Best pension products in Switzerland in 2024

The Swiss pension system is designed to guarantee social protection for the Swiss population.

This system is based on 3 pillars: compulsory old-age provision (1^st pillar), occupational pension provision (2^nd pillar) and private pension provision (3^rd pillar).

We'll take a look at exactly how the Swiss pension system works, what the 3 pillars cover, how pensions are calculated and how to choose the pension plan best suited to your needs.

What is a pension in Switzerland?

Swiss pension provision is based on a 3-pillar system. The purpose of the latter is to distribute aid according to the needs of the Swiss population and to limit the risks of funding gaps.

• The 1^st pillar is the compulsory old-age provision. This covers your basic needs after retirement.
• The 2^nd pillar is the occupational pension plan. Its benefits will enable you to maintain your usual standard of living when your working life comes to an end.
• The 3^rd pillar is a private pension plan. It can be seen as a "plus" that will enable you to cover any additional needs you may have.

Pillar type	1st pillar	2nd pillar	3rd pillar
Provided by	State	Professional	Private
Names	Old-age and survivor's insurance (OASI) Disability Insurance (DI) Loss of earnings compensation scheme (EO)	Pension fund (OP)	Private pensions
System	Distribution	Capitalization	Capitalization
Objective	Maintaining a minimum standard of living	Maintenance of usual standard of living	Coverage of additional private needs
Mandatory		If minimum gross annual salary > 21 510 CHF

What are the 3 pillars in Switzerland?

Old-age provision is an essential element of social security in Switzerland. It is conceived as a three-pillar system.

Since 1948, the first pillar has been the old-age and survivors' insurance scheme, designed to ensure subsistence. Thanks to a generation contract, the working population finances pensions via a pay-as-you-go process. As the money in the first pillar was insufficient to maintain the desired standard of living, a compulsory occupational pension provision was created in 1985.

All working people save their retirement assets through a capitalization process. When you retire, you receive around 60% of your last salary. This pension is made up of benefits from the first pillar, the state pension scheme, and the 2nd pillar, the occupational pension scheme.

To ensure that you have enough money for retirement, you can take out a voluntary 3rd pillar pension. Taken out with a bank or insurer, it supplements the first pillars (1^st pillar and 2^nd pillar) by building up assets such as a savings account, securities or life insurance.

How does Switzerland’s 3-pillar system work?

Swiss retirement concerns everyone. Each pillar guarantees different rights and is governed by different regulations.

Pension planning, as it's known, gives us a long-term view of our income when we reach retirement age. It enables us to accurately determine the pensions and capital we will receive when we retire. Retirement is built on a foundation of 3 pillars.

The 1st pillar in retirement is the OASI. This is the monthly pension that you receive indefinitely from the first day of your retirement. It's a subsistence minimum guaranteed by the State thanks to the contributions of all those still working.

The 2nd pillar of this system is the Pension Fund (OP). This is obtained by making compulsory contributions thanks to your salaried status, but as a self-employed person, you have the choice of whether or not to pay into it. Beyond that, it can be paid out in the form of an annuity, a lump sum or a mixture of the two. It will be added to the OASI pension from the first pillar to reach around 50 to 70% of your former salary.

Finally, the 3rd pillar, which is the only free component of the pension system, is private pension provision. It's up to you to decide whether or not you want to save part of your salary to enjoy later or not. These contributions are no longer taxed and will be returned to you on your retirement date in the form of a lump sum.

How are the 3 pillars organized in Switzerland?

Here's how the three pillars of Switzerland's social welfare system are organized :

What is the 1st pillar of the Swiss state pension scheme?

Here is a summary table of the first pillar of the state pension scheme:

Who / What	First pillar
By whom?	State provision State responsibility
Mandatory
Type of social insurance	Old-age and survivor's insurance (OASI) Supplementary benefits
Contributions	OASI contributions: Employer and employee: 50% each Self-employed or not in gainful employment: 100% self-financing CP contributions: Financed by federal and cantonal tax revenues
Pensions paid	Old-age pension Child's pension Disability pension Disabled child's pension Widow's/widower's pension Orphan's pension

What does the first pillar cover?

The first pillar of social security or the state pension is often referred to as OASI is supposed to cover the basic needs of a person and their family. It is designed as a pay-as-you-go system, meaning that contributions collected are immediately paid out to current beneficiaries.

The OASI is the first pillar of the Swiss social security system for a very specific reason: it covers basic survival needs.

It includes not only retirement and disability benefits but also compensation for loss of income due to compulsory service (army, civil service, etc.) or maternity leave.

Although covered by separate legislation, the first-pillar system also includes compulsory unemployment insurance. If a person becomes involuntarily unemployed, the insurance pays 70% (80% if dependent children live in the household) of the insured salary, depending on the person's age and months of OASI contributions.

All residents of Switzerland are obliged to pay contributions to the OASI scheme, regardless of their employment status;

For people in employment, the obligation to contribute begins on the first day of January after the age of 17. For unemployed people, the obligation to contribute begins on the first day of January after the age of 20.

The AVS allocates two types of pension:

• First of all, the old-age pension which enables the insured to retire from working life with material security, allowing them a financially secure retirement.
• A survivor's pension for widows, widowers and orphans to help overcome financial problems following the death of an insured. The aim is to prevent the family of a person affected by the death of a parent or spouse from suffering economic distress.

How much is a 1st pillar pension?

You are entitled to a full pension in Switzerland, provided you have made continuous payments from the age of 20 until retirement for at least 44 years, with an average annual income of 86,040 CHF or more. Even if you have only paid OASI contributions for one year, you are still eligible for this pension.

The amount of OASI pension you receive depends on the number of years you have paid contributions in Switzerland and your average income during the insurance period.

The sum of all the annual salaries you earned during your working years divided by the number of years you contributed (number of working years) gives you your average annual income;

Once we know your average annual income, we need to refer to a table, known as scale 44, provided by the AVS/AI information center. This scale enables you to determine where you stand and what your monthly pension will be when you retire.

This monthly pension for life ranges from 1,195 to 2,390 CHF, or a maximum of 3 585 CHF for a married couple.

What is the 2nd pillar of occupational benefits?

The 2nd pillar offsets the benefits paid out by the pay-as-you-go system. It aims to guarantee an income equivalent to 60% of your last salary when you retire. The 2nd pillar also covers your needs in the event of disability due to illness or accident before your planned retirement age. You will then receive a disability pension.

Finally, it guarantees the needs of your loved ones (spouse and children) in the event of death, who will then receive a spouse's pension or orphan's pension.

Please note:

• Combined OASI and 2nd pillar benefits represent between 60% and 75% of the final salary.
• The lower your salary, the lower your benefits.
• The vast majority of pension funds only maintain insurance coverage if your salary exceeds 21,510 CHF.

What does the second pillar cover?

As we saw earlier, the system is based on 3 mutually complementary pillars, offering the best possible financial security in old age. In addition to compulsory OASI insurance, you are also required to contribute to the second-pillar occupational pension scheme (OP) as an employee;

In the Swiss social security system, the OP is an occupational pension scheme. For this reason, it is compulsory only from the age of 25, and only above a certain income level.

This contribution is also deducted directly from your salary. The OP is organized by private pension funds and life insurance companies. The second pillar serves to ensure your usual standard of living, in addition to the first pillar, which is compulsory for everyone.

We can think of the second pillar as a savings account into which we can save for our future retirement. The minimum amount to be contributed each month is set by law and corresponds to a percentage of salary.

The vested benefits account as a savings solution?

A vested benefits account is an account into which your occupational pension capital (2nd ^{pillar) is paid;}

If you leave your company, it is not possible to withdraw the money from your pension fund, as maintaining your occupational benefits is a legal obligation. Your funds must then be transferred to a vested benefits account until you find a new employer and a new pension fund.

The vested benefits account can be compared to a secure transition point for your retirement capital.

What is the 3rd pillar of private pension provision?

