The Individual Account - IK and what you need to consider
Practical example

Why it is worth ordering the IK statement regularly and how the pension can change by CHF 15,000. The Individual Account (IK) records the income subject to contributions, the contribution periods and the care credits on an annual basis and forms the basis for the subsequent calculation of the retirement, survivors' or disability pension. In the following article, we will show an example from practice and take a closer look at the Individual Account.

The Individual Account IK

An individual account (IK) is kept for each insured person who is registered with the compensation funds. The reported earned income and contribution periods are recorded in this account. The compensation offices take the annual income from the employer's salary report. In the case of self-employed persons, the annual income is reported by the tax administration. The compensation office records the contributions and enters the corresponding income on the IC. The IC entry for non-employed persons is based on the personal contributions paid, which are calculated on the basis of pension income and assets and recognised in the IC as income. These entries and any care credits serve as the basis for calculating retirement, survivors' or disability pensions.

Regular control of the IC

To ensure that all employers have actually settled the contributions deducted from wages with the compensation office, a Free account overview requested from the compensation office are issued. For this account statement, the insured person's ICs are requested from all health insurance funds and provisionally collated. It takes some time to process the salary notifications. As a result, employee income may not be visible in the IC statement until October of the following year.

In our practical example, the issue is that employer reports were not correctly recorded. In 4 of the 25 contribution years to date, incorrect declarations have been made. In 3 contribution years, the correct number of months were not reported or were credited to a different AHV number and 1 year was not recorded at all because the date of birth did not match. What were the consequences? The incorrect salary reports resulted in a lower average annual income, which is relevant for the subsequent pension. After the correction, the insured person climbed up the Scale 44 She moved up a whole 3 steps and thus had a higher monthly pension of CHF 52. If you extrapolate this to the average life expectancy of a woman after retirement of 23 years, it would be a whole CHF 15,732. It is possible that the compensation office would have noticed the completely missing year during the final pension calculation and would have drawn the person's attention to it by then at the latest. For those years in which individual months were reported, they would almost certainly not have enquired further. Either way, you cannot rely on such reports actually being found after 40 years. In rare cases, it can even happen that the employer does not make or submit the salary reports and only shows the AHV contributions on the employee's monthly payslip. This would of course be a criminal offence, but would involve a great deal of effort for the insured person. If the employer does not fulfil its legal obligations and does not pay the contributions, there is basically no disadvantage. However, this presupposes that the injured person was actually employed by his former employer. It would be ideal if you could provide payslips showing the exact deductions for social insurance. In this context, wage documents can be requested from the former employer for up to 10 years retrospectively. Alternatively, other verification options such as bank statements, employment references, tax documents, etc. can also be used. The more documents available that indicate employment with the company in question, the better.

It is then the responsibility of the compensation office to demand the subsequent payment of the outstanding contributions from the former employer and, if necessary, to determine this by decree. Even if the contributions due cannot be claimed from the employer - whether due to the statute of limitations or impossibility of collection - this has no effect. The missing contributions will be credited to the individual AHV account.

Missing contribution years

The insured person can also use the IC to check whether there are any gaps in contributions between the age of 21 and 65 (from 1964). These gaps can lead to reductions in insurance benefits, but can be closed retrospectively under certain conditions. Contributions can be paid retrospectively for up to 5 years. In the case of low or irregular employment, it is advisable to order an IC statement within this period.

It is therefore advisable for several reasons to request an IC extract yourself from time to time and to check all the details.

How your financial planner can help you

Your financial planner is able to draw your attention to various aspects, including the topic of retirement provision, in the sense of holistic financial planning. They will show you possible risks or opportunities based on your personal circumstances and help you prepare for them in the best possible way. At finberg.ch you will find further helpful financial guides for the topics of taxes, pension provision, estate planning, real estate and investing.

Would you like to make sure you don't miss any news, changes to the law or other helpful financial guides in future and benefit from useful checklists or templates for your planning? Then sign up for the FINBERG Compass right away at finberg.ch.

FINBERG Compass

Interests