Time Value Accounts - A Pension Model with Potential
As the world of work continues to change, new pension models are gaining importance. One such model is the "time value account", also known as lifetime working time account (Zeitwertkonto), which is already established in Germany. In Switzerland, however, this model is still relatively unknown. This article explains the concept of "time value account", its advantages and disadvantages, and discusses whether it could be a suitable addition to Switzerland’s pension and retirement planning system.
What is a ‘Time Value Account’?
A "time value account" is a flexible working time and compensation account, into which employees can deposit certain salary components or time credits, to be used later for paid leave or early retirement. The deposited amounts are invested, managed, and accrue returns over time.
Examples of contributions:
Overtime
Parts of gross salary (e.g., bonuses, vacation pay)
Unused vacation days
Special employer payments
Possible uses:
Early retirement (e.g., phased retirement, sabbaticals)
Family care leave
Further education
Parental leave
Bridging the gap until official retirement
Advantages of the ‘Time Value Account’
1. Flexible Career and Life Planning
Employees can actively shape their working life and take longer leaves of absence without major financial losses.
2. Better Work-Life Balance
Parental leave, caregiving for relatives, or sabbaticals become easier to organize.
3. Possibility for Early Retirement
Especially attractive for physically or mentally demanding professions.
4. Tax and Social Security Optimization (depending on the model)
In Germany, contributions are often made from gross income, which can reduce taxes and social security contributions during the accumulation phase. For Switzerland, similar regulations would need to be developed.
5. Attractive Tool for Employers
"Time value accounts" can serve as a competitive advantage in attracting and retaining skilled workers.
Disadvantages and Challenges
1. Administrative Complexity
Setting up and managing such accounts requires expertise, clear legal frameworks, and appropriate investment instruments.
2. Investment Risks
Since the saved capital is usually invested in financial markets, depending on the design, there are certain risks of loss.
3. Employer Insolvency Risk
In Germany, employers are required to secure "time value account" balances against insolvency (e.g., through trust solutions). Similar mechanisms would have to be created for Switzerland.
4. Legal Framework
Switzerland’s social security and tax laws currently offer no equivalent model. Legal adjustments would be necessary.
5. Liquidity Burden for Employers
Especially for SMEs, financing such models may pose a challenge.
Suitability for Switzerland?
Switzerland already has a well-developed three-pillar pension system. Nevertheless, societal trends — such as individualization, flexible work arrangements, and the growing desire for better work-life balance — suggest that additional flexible pension models could become increasingly relevant.
A "time value account" could fill certain gaps, such as:
Flexible career and life planning beyond classic early retirement models
Bridging gaps in the 2nd pillar during employment interruptions
Supplementary savings for individuals with irregular work patterns
However, prerequisites would include:
Clearly defined legal framework
Tax integration
Insolvency protection (e.g., via external trust solutions)
Transparent investment regulations
International companies operating in Switzerland (especially those with experience in markets like Germany) could implement "time value accounts" as an innovative HR tool. For SMEs, the complexity and cost structure would likely be a first hurdle.
Conclusion
The "time value account" is not a replacement but a valuable addition to the existing pension system. It allows for flexible career and life models and supports a better work-life balance. However, introducing it in Switzerland would require legal, tax, and administrative adjustments. Still, especially in light of demographic changes and growing work flexibility, it is a forward-looking model that deserves more attention.