The Pension Landscape Switzerland
The pension system in Switzerland is based on all three pillars. The first pillar; including the public old-age, survivors’ and disability insurance, secures the basic needs. Due to the fact that there is no ceiling for contributions but a maximum pension amount, there is a significant redistributive effect.
Switzerland is one of the few countries where occupational pension provision is mandatory by law. The occupational pension system is an important part of the Swiss pension system with the aim to maintain the previous standard of living by providing, together with the statutory pension system, a replacement rate of about 60 % of the final salary. Voluntary private pension provision often consists of life insurances.
| Provider: | Cantonal Compensation Fund Offices, Federal Compensation Fund Office for federal administrative personnel etc. |
| Scheme: AHV/IV | Old-age, survivors'- and invalidity pension scheme. Mandatory insurance for Swiss residents and for people working in Switzerland. |
| Financing: | AHV/IV is a pay-as-you-go system and is mainly financed by the economy, employer and employees. It is also tax funded (VAT). |
| Contributions: | Contributions to AHV/IV are 10.3% (AHV - Old-age and survivors’ insurance: 8.4%, IV - Invalidity insurance: 1.4%, EO - Income compensation allowances in the event of service or of maternity: 0.5%). Employer and employee are charged with half of the contribution. |
| Benefits: | Coverage of the basic living costs; income related. The AHV pension amount depends on the length of the contribution period and the average annual income during this period. The qualifying period is one year of contributions. |
| Pension scales: | The pension amount is determined in accordance to so called “Pension Scales” (Rentenskalen). In case of a continuous contribution period of 44 years the ‘full pension’ according to the “Pension Scale 44” will be paid. If retiring with a full continuous contribution period of 44 years (men)/43 (women) the pension amount varies from monthly CHF 1.175,- (minimum) up to CHF 2.350,- (maximum) depending on the average annual income during the period of contributions (2018). An interrupted service period leads to a reduction of 1/44 for each missing year To determine the pension amount the calculation table “Pension Scale 1-43” is used. Gaps may be closed with extra payments but only for the past 5 years |
| Retirement age: | Legal retirement age is 65 for men and 64 for women. Early retirement leads to a pension reduction: 6.8% per one year; 13.6% per two years (2013) |
| Additional services: | Additional services for people without or with low income (EL) |
| Coverage rate: | Active insured persons in 2011: 3 687 263; pensioners in 2011: 1 062 931 |
| Obligatory/ voluntary: | Obligatory for earnings exceeding CHF 21 330 (“Mindestjahreslohn”) but solely up to an annual income of CHF 85 320 (2018). Annual earnings above CHF 85 320 (2018) can be subject to super-obligatory benefits. Voluntary insurance for self-employed and employees who are not subject to obligatory insurance but earn more than CHF 21 330 (2018) from various employers. |
| Portability | In case of any change of the employer within Switzerland a transfer to the new employer’s pension fund is mandatory. Cross-border transfers of the obligatory part are not possible. |
| Tax incentives | Employer and employee contributions are tax deductible. |
| Products | E.g. life insurance products, capital investment; restricted pension plans with tax incentives (maximum contribution CHF 6 768 for persons insured with an occupational pension fund) or unrestricted pension plans with only some tax incentives for insurance products. |