What is a pension shortfall?

The pension shortfall is the difference between the financial needs in retirement and the income actually available from the three retirement provision pillars. Payouts from the first two pillars usually account for 60 to 75% of the final salary. Retired persons must therefore either reduce their standard of living or their expenses, or fill the gap with personal retirement provision (pillar 3a/3b).

Lower earners tend to be affected more frequently and more severely by a pension shortfall. However, employees with higher incomes are not exempt, as they usually wish to have a high standard of living after retirement. To avoid a pension shortfall, you should address your own retirement provision situation as early as possible as part of financial planning.