The three pillars of the Swiss pension system help you build your assets up over the years and decades – for when you’re older, if you become disabled or if you die. We can help you look forward to a self-determined future.
One out of three Swiss has a gap in coverage
60% of gainfully employed persons regularly pay into the 3rd pillar
AHV and pension fund typically cover 60 to 70% of previous employment income
The pension system is one of Switzerland’s fundamental elements. It is based on the three-pillar concept:
The first pillar – state benefits – is intended to ensure basic subsistence in old age, in the event of disability or, after death, for survivors. The second pillar – occupational provision – is intended to ensure that individuals are able to maintain their accustomed standard of living. But the benefits from the first and second pillars – i.e. AHV and pension fund benefits – only permit this to a limited extent. The third pillar – private provision – is intended to help close any pension gap between the benefits from the first and second pillars and your financial needs.
The state pays the benefit recipient a minimum standard of living from the first pillar – to cover living expenses in old age, in the event of disability and for survivors following the individual’s death. However, at a maximum of erste-saeule-maximum-monat-einzelperson per month (as of aktuelles-jahr) the old-age pension is only enough for the bare necessities. At a maximum of erste-saeule-maximum-monat-witwen-witwer for widows/widowers and erste-saeule-maximum-monat-waisen for orphans, the survivors’ pension is even lower.
Federal Old Age and Surviving Dependants Insurance (AHV/AVS)
The AHV is intended to provide a minimum standard of living in old age. When an individual dies, his or her survivors are generally paid a widow’s/widower’s pension or an orphan’s pension. The amount of the pension is based on the amount of the contributions that have been paid in as well as the contribution period.
Disability insurance (IV)
The primary aim of the IV is to reintegrate people who have become disabled due to illness or an accident. If a disabled person is no longer able to work or is only partially able to do so, the IV will pay a pension to ensure a minimum standard of living.
Points to consider
A full pension is awarded to those who have made AHV contributions without interruption from age 20 until retirement age. Each year without contributions generally leads to a reduction of the pension. You can see how much you have contributed towards a full pension by requesting a statement for your individual account from the AHV (www.ahv-iv.ch). You can also ask a pension advisor to help you put these figures together.
The occupational provision, together with the first pillar, is intended to ensure that you are able to continue your accustomed standard of living when you are old or if you become disabled – and that of your survivors if you die. The amount of the pension depends on the amount of your contributions over the course of your working life.
Together with the AHV, the second pillar benefits provide about 60% to 75% of your last salary, but only up to an annual salary of zweite-saeule-maximum-jahreslohn (as of aktuelles-jahr). If you earn more or are self-employed, you should find out how you can obtain additional cover or fully cover yourself as part of your occupational pension. Second pillar pension benefits will likely fall somewhat for future generations. This is because people are living longer and interest rates are lower. For this reason, it is advisable to learn more about Swiss Life’s private retirement savings offerings in a non-binding consultation with an expert.
Points to consider
- A lower salary will result in reduced benefits. Please note that in most pension funds you can only remain insured if your salary is above the defined minimum of zweite-saeule-minimum-jahreslohn (as of aktuelles-jahr).
- Are you planning to retire early? You can offset the lower retirement benefits through targeted second pillar purchases.
Check the amount of any income gap remaining after you receive the first and second pillar benefits: complete the Swiss Life pension check and with just a little bit of information you can learn more about your individual pension situation.
Retirement (old age)
100% retirement pension
6.8% of interest-bearing retirement savings at the normal retirement age (65 for men and 64 for women).
20% retired person's children's benefit
For every child of a pensioner (up to the age of 18; if in education or at least two thirds disabled up to the age of 25)
100% disability pension
6.8% of the BVG retirement savings that the insured person has acquired plus interest up to inception of the claim and the sum of the BVG retirement credit for the missing years up to retirement age, without interest.
20% disabled person's children's benefit
For every child (up to the age of 18; if in education or at least two thirds disabled up to the age of 25)
In the event of death
60% widow's/widower's pension
60% of the full disability/retirement pension. There is an entitlement if the widow/widower is responsible for one or more than one child or has reached the age of 45 and the marriage lasted at least five years. Otherwise there is a lump-sum payment to the value of three years' pension. A divorced person is treated the same as a widow/widower, if the deceased was obliged to pay maintenance and the marriage lasted at least ten years.
20% orphan's pension
20% of the full disability/retirement pension for each child of the deceased (up to the age of 18; if in education or at least two-thirds disabled up to the age of 25)
The first and second pillars cover about 60% to 75% of your last income. The third pillar helps to close most of this income gap. It is intended to enable you to enjoy your accustomed standard of living in old age after retirement. Swiss Life offers you solutions as part of pillar 3 that also provide you with financial protection in the event you become disabled or die.
Another important feature of the third pillar: the federal and cantonal governments provide tax incentives for it, which can mean tax savings each year of up to CHF 2,000.
The thirds pillar is for voluntary, individual provisions. It allows you to accumulate your own additional retirement capital. A distinction is made between pillar 3a (tax-qualified provisions) and pillar 3b (non-tax-qualified provisions).
- Pillar 3a (tax-qualified provisions) enjoys comprehensive tax advantages: contributions up to the statutory annual maximum reduce taxable income considerably. Occupational income subject to AHV contributions is the prerequisite for paying into pillar 3a.
- Pillar 3b (non-tax-qualified provisions) combines all assets that are not included in pillars 1, 2 and 3a. Pillar 3b includes traditional saving and investing for various goals, such as for education, for old age, for a holiday, for a new car etc. Typical examples include securities and a savings account.
|Pillar 3a (tax-qualified provisions)
|Pillar 3b (tax-qualified provisions)
|Gainfully employed persons living in Switzerland
|every person (worldwide)
Maximum contribution set by the Federation
|The amount and payment frequency are freely selectable
Contributions are deductible from taxable income. On payment: reduced tax rate, separate from other income.
If both spouses/partners work and pay contributions to a recognised form of future provisions, both can claim the tax benefit.
|Regarding the flat-rate deductions for insurance premiums. The surrender values on insurance policies are taxed as wealth during the term. Tax free on payment.
|Withdrawal at the earliest 5 years before and at the latest 5 years after the normal AHV retirement age (men 65/women 64)
Possible in the following cases:
In the event of old age and disability:
In the event of death:
|Beneficiaries can be chosen freely subject to the legal compulsory portions.
Current interest rates, the changing age structure of the population and constantly increasing life expectancy present significant challenges for the Swiss pension system. Because people are living longer, pensions must be paid out longer and the retirement savings an individual has accumulated must last longer as well. In addition, a smaller number of workers paying into the AHV must support a rising number of pensioners.
For these reasons, it can be assumed that many pensioners will likely receive a lower pension in future, so it is all the more important for you to pay attention to your pension situation to ensure financial flexibility for yourself in old age. We therefore recommend that you review your third pillar pension options.
The earlier you begin saving with private provisions, the better. This is because you’ll be able to save more money over a longer period of time. And you’ll also pay less in tax. So the optimal starting point is when you first start working. But it is never too late to start saving – better late than never.
Make an appointment for a consultation
There are a number of pension options, which can be individually tailored to your needs. The earlier you address the issue of occupational benefits, the greater your financial flexibility for a self-determined life. Our advisers offer you professional support with all questions concerning the topic of employee benefits. We would also be happy to advise you by video instead of in the General Agency or at your home.
Key pension figures at a glance
Maximum pillar 3a contribution, coordination offset and entry threshold: we’ve compiled a handy overview of the amounts that currently apply.