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Swiss Pension System

Swiss pension is fully and exclusively funded by pension contributions (not other taxes). Foreigners and Swiss citizens are treated equally. Pension is spread over three “Pillars”…

1ST PILLAR – State Pension

The basic state pension (AHV/AVS) is covered by a 10.6% premium split equally between employer and employee.

The pension is paid up to 2’450.- per month from age 65 (men) or 64 (women) depending on years of service. For married couples the maximum paid out is only 1.5 times the single pension. This, together with the fact most cantons tax married couples at a rate based on their combined income, is a significant financial reason for people not marrying in Switzerland.

It also includes a limited permanent invalidity insurance.

If leaving Switzerland but remaining in the EU this pension can be counted for eventual retirement if at least one year’s premiums have been paid. The accrued funds cannot usually be otherwise paid out although there are agreements with some countries outside the EU.

How do I qualify for a Swiss state pension?

The Swiss state pension amount is based on the number of years during which the minimum contributions were made to the Swiss AHV funds.

At the chosen retirement age EU expatriates will report their earnings in other qualifying EEA countries (including Switzerland) to their State pension office together with the relevant insurance number. If contributions were made over more than 12 months in a given country that country will then directly pay a pension to the individual based on the contributions that were made. Note: since Nov 2021 the UK was once again recognised, post Brexit, in Switzerland due to a bilateral agreement.

Can I opt to have Swiss state pension paid as a capital sum?

You cannot elect to do this. However if the amount of pension is very low and does not justify the admin costs, the Pension office can choose to pay out a capital lump sum instead of a regular pension.

When can I retire?

In Switzerland, retirement can occur between 60 and 70. 65 is default for men, 64 for women (increasing to 65). The later you retire the larger the annual pension you get, because you have less long to live on average.

However, years worked after reaching state pension age do not count toward the total contribution years upon which the pension is based.

Is there a spouse's pension?

Yes, if you die your spouse receives a spouse’s pension (if you have contributed for at least 12 months).

How do I find out how much pension I have?

You need to apply to the State Pension (AHV) Office with your AHV number, which will have been given to you when you were first employed in Switzerland. You can apply on line and the report is free of charge once every five years.

How is Swiss state pension funded?

Swiss state pension, together with some cover for disability pension is funded via a premium (10.6% of gross salary in 2022) paid equally by the employer and employee.

2ND PILLAR – Professional Pension

The professional pension (BVG/LPP) covers employees from age 25 to retirement, whose annual salary is above CHF 22’050.- it varies up to 18% of salary, normally split equally between employer and employee.

It includes life cover and invalidity insurance.

Some employers will provide more generous schemes (up to 25% of the annual salary can be allowed).
Voluntary tax deductible top ups can also be paid to make up for lost time in the system, which can lead to significant tax savings during higher income years.

The funds can be paid out or pledged to finance house purchase (anywhere), to fund a self employment startup, or on leaving the EU. (Only the voluntary part can be paid out if leaving Switzerland but remaining in the EU.)

There is a witholding tax to pay on funds paid out (typically 6%).

WARNING: generally, once state retirement age is reached it is not possible to join a professional pension scheme, so moving to a new employer can mean no longer being able to contribute. If this is so, you can take out a much larger tax deductable 3rd Pillar fund instead. Existing scheme membership can be continued up to age 70.

What is the Swiss Professional Pension

Switzerland provides for pension in three categories (or pillars). They integrate into this the long term invalidity, widow’s and orphan’s compensation for loss of earnings in the event of sickness, injury or death. More details on the three pillars. The second pillar is the Swiss Professional Pension, which is offered by private pension companies under the supervision (and guarantee) of the state.

Must I be covered by Swiss Professional Pension?

Anyone with an annual salary above CHF 21’150.- and an employment contract that extends beyond three months must have at least the minimum compulsory cover. The time rule applies to employment with a given employer regardless how long you already worked in Switzerland.

If you have a contract less than three months that is extended, the cover applies from the date the extension is signed. If you leave and return within 3 months, the new contract is considered an extension to the previous contract for this purpose and the pension is applied from the beginning of the new contract.

Are Swiss Professional Pension funds guaranteed?

Pension based on salary up to CHF129’060 per annum (in 2022) is guaranteed by the Federal Government. For this reason the pension management team can only invest this portion of pension capital in instruments allowed by the Federal government (chosen to minimise risk). The pension premiums are guaranteed from the month of payroll, even if the employer becomes insolvent before paying the premiums.

Funds above this limit are not guaranteed by the Federal government and are therefore much less closely controlled. Some such funds even allow the employee to decide where his/her funds are invested.

How is Swiss Professional Pension paid out?

Either as a capital lumpsum, or as an annuity. Currently the annuity rate on the BVG minimum funds is set by the state and is expected to drop in the near future. The Supermandatory funds are not so regulated and the conversion rate tends to be a few percent lower.

When can I retire for my Swiss Professional Pension?

Retirement for professional pension can be between age 60 and 70 in Switzerland. You can continue to work once retired and can also contribute further to pension (but do not have to).

Can Swiss Professional Pension capital be paid out early?

Yes, pension capital can be paid out:

* to (re)finance your primary residential property (worldwide)
* if you become self employed
* if you leave the EU (if you only leave Switzerland just the super-mandatory part)

A withholding tax is levied from your your canton (or if you already left, the canton in which the pension fund resides). In Zürich (in 2018) this ranges from 6% at CHF 25’000 to 8.6% at CHF 750’000, thereafter 8.3% on holdings above CHF 950’000.

If over 50 years old the amount that can be paid out for financing property is limited to the amount saved before reaching age 50, or half the total amount saved at the time of withdrawal.

Once capital is paid out it is no longer possible to deduct extra capital purchases from taxable income, until this capital is repaid. When such capital is repaid, the tax previously withheld when it was paid out, is refunded.

Note that Accurity’s scheme also pays the capital out if the capital accrued during your employment does not exceed one year’s worth of employee premiums.

Can I pay more into the Swiss Professional Pension scheme and save income tax?

Based on premium shortfall due to career years where you were not paying premiums in Switzerland you can top up your pension and this can be deducted from income on your Swiss tax return, resulting in a significantly lower tax bill. The pension company will show you how much you can top up on the tax certificate you receive when you join us.

What happens to my Swiss Professional Pension capital when I leave Accurity?

If you move to a new Swiss employer the pension capital is transferred to their scheme. If you do not move immediately to a new Employer, and do not qualify to pay the capital out (see other questions in this FAQ to decide if you can) then the funds are placed in a vested benefits account by the pension company in your name. You can choose which account with which provider or bank. Some accounts invest more agressively with potentially more volatility and higher returns.

However when choosing an account beware of the rules for paying the capital out from that account, which may be more restrictive than those of your pension company.

Is there a waiting period for paying out Swiss Professional Pension capital early?

For the Mandatory BVG or supermandatory capital there is no statutory waiting period, other than the time required for documents and payments to be processed.

For lump sum purchases there is a waiting period of three years from the date of making the purchase before this can be paid out.

Can I pay funds from an overseas pension into my Swiss Professional Pension?

In some circumstances this is possible but generally not straightforward, and depends on agreements between Switzerland and your country.

Is my spouse or common law partner covered by my pension?

Yes, each of our pension plans cover you for longterm disability and your spouse and children in case you die. This cover also extends to a common law partner – for which a registration from is to be filled. The level of cover depends on which of our five pension plan options you choose.

3RD PILLAR – 3a/3b Savings

Up to CHF 7’056.- can be paid into an approved “3a” pension savings scheme each year. If you are not able to contribute to a 2nd Pillar scheme (BVG) you may pay up to CHF 35’820 per year into a 3a scheme.

The risk profile of the qualifying savings schemes is less restricted than the 2nd Pillar schemes.

The funds can be paid out before retirement or pledged for financing property purchase.

If leaving Switzerland it is possible to pay these schemes out.

There is a moderate withholding tax to pay on funds paid out (typically 6%).

There is a further “3b” category of pension savings which offers no direct tax advantage and is not restricted as described here for the “3a” schemes.

Generally, 3a schemes cannot be started after reaching state retirement age, but if they already exist can be continued up to age 70.

If you have any further questions please don’t hesitate to contact us. We are always interested to know what people are concerned about regarding Swiss employment.

Please note the above information is provided without guarantee or warranty. Employment, tax and pension laws are dependent on your specific situation and can change quickly. To be sure of the facts always contact us directly for a verified up to date answer.