Swiss Pension Overview
As an international worker resident in Switzerland it is vital to understand the workings of the Swiss Pension system. Whether you are planning to retire in Switzerland or move on somewhere else making the most of the system will assist you in your retirement planning.
There are three main pillars to the pension system in Switzerland.
- Pillar 1 (state)
- Pillar 2 (occupational)
- Pillar 3 (private)
Pillar 1
Also known as the Old Age and Survivors Insurance (OASI).This is the equivalent to the UK State Pension or US Social Security and is provided by the Swiss Government. Contributions are mandatory and are made by both employer and employee.
OASI also includes
Unemployment Insurance
Unemployment Insurance
Supplementary Insurance
Compensation for loss of earnings
The level of retirement income is dependant on marital status, number of years paid into the system and level of contributions made.
Retirement is from age 65 for both men and women and in order to receive the full pension contributions must have been made from age 20until retirement age.
Pillar 2
Pillar 2 pensions are made up of 2 parts a and b. Pillar 2ais the mandatory occupational scheme in Switzerland whilst Pillar 2b is the nonmandatory element. 2a contributions are based on employer and employee contributions as a percentage of salary up to a certain level. For higher earners contributions will also be made into 2b pensions. The level of contributions between employer and employee is subject to the employment contract.
All contributions receive tax relief and growth within the account is tax free.
Upon retirement then there are options for lump sum distributions or income or a mix of the two, however the level of these benefits is dependant on the size of the fund at retirement which is subject to the levels of contributions and investment performance.
Pillar 3
Pillar 3 pensions are also made up of 2 parts a and b. Pillar 3 pensions are private pensions and unlike pillar 1 and 2a are not mandatory. Pillar 3a pensions receive full tax relief on contributions and are therefore subject to an annual cap of CHF 6,883
Benefits can be taken at retirement at age 65, however can also be used to purchase a property or start a business.
Pillar 3b benefits work in a very similar way, however there is no tax relief on contributions and therefore no limit to how much can be paid in each year. Benefits from the plan do not necessarily need to be set to age 65 and can be set much younger.
