What happens when you retire? Where does the money you need to live come from? In Switzerland, there is a system known as the three-pillar system. This is how this works:
- The 1st pillar (state pension) consists of old-age and surviving dependants insurance (AHV), disability insurance (IV), supplementary benefits and a fund for loss of earned income. The idea behind these provisions is to ensure that pensioners, disabled people and surviving dependants have enough money to live on and are not impoverished. This is why it is mandatory.
- The 2nd pillar (occupational pension) allows you to continue enjoying your usual standard of living when you retire. It consists of your occupational pension (under the Occupational Pensions Act (OPA)) and accident insurance (under the Accident Insurance Act (AIA)) and is mandatory for people in employment.
- The 3rd pillar (private pension) consists of optional savings. The payments you make into the 3rd pillar supplement the provisions of the 1st and 2nd pillars so that, even when you’re older, you can still do the things you want or guarantee yourself a standard of living that corresponds to your own personal needs. If you pay into the fixed pension plan (pillar 3a), you can save on taxes or optimize how much tax you pay.
Let’s take a closer look at the pension fund in the context of the 2nd pillar – as this is a vital part of your personal retirement funds.