Financial security for you and your family
Do I have adequate financial security if something happens to me that means I am no longer able to work? What would my partner's financial situation look like? Would my family be well protected? These are questions that we should all ask ourselves at some point in our lives, because there are various benefits available to you and your family depending on your specific circumstances. Find out how to ensure financial security in the context of specific family compositions.
Key points in brief
- Financial security for surviving dependents: Switzerland's three-pillar approach
- Financial security in the event of accidents: Accident insurance
- Supplementary insurance providing financial security
- Financial security for single people
- Financial security for cohabiting couples
- Financial security for married couples
- Financial security for those in registered partnerships
- Arranging financial security at an early stage
Financial security: Switzerland's three-pillar approach
Switzerland's three-pillar approach provides a structure for building up reserves that can be drawn on during retirement. At the same time, this system also guarantees financial security if you are unable to maintain your standard of living in a worst-case scenario.
If you are temporarily unable to work, the employer or accident insurance provider will pay you a daily benefit to help offset your lost earnings. If you are unable to work for a longer period, you will receive an AHV disability pension and, depending on the nature and extent of your inability to work, a disability pension paid by your pension fund or accident insurance provider. The amount depends on the degree of disability. If the degree of disability is more than 40%, a partial benefit is paid; if it is 70% or more, a full disability pension is paid.
However, under the Swiss pension system, it is not only the affected person that receives support. If the insured dies and leaves dependents, in many cases they will also be entitled to financial benefits.
Financial security in the event of accidents: Accident insurance
Employees are covered by the mandatory accident insurance. The employer pays the insurance premiums for occupational accidents and illnesses, while employees pay the premiums for accidents that occur outside of the work environment. Self-employed persons can obtain insurance coverage themselves.
Starting on the third day after the accident, the insured will receive a daily benefit of 80% of their salary. If they will be unable to return to work, together with the first pillar they will receive a pension amounting to a maximum of 90% of the pensionable salary. These benefits apply up to a salary of CHF 148,200 per year.
If the insured dies as a result of an accident, the accident insurance will pay out orphan's pensions to the deceased's children until their 18th birthday, or their 25th birthday if they are still in education. If both parents are deceased, the pension is 25% of the pensionable salary; if one parent is deceased the amount is 15%.
Other family members are not eligible for benefits unless the spouse is the only family member. Under certain circumstances, the widow or widower may receive a survivors' pension of 40% of the insured salary. In total, the benefits for all surviving dependents combined amount to a maximum of 70% of the insured salary, or a maximum of 90% of the insured salary taking into account AHV benefits.
In most cases, accident insurance offers better protection, so in the rest of this article we will focus mainly on what happens in the case of illness.
Supplementary insurance providing financial security
If you become disabled as a result of accident or illness, disability insurance will ensure that you can maintain your usual standard of living. The disability pension closes the income gap between the federal and employee benefits insurance (second pillar) disability benefits and the actual costs of living, which tend to be higher – particularly in the case of illness.
With term life insurance or life insurance, the beneficiaries immediately receive a pre-agreed lump-sum payment or pension upon the death of the insured. This type of insurance policy is often taken out as a form of flexible pension provision under Pillar 3b. With this scenario, however, a portion of the money paid in is used to finance the insurance coverage and is therefore not available upon retirement. As an alternative, you can set up a retirement savings plan with a bank and conclude a separate risk policy with an insurance company. Although you are free to appoint anyone you wish as a beneficiary under Pillar 3b, you must have notified the insurance provider of their names in advance.
The insurance is particularly worthwhile if you want to cover the cost of your children's education or ensure the financial security of your company for instance. It's also advisable to take out term life insurance if, due to your family circumstances, you want to offset the lack of survivors' benefits under the first and second pillars. Finally, supplementary insurance can be beneficial if you have a mortgage outstanding on your home. It can provide a guarantee that your partner and children will be able to continue living in the family home, and applies regardless of whether or not you are married.
Financial security for single people
The following benefits are paid to dependents from the individual pillars:
Pillar 1: If you have children at the time of death, they will receive an orphan's pension until they reach the age of 18. If they are still in education, they will continue to receive the pension until they graduate, but only until age 25.
Pillar 2: In the event of death, an orphan's pension will be paid to any children under the same conditions as Pillar 1. Depending on the order of beneficiaries set out in the pension fund regulations, the accrued retirement assets may also be paid out to other family members; it is possible to change the order of beneficiaries by filling out a form. Pension funds are not obligated to provide this option, however. In such cases, your retirement assets will lapse and be placed in the pool for all insured.
