The Swiss Pension System

The Swiss pension system, whilst effective is far from straight forward. The system rests on three pillars, two are compulsory: state pension (Pillar 1) and occupational pension (Pillar 2) with the third being an optional private pension (Pillar 3).

The purpose of the three pillars is to ensure an accustomed standard of living for insured persons during retirement, in the event of disability or, to protect their surviving dependants if the worst was to happen.

However, with over 50% of expats staying in Switzerland for less than ten years, it’s likely you won’t be here forever, and this is something you should bear in mind when planning for your future.

The Swiss Pillar System

PILLAR 1

Pillar 1 is financed just like the UK State Pension, through a mandatory ‘pay as you go’ tax on an individual’s income and employer contributions. The first pillar is designed to guarantee a basic standard of living via an old age pension and, when necessary, provide benefits to widows and orphans in the event of death.

PILLAR 2

Pillar 2 compliments pillar 1 and is designed to allow an individual and/or their family to continue their standard of living into retirement, or in the event of death.

Contribution to the second pillar is also mandatory for all employees over the age of 17, who are earning in excess of CHF21,150 per year and a person’s contribution should always at be least matched by their employer. Second pillar contributions are voluntary for the self-employed.

PILLAR 3

Pillar 3 allows you to add to the benefits from Pillars 1 and 2. Essentially pillar 3 is an additional private pension that sits alongside the other pillars to cover any potential income shortfall in retirement.

The third pillar is entirely voluntary but is nonetheless extremely valuable for a number of reasons, such as helping to reduce your income tax and save for a property purchase.