Here is a summary table of the third pillar, the private pension plan:

Who / What	Third pillar
By whom?	Individual benefits Individual benefits
Character	Optional
Type of social insurance	Linked pension plan (3a) Unlimited pension plan (3b)
Contributions	100% self-financing to close gaps in individual pension provision
Pensions paid	Insurance and banking products Other savings and assets

What does the 3rd pillar private pension plan cover?

Voluntary third-pillar pension schemes are flexible retirement plans that complement the mandatory first- and second-pillar schemes.

The third pillar is divided into tied pension provision (generally referred to as pillar 3a) and free pension provision (pillar 3b). Tied pension provision (pillar 3a) is a long-term provision whose contributions are tax-deductible, but whose capital is locked into the pension plan. In other words, you only receive your capital when you retire.

Pillar 3b plans, on the other hand, are flexible schemes with no compulsory conditions, and are generally not tax-deductible at the time of contribution. Capital can be withdrawn at any time.

How can I save with my 3rd pillar?

Pillar 3a provisions are very popular among Swiss taxpayers, mainly because each time a contribution is made, the taxpayer can claim a tax deduction for the tax year in which the contribution was made.

Please note, however, that the maximum amount that working people with a pension fund can contribute is 6,883 CHF in any one tax year.

How can you close the gaps in your pension provision?

First of all, it's important to understand what is meant by a pension gap. Gaps are the difference between the amount of your former salary and the amount of your retirement pension when you retire. This pension is generally lower than the salary you received when you were still working.

We all know that Switzerland has a highly efficient 3-pillar pension system. However, gaps in pension provision are far from being isolated cases;

Even if an employee has contributed to the first and second pillars throughout their working life, they can only count on around 60% of their salary on average once they retire. Yet experience shows that it is necessary to receive 80% of the last salary to maintain one's standard of living. This leaves a gap in foresight that needs to be filled.

Every Swiss should set up a 3rd pillar and make regular contributions to it. These savings will come in handy when it's time to retire, and money invested in Pillar 3a is tax-deductible up to a certain amount.

Another option is to buy into the pension fund (OP), but as with the 3a plan, withdrawal of the capital before retirement is subject to certain conditions. If you prefer to enjoy your capital freely, it's best to opt for pillar 3b, which is a free retirement plan such as life insurance, savings, the stock market or home ownership.

The optimum solution for bridging the pension gap depends on the individual's tax, family and financial situation, but it needs to be updated as early as possible, for example by drawing up a budget and carefully planning savings.

Why does Switzerland have a three-pillar system?

The Swiss pension system, with its three pillars, aims to provide financial security for people in Switzerland during old age, in the event of disability and the event of death.

This model is based on the interaction between state protection of basic means of subsistence, occupational pension insurance (which includes employers) and private pension provision. The Swiss pension system is an essential factor in supporting the social and financial security of people living in Switzerland.

How can I build up attractive savings with the three pillars?

A good way of building up attractive savings is to save money in Pillar 3a, the deposit amount of which can be deducted from taxes.

Anyone who pays the maximum amount of CHF 6,883 per year can deduct this amount from their taxable income. The main advantage of starting to save early is to benefit from compound interest, even if interest rates are currently low.

Savers can take advantage of a longer investment horizon, increasing their chances of higher returns.

Why use the 3-pillar system to plan your retirement?

The most important part of retirement is you. It's about your goals and desires for your life and how you want to live it. With a solid savings system and a sound planning strategy, you'll be able to choose your path to and in retirement.

Managing your day-to-day expenses and lifestyle desires, such as travel and spending on grandchildren, is part of what retirement financial planning can help you do.

Finally, retirement planning using the Swiss three-pillar system is important because it can help you avoid running out of money in retirement.

How to ask for advice on the three Swiss pillars?

To claim your Swiss OASI pension, you must submit a written request to withdraw your pension to the fund where you made your last contribution payment.

You can find out which compensation fund is responsible on the government and AVS websites. But don't forget to send in your application at least three months before you reach retirement age in Switzerland.

Finally, more information on how to apply can be obtained from the Central Compensation Office, which is the Confederation's central implementing body for the 1st pillar of social insurance.

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