Early retirement increases life expectancy

How pension funds reach the retirement age of 65 for women through the back door

Politicians have long been discussing raising the retirement age for women from 64 to 65 years. Over a third of the pension funds have already taken this step.

Brigitte M. was surprised. She reads the newspaper regularly and is therefore familiar with the tough political discussions about the proposal to increase the normal retirement age for women from 64 to 65. But recently, at an internal information event, the 62-year-old suddenly had to take note that the normal retirement age for her company was in her pension fund Women is already 65 as for men. This is by no means an isolated case. According to an industry survey by Swisscanto, around 36% of pension funds have already set the normal retirement age for women at 65. In 2010 it was around 10 percentage points less.

Is that even allowed? The statutory reference retirement age for women is still 64 for the occupational pension scheme, as is the case with the AHV. However, like the statutory minimum conversion rate, this standard only applies to the compulsory part of the retirement capital in the pension funds. In the extra-compulsory part, the tills are free. Since most insured persons save retirement capital beyond the legal minimum, the health insurances can make a mixed calculation in these cases, which also allows the introduction of the normal retirement age of 65 for women. With enough extra-mandatory capital, pension funds could also decide under the current law a reference retirement age of 66 or 67 for men and women. In such a case, it would be important to adjust the employment contracts accordingly - so that employees are not routinely thrown out at 65.

More flexible when it comes to the exit

If the question is "Lower annual pension or higher retirement age?", Not all insured persons will have the same preference. In any case, a higher reference retirement age does not necessarily have to be a disadvantage for those affected. In theory, it could mean the same thing financially for a woman whether she is insured in a pension fund with a reference retirement age of 64 or in a fund with the normal retirement age of 65 - provided that the conversion rate for calculating the annual pension is correspondingly higher in the second fund.

The insured person concerned could also retire in such a fund at 64, and the annual pension reduced due to early retirement would be the same as the regular annual pension in a comparative fund with the normal retirement age of 64 In this example, there are no financial disadvantages for affected women and the advantage of additional flexibility - with the option of working regularly up to 65 instead of perhaps having to retire at 64.

Who is subsidized here?

But whether it comes down to the same financially for women in practice is another question. The short answer: It depends on the individual pension fund. According to the pension fund experts asked, funds with the normal retirement age of 65 typically have a uniform conversion rate for women and men for calculating pensions for both genders. Meanwhile, the annual Swisscanto industry survey shows that on average the conversion rates for women with retirement age 64 do not differ significantly from the rates for men with retirement age 65.

According to the industry survey for 2018, almost half of the health insurers surveyed made no gender difference in terms of conversion rate in the 64/65 constellation; the average rate for women was 5.81% and for men 5.87%. As a result, the average annual pension per franc of retirement capital for men with retirement age 65 was only about 1% higher than for women with retirement age 64. In purely mathematical terms, the difference in retirement age of one year should lead to a significantly larger difference in the conversion rate.

At first glance, women generally seem to have a strong advantage when calculating the annual pension: They have a longer life expectancy than men, and even if they retire a year earlier, on average they receive almost the same pension as per franc of retirement capital the men. But on closer inspection, the picture looks different. The insured men are more expensive for the pension funds than the women, because widows' pensions are often still due after the death of the men. "The widows left behind are on average around three years younger than the deceased husbands and live almost three years longer," says Stephan Wyss, pension fund expert at the Zurich consulting firm Prevanto. In contrast, insured women are far less likely to leave behind a widower.

According to Wyss, the bottom line is that the additional costs of the funds for widow pensions are about the same for men as retiring two years earlier. From this point of view, if mathematically correct application is made, the conversion rate for women with retirement age 63 should be roughly the same as the rate for men with retirement age 65. One might counter that the widow's pension does not benefit men, but from the arithmetical point of view it is the pension fund the total costs are decisive.

Inclined plane

The practice of a uniform conversion rate for both genders with the same retirement age also has a lot to offer. After all, anyone who begins to differentiate between different groups quickly finds himself on an inclined plane. In this logic, for example, men with very young wives would have to accept a pension cut because the pension fund would have to reckon with a potentially long term of a later widow's pension. And single people would have to receive a significantly higher old-age pension, as there are no survivors' pensions.