Switzerland's three-pillar system

There are many good reasons to provide for your future. The need to finance your accustomed standard of living in retirement is just one.

Reasons to provide for your retirement

Those who wish to maintain the lifestyle they are used to should not simply rely on their AHV state pension and pension fund. Another reason to provide for the future is to ensure that if you die your family will at least be relieved of financial worries. Achieving savings goals, cutting your tax bill and insuring yourself against the risk of being unable to work are also good reasons to consider retirement planning solutions.

The three retirement provision pillars

1st and 2nd pillar provision is intended to enable you to secure your accustomed standard of living. Private retirement planning is an adjunct to these arrangements and can fill any gaps in your provision.

1st pillar: state pension provision

The 1st pillar comprises the AHV pension (Old-age and surviving dependants insurance), Disability Insurance (IV), compensation for loss of earned income during military service (EO) and Unemployment Insurance (ALV). AHV/IV insurance is mandatory for all Swiss residents.

However, the AHV/IV scheme often no longer achieves its goal of securing a minimum level of income. In this case, supplementary benefits can be claimed, depending on the pension recipient’s asset and income situation.

2nd pillar: occupational pension provision

The 2nd pillar is based on the laws on occupational pension provision (BVG) and accident insurance (UVG). The range of persons insured under 2nd pillar provision is restricted in comparison with the 1st pillar.

Employees with income of more than CHF 21,150 are automatically insured by a 2nd pillar pension fund. Its task, in combination with 1st pillar benefits, is to ensure that scheme members are able to maintain their previous standard of living.

UVG and BVG insurance has been mandatory for all employees since 1984 and 1985 respectively, while the self-employed can join on a voluntary basis.

3rd pillar: private pension provision

As the first two pillars only partially achieve their objective, the state also supports private pension provision, known as the 3rd pillar. This too is enshrined in law and offers partial tax advantages.

In the case of 3rd pillar provision, we distinguish between fixed (pillar 3a) retirement savings schemes, which offer tax benefits, and flexible retirement saving schemes (pillar 3b) which are savings vehicles that do not normally offer tax advantages.

In contrast to mandatory AHV insurance and pension funds, savers have a free choice of savings arrangements for their 3rd pillar provision.

 

The three retirement provision pillars at a glance

1st and 2nd pillar provision is intended to enable you to secure your accustomed standard of living. Private retirement planning is an adjunct to these arrangements and can fill any gaps in your provision.

1st pillar2nd pillar3rd pillar
Secures a minimum level of incomeDesigned to maintain your standard of livingIndividual top-up to close gaps in pension provision
State insuranceOccupational pension planProviding for your own retirement, taking responsibility for yourself
  • AHV/IV
  • Supplementary benefits
  • Mandatory BVG/UVG
  • Supplementary employee benefit provision

 

  • Fixed retirement savings account 3a
  • Flexible retirement savings account 3b