Normal retirement: How to take your retirement

Taking normal retirement. What you need to do.

You will soon be reaching the reference age and wish to take your well-earned retirement. Find out what steps you need to take for normal retirement and what points you need to bear in mind.

Starting retirement: Officially ