The Swiss pension system is based on three pillars:
First pillar: The State pension plan
The State pension plan is mandatory and is the legal minimum for the entire Swiss population.
It is made up of three insurance policies:
Old Age and Survivors Insurance
Disability Insurance and additional benefits
Income compensation allowance
AVS (old age and survivors insurance)
AVS insurance replaces part of the salary at retirement age, paying out old-age pensions, survivors' pensions and various allowances.
- This insurance also covers death; a widow's/widower's pension and orphan's pension (untile age 18, or up to age 25 for individuals enrolled in training) will be paid to survivors.
- This insurance also covers accidents that occur before retirement age. Once retirement age is reached, disability insurance is converted into pension benefits.
Anyone living and working in Switzerland who is over age 20 is required to contribute.
However, the contribution is waived in special cases, e.g. for individuals earning a salary of less than CHF 2,300 per year; or for a married couple in which one spouse is unemployed, and the working spouse contributes at least CHF 956 per year, the unemployed spouse is exempt from paying contributions!
Please visit the AVS website to find out more about these special cases.
Anyone who has contributed to the AVS for at least one year is entitled to this pension.
Anyone who has made continuous payments from age 20 until retirement for at least 44 years, and who has earned an average annual income of CHF 84,600 or more is entitled to a full pension.
If the length-of-payment criterion is not met, payments are calculated in proportion to the years worked in Switzerland.
If the minimum-wage criterion is not met, you will not receive a full pension, even if the length-of-payment criterion has been met.
APG (income compensation allowance)
APG insurance allows you to supplement your AVS or AI, if the minimum wage is not covered.
Second pillar: occupational pension plan
Joining an occupational pension plan is mandatory for all Swiss company employees earning a minimum wage of CHF 21,150 per year from the age of 17.
Contributions are paid by both the employer and the employee on an equal basis. The employee's contribution is deducted directly from his or her wages, while the employer's contribution is entirely covered by the employer. In addition to your salary, your employer contributes to your pension plan. Some companies contribute more than the employee's contribution. This is an issue you can discuss with your employer.
Second pillar insurance complements the AVS insurance and provides a way for you to build up capital for your retirement so that you can maintain your previous standard of living. Upon retirement, the capital accumulated in a second pillar account can be paid out in the form of a pension or capital, depending which option the employee chooses. We would recommend consulting pension fund regulations to find out more about all the options available.
According to the Occupational Pensions Act (LPP), the maximum amount of wages insured is CHF 84,600 and applies in the case of disability or death. This amount reflects the average salary in Switzerland.
People with higher incomes or who are self-employed should consider alternative options to ensure adequate additional income.
Third pillar: Private pension plan
Although joining a private pension plan is not mandatory, it is enshrined in the Swiss Constitution and constitutes the third pillar of the pension system. That is why the Swiss government encourages private pension plans with tax deductions.
You must be a resident in Switzerland to be eligible to sign up for a third pillar plan.
Each individual chooses a third pillar capitalisation scheme and saves for his or her own retirement, unlike the first pillar. The amounts can be paid into a bank account or a life insurance policy.
The third pillar should make it possible to maintain one's usual standard of living upon retirement, given that the first and second pillars cover around 60% of the last paid wage.
And since the maximum salary that is 100% covered by the first and second pillars is CHF 84,600 per year, the loss of income is even greater for higher annual salaries.