Many pension funds voluntarily opt to make a single lump-sum payment, known as a "lump-sum death benefit." This is usually paid to the insured's parents or, if they are also deceased, to the siblings. Details of the benefit amount and how to change the order of beneficiaries can be found in the pension fund regulations.
If you have children, they will also receive a disability pension if you become unable to work. This disabled person's child's pension is 20% of the disability pension.
Pillar 3: Private pension provision is highly suitable not only for retirement provision but also for setting aside capital for the worst-case scenario. For example, in the event of your death, any children you may have will take priority in the order of beneficiaries. If you do not have any children, the assets can instead be granted to someone whom you supported to a considerable extent in your lifetime. You can also appoint multiple beneficiaries and specify their entitlement individually.
Financial security for cohabiting couples
The following benefits are paid to dependents from the individual pillars:
Pillar 1: In the event of your death, your partner is not entitled to benefits from the first pillar. If you have children, however, they will receive an orphan's pension until they reach the age of 18, or the age of 25 if they are still in education.
Pillar 2: In general, the Federal Act on Occupation Retirement, Survivors' and Disability Pension Plans (BVG) does not provide for death benefits for cohabiting partners. However, pension funds can include survivors' benefits in their regulations subject to certain conditions. These can take the form of a partner's pension or lump-sum payment. In most cases, the pension fund must be notified of the cohabiting partner in writing and you must have lived together for at least five years or pay for the upkeep of joint children. Your own children will receive an orphan's pension in line with the rules for Pillar 1.
In the event of disability, benefits are also paid out for children: They receive a disabled person's child's pension. This is 20% of the disability pension.
Pillar 3: In the event of your death, your children will take priority in the order of beneficiaries. By contrast, you must have notified the pension fund of your cohabiting partner for them to be entitled to benefits.
Financial security for married couples
The following benefits are paid to dependents from the individual pillars:
Pillar 1: In the event of a husband's death, a wife with children will receive a lifelong widow's pension from the first pillar (AHV). If there are no children, this applies only if the wife is at least 45 years old and the couple was married for at least five years.
By contrast, if the wife dies, widowers will receive a widower's pension only if there are children. You can find more information in this AHV information sheet about survivors' pensions. Children will receive an orphan's pension until they reach the age of 18, or the age of 25 if they are still in education.
There are also differences for same-sex couples. If one of the husbands of a male couple dies, the other husband will not receive a widower's pension. If the couple have children, the partner will receive a pension. A surviving wife in a female couple will receive a widow's pension without a time limit if there are children. In the case of female couples without children, as is the case with heterosexual couples, the surviving wife must be older than 45 and the couple must have been married for at least five years to be entitled to a pension. The duration of any registered partnership preceding a marriage will be counted.
Pillar 2: Under the second pillar, a wife or husband will receive a survivors' pension or a single lump-sum payment from the pension fund in the event of the insured's death. The insured's own children will receive an orphan's pension in line with the rules for Pillar 1. Full details of second-pillar benefits can be found in the pension fund statement and pension fund regulations.
In the event of disability, benefits are paid out for children: They receive a disabled person's child's pension. As a rule, this is 20% of the disability pension.
Pillar 3: If the insured dies, the spouse and direct descendants are entitled to the retirement savings in line with the order of beneficiaries.
Financial security for those in registered partnerships
From 2007 to mid-2022, same-sex couples in Switzerland had the option of entering into a registered partnership.
The following benefits are paid to dependents from the individual pillars:
Pillar 1: In the event of the death of one of the partners in a registered partnership, the surviving partner is considered a widower, regardless of whether they are male or female. As such, the surviving partner is only entitled to a survivors' pension if there are children. Children and stepchildren will receive an orphan's pension until they reach the age of 18, or the age of 25 if they are still in education.
Pillar 2: In the event of the insured's death, the partner will receive a survivors' pension or a single lump-sum payment from the pension fund. If there are children or stepchildren, they will receive an orphan's pension. However, the individual pension fund statement and the pension fund regulations must be consulted for details of the second-pillar benefits.
In the event of disability, benefits are paid out for children: They receive a disabled person's child's pension. As a rule, this is 20% of the disability pension.
Pillar 3: In the event of the insured's death, the registered partner and any children or stepchildren will automatically be entitled to the retirement assets.
Arranging financial security at an early stage
We can all be affected by a twist of fate, however unlikely it may seem. It's therefore a good idea to find out about your options for financial security at an early stage, to plan your estate, and not to leave anything to chance. This is the only way to identify gaps in coverage in good time and to adapt your financial provision accordingly.