Pension savings in Switzerland. The three-pillar principle explained in simple terms.
The Swiss pension system, also known as the three-pillar principle, consists of three pillars. . The public pension scheme (AVS), the occupational pension scheme (LPP) and the individual pension scheme (pillar 3a/b) together form the solid framework for comprehensive pension savings. Pension savings in Switzerland explained simply.
Maintain your standard of living with the three-pillar principle.
The Swiss three-pillar pension system is one of the most advanced in the world. It is based on three pillars: public pension scheme (AVS), occupational pension scheme (LPP) and individual pension scheme (pillar 3a/3b). The existing 3-pillar system is established in the Federal Constitution (Art. 111) and aims to maintain the usual standard of living on retirement or in the event of death or disability, for oneself or one's survivors.
- The 1st pillar guarantees the minimum standard of living.
- Together with the 2nd pillar, it is supposed to cover 60% of the former income at retirement age.
- The 3rd pillar complements the 1st and 2nd pillars and contributes to the preservation of the usual standard of living.
The three-pillar system explained simply
To learn more about the different modules with which the Swiss “pension structure" is built, click on the corresponding arrows in the graphic below.
The 1st pillar aims to cover the basic financial needs of the beneficiaries of old age, disability or survivors' pensions. It allows for the payment of benefits in the event of retirement, disability or death. It consists of old age and survivors' insurance (AVS), disability insurance (AI) and supplementary benefits (PC). All persons who are employed in Switzerland as of January 1 following their 18th birthday, as well as persons who are not employed as of January 1 following their 21st birthday, are subject to contributions. The obligation to contribute ends at the ordinary retirement age.
- Measures to prevent health problems
- Rehabilitation measures
- Disability pensions
- Care allowance
Identifying and closing shortfalls in Swiss retirement savings
Pension shortfalls in the 2nd pillars lead to a lifetime reduction in pension. The following options are available to protect yourself against this or to make up for existing shortfalls:
- You can pay the missing AVS contributions within five years.
- If there are shortfalls in your 2nd pillar coverage, you can buy into your pension fund.
- The individual pension Pillar 3a is an effective solution to build up retirement assets and close shortfalls. If possible, pay in the maximum annual amount.