The Swiss pension system is divided into three parts, known collectively as the three-pillar system. Pillar 1 is the state pension (AHV/AVS); Pillar 2 is the occupational benefit plan; and Pillar 3 is your private pension. The aim of these pillars is to allow the insured to maintain his/her standard of living during retirement, or to provide financial support for any surviving dependents in the event of the insured's disability or death.
Pension plan 0vewiew
Swiss federal law makes occupational benefits compulsory for all employers in Switzerland. The law also defines the level of compulsory benefits and the salary range that must be insured, as well as the minimum payable contributions, the minimum interest rate to be credited to the compulsory part of retirement savings, and the percentage used to convert accumulated savings into an annuity.
In 2010, employees with an annual income between SFr 20,520 and SFr 82,080 are obliged to pay contributions to the scheme. Pension funds are usually managed and administered by insurance companies, however, a company can manage its own scheme.
The obligation to take out insurance kicks in as soon as you are gainfully employed, or after reaching the age of 17, however, these contributions cover only the risk of death and disability. At the age of 25, the insured person also contributes towards his/her retirement benefits.
People not subject to this mandatory insurance include the self-employed, certain employees on short-term contracts (less than three months), people who are at least 70 per cent disabled, and family members of farmers (providing they are working on the farm). Management or employees earning a higher salary are usually insured in an additional non-mandatory insurance.
Disability insurance covered by the pension fund scheme
The pension scheme pays the insured person a pension if an accident or illness results in disability, as well as a children's pension if applicable. These pensions continue to be paid when the insured party reaches retirement age.
Death insurance covered by the pension fund scheme
A survivor's pension is paid to the surviving spouse, if he/she is left with a child or children, provided the spouse is at least 45 years old and has been married for five years or more. A surviving spouse who does not satisfy any of the aforementioned criteria will receive a one-off payment.
Thanks to the Swiss Promotion of Home Ownership Act, it is possible to use the...