- Pension planning
- State pension
The state pension in the Swiss 3-pillar system
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State provision (Pillar 1) forms the foundation of the 3-pillar system and serves as a means of livelihood. In addition to this, the second pillar (the pension fund) is intended to ensure employees have a comparable income after retirement. However, even with regular payments into the second pillar, there is still a gap compared to the actual income of the employee. Private provision (Pillar 3) is intended to close this gap. The state supports payments into Pillar 3a with tax advantages.
What the state provision (Pillar 1) provides in detail
The old-age and survivors' insurance (AHV) is intended to secure existence in old age and to protect survivors from financial hardship when a spouse or a parent dies. If the remuneration from the AHV is insufficient for the subsistence level, the state provision provides supplementary benefits (EL). In the meantime, disability insurance (IV) is intended to cover the disabled in the event of invalidity.
This insurance covers any person who resides in Switzerland and is in gainful employment. The state pension scheme is a pay-as-you-go social insurance scheme, which is used to pay contributions for old-age pensions and other benefits. The contribution rate serves as the basis for the calculation of the pension. An individual account is created for each insured person who records income, contributions and childcare allowances for children up to 16 years of age.
Contributions in the state pension
All residents of Switzerland, with the exception of children and retirees, are liable to pay pension contributions. In the case of employment, the payments begin from 1 January after the age of 17. Anyone who does not pursue gainful employment is obliged to pay contributions for the state pension from 1 January after the age of 20. The amount of contributions is calculated on the basis of the unemployment compensation and the asset situation. If a person of retirement age pursues an employment, he or she must also contribute to the state pension if their income exceeds the statutory entitlements.
In the case of salaried workers, employers and employees each pay the 50 percent contribution rate. Self-employed persons have to pay the whole amount. While the rates for the AHV and the IV are uniform among employees, they vary according to the income of self-employed persons. Contingencies can be closed within 5 years. If this does not happen, the state's pension provision may be reduced.
The purchase of a state pension
The retirement pension is available from the statutory retirement age; the pension amount is limited by a minimum and a maximum amount (as of 2021):
- Individual minimum: CHF 14'340
- Individual maximum: CHF 28'680
- Married couples minimum: CHF 21'510
- Married couples maximum: CHF 43'020
It is possible to purchase the retirement pension 1 or 2 years before the standard retirement age. However, this is accompanied by a lifelong reduction of 6.8 percent per annum. The start of the pension cover can be postponed for up to 5 years. This is a percentage increase to the regular pension.
The disability pension is paid when a person is no longer or only partially capable of working. Before this happens, a number of measures are taken to integrate into the working life. In the case of recognized disability, the amount of the pension of the state pension is determined by the degree of invalidity. From a grade of 70 percent, the full pension is paid out. A person receiving the disability pension who is widowed will receive a 20 percent supplement to the invalidity pension. The invalidity pension is replaced by the old-age pension upon reaching retirement age.
The state pension is used solely to safeguard the livelihood, and in the course of an ageing society, provision in Pillar 2 and especially Pillar 3 will become increasingly important. The MoneyPark consultants will help you design a customized and well thought-out pension plan.
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