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You can use the coordination deduction to calculate your insured salary for the 2nd pillar. The coordination deduction ensures that there is no overinsurance in the pension system. For this purpose, the coordination deduction regulates (coordinates) the pensions of the 1st pillar (AHV) and 2nd pillar (BVG).
Finally, the deduction prevents pension fund contributions (2nd pillar) from being levied only on those parts of the salary that are not already insured under the 1st pillar (AHV). In this way, the deduction protects you from overinsurance. While overinsurance is bad in many areas of life, it would probably be welcome in the case of pensions.
The Coordination deduction reduces the retirement pension and therefore has a major impact on all of us. In this article, we will therefore look at how the coordination deduction is calculated and also how the coordination deduction affects part-time workers.
The insured salary is also referred to as the coordinated salary. In order to calculate the insured salary or the coordinated salary, you deduct the coordination deduction from your gross salary.
Coordination deduction Example: You earn CHF 80,000 a year, but your coordinated salary is only CHF 53,540. Why is that? The current coordination deduction is deducted from your salary. CHF 80,000 - CHF 26,460 = CHF 53,540. This CHF 54,275 is your coordinated salary and therefore contributes to your pension fund contributions.
Since the coordination deduction determines the amount that is insured in your pension fund, this is also referred to as the insured salary. You will find the term insured salary on your pension fund statement.
After the above example, you're probably wondering what happens at low or very high incomes?
After all, the deduction is considerably high and drastically reduces a low income. So let's look at the minimum insured salary first:
Minimum insured salary: CHF 3'675
The minimum coordinated salary is calculated as the difference between the maximum AHV pension of CHF 29,400 and the current coordination deduction of CHF 26,460.
Maximum insured salary: CHF 62'475
The maximum coordinated salary is calculated as the difference between the upper BVG limit of CHF 88,200 and the current coordination deduction of CHF 26,460
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How is the coordination deduction calculated?
Quite simply: The Coordination deduction results in 7/8 of the maximum AHV pension (CHF 29,400 per year).
With this information, you can calculate your insured salary by subtracting the deduction from your gross salary.
You can use the coordination deduction calculator above or you can calculate your BVG by using the information from above.
So now you know the simple answer to the question of how to calculate the coordination deduction.
As the BVG coordination deduction is calculated at 7⁄8 of the AHV maximum pension, it is constantly changing with AHV adjustments. Here is the historical trend of the coordination deduction in recent years:
Since the coordination deduction particularly affects part-time workers, here is some more info for part-time workers.
As mentioned above, the entry threshold for the 2nd pillar (BVG) is currently an annual salary of CHF 22,050, so anyone earning less is not affiliated to a pension fund and is therefore purely dependent on the AHV pension (1st pillar).
It is advisable, if possible, to work at least a stint of 60% when working part-time in order to be insured in a pension fund.
Tip: Some pension funds optimise the coordinated salary for part-time employees. Depending on the employer or its pension fund, there is therefore room for manoeuvre when it comes to BVG deductions. This increases the insured salary and therefore also the payments into the pension fund. When choosing an employer, this can therefore be an issue in the job interview.
"Intelligent people learn from the mistakes of others".
We have compiled our top selection for you from all our tests and experience reports:
You should now be able to answer the question "what is the coordination deduction". Furthermore, you know what and how high your insured salary is. With this knowledge, you would vote for the abolition of the coordination deduction in a political vote, wouldn't you?
The next time you apply for a job, you can ask about the pension fund and its deductions (especially for a part-time position). Even in an existing employment relationship, you can talk to your boss about the topic, perhaps the company will even consider a change to a better pension fund if this is a problem for you.
Honestly, in 4 weeks do you still know what the insured wage is exactly and how it is calculated?
I look forward to honest comments 🙂 .
Sources:
The relevant salary is the gross salary that is relevant for the 2nd pillar. Your annual salary may be higher, but the coordination deduction from the pension fund is deducted from this first. Only then is the insured salary calculated.
No, in principle you are not insured twice. However, if your employment is reduced, your pension fund contributions may fall, resulting in a pension gap. Some people supplement their pension provision with private provision (e.g. pillar 3a) in order to secure their accustomed standard of living.
The employer and employee (i.e. you) pay into the pension fund together. The coordinated salary is calculated from the gross salary "minus the coordination deduction" to determine the coordinated salary. The higher your insured salary, the more your employer pays into your pension.
Yes, the coordination deduction has been adjusted because it is linked to the maximum AHV pension. A higher deduction can reduce the coordinated salary, which will affect your pension in the long term. Keep yourself informed about new limits in the future.
Complete abolition would mean that no salary is deducted before contributions are due. This would increase your insured salary and your pension entitlements could grow. However, it remains to be seen whether this will be implemented politically.
If you stop working before regular retirement, you pay in for less time and may have a gap in your pension provision. You can counteract this with pillar 3a or additional private pension provision so that you can maintain your accustomed standard of living.
Yes, by keeping your insured salary as high as possible. For example, by organising your employment in such a way that the coordination deduction is less significant, or by making additional contributions to pillar 3a. This way you can reduce gaps even if you work part-time.
2 responses
Dear Eric; thank you very much for the always well and understandably explained contributions; in my opinion, an error has crept in here, all the limit values mentioned are still from the year 2022. Due to the pension increase as of 01.01.2023, these have also changed accordingly. Best regards;
Thank you for pointing this out, the post will be updated immediately 🙂