can grow to CHF 60'000–140'000 in free assets at 6% expected return — a second safety net alongside pension provision.
Step 4: Negotiate for the invisible
In salary negotiations: negotiate not only for gross salary, but also for the employer's share in the pension fund. Many employers pay more than the legal minimum (often 60% of contributions instead of 50%), and some voluntarily offer higher retirement credits (15–18% instead of the BVG minima of 10–18%). An employer with a PK level 5 percentage points higher is often more valuable over 25 years than an employer with CHF 5'000 more gross salary.
The complete buy-in strategy including cantonal optimisation and capital withdrawal planning: Pension Fund Lump Sum: Optimise Taxes.
06The partner perspective: planning together
In most Swiss households, the career break doesn't hit the whole family — only one partner. And even if both partners earn, the workload is often different after a child's birth. This creates an asymmetry in pension provision that builds up massively over 20–30 years: one partner has large PK capital at 60, the other has significantly less.
The consequence at divorce is well known (PK splitting in divorce law), but the consequence in continuing marriage is more subtle: the partner with smaller PK capital has less flexibility at retirement and is more dependent on the AHV couple's pension, which is capped anyway.
A fair compensation mechanism
A strategy becoming increasingly popular in Switzerland: the partner with higher income pays the 3a maximum amounts also for the other partner, as soon as they have some earned income again. Tax-wise this is a win-win (2× maximum 3a deductions instead of 1×) and at the same time builds up the retirement capital of the "less earning" partner.
Additionally: anyone who takes the career break and later re-enters should insist on a fair share of household savings being directed straight into PK buy-ins and savings plan. This isn't pedantry, but basic fairness — and it's worth agreeing on explicitly before the break.
07Frequently asked questions
Is a career break ever financially worthwhile?
Purely financially, a career break is almost never optimal — it easily costs CHF 60'000–150'000 over 25 years. But life is more than a pension table. The right measure is: have you thought through the re-entry plan, and do you have a partner compensation mechanism to handle the asymmetry fairly?
Can I contribute to the pension fund during the break at all?
In some cases yes — if your employer offers a "sabbatical model" and keeps you insured in the pension fund during the break (often at a reduced contribution). Ask explicitly. Alternatively, you can voluntarily continue insurance as a non-working person with the BVG default fund — but this is administratively cumbersome and rarely worthwhile.
How long does it take to fully close the gap?
With a disciplined re-entry plan (staggered PK buy-in, maximised 3a, additional savings plan), you can close the gap in 10–15 years. The earlier you start and the higher your income after re-entry, the faster. The most important variable is: consistency. Anyone who waits 5 years for the "right moment" loses exactly those 5 years of compound interest.
Is retroactive 3a contribution really that effective?
Yes — for anyone with a gap from 2025, it's one of the strongest new levers. You can contribute up to 10 years retroactively, and every contribution is tax-deductible from income. The constraint: you need income in the catch-up year, and the catch-up is in addition to the current 3a contribution.
What about women in a divorce — are PK claims fairly divided?
Divorce law applies the equal splitting of PK capital accumulated during the marriage. This means: if a woman accumulated less PK capital during the marriage, the splitting compensates part of this gap. But only the part that arose during the marriage — gaps from before the marriage are not subject to compensation.
Does Pillar 3a pay off at very low incomes?
The 3a tax deduction only works strongly when your marginal tax rate is high. At very low incomes (e.g. CHF 40'000), the marginal rate is often only 10–15%, and the advantage of 3a over a free savings plan is smaller. But: 3a also prevents you from spending the money in between — that's the other, often underestimated value.
Should I optimise the career break timing-wise?
If possible, yes. A break before age 35 costs less than one after 45, because the compound interest effect of earlier missed contributions acts longer. And: if you plan to have children and the break is coming anyway, it tends to make more sense to place it in a life phase with a lower retirement credit (25–34, where the BVG credit is only 7% instead of 10% or 15%).
Further reading & calculators
Pension gap calculator
Calculate your personal gap
PK statement explained
Your most important financial document
Vested benefits explained
What happens at job change
Pension fund lump sum
The tax strategy at retirement
Pillar 3a comparison
Bank, insurance, or app
3a tax calculator
How much do you really save
The break isn't the mistake — the missing plan is
Years with children, sabbaticals, part-time phases for a project — these aren't financial mistakes. They're decisions that make your life richer in ways no pension statement will ever measure. The financial mistake isn't taking a break. The financial mistake is not knowing the consequences and doing nothing about them. Anyone who keeps planning during the break — preparing the PK buy-in strategy, understanding the 3a retroactive rule, fairly dividing with the partner — and consistently pulls the levers after re-entry can close the gap almost completely. Those who only realise at 55 that something is missing lose 20 years of compound interest. That's the real mistake.
Written by Thierry Borgeat, Co-Founder of arvy, and reviewed by Patrick Rissi, CFA and Florian Jauch, CFA. Calculations based on 2026 BVG data: coordination deduction CHF 26'460, BVG entry threshold CHF 22'680, BVG retirement credit for age range 35–44 at 10% of insured salary, 3a max CHF 7'258 for employees with a pension fund. Lifetime pension effect calculated at 2% BVG interest over 25 years compound and 5.5% blended conversion rate over 25 pension years. All numbers are illustrations and depend on individual pension fund and canton. Last updated April 2026.
Disclaimer: This article is for general educational purposes and does not constitute personal retirement or tax advice. Amounts cited vary by pension fund regulations, canton, marital status, and individual situation. For concrete decisions we recommend consulting an independent retirement advisor. arvy is a FINMA-supervised asset manager. Imprint & Legal Notice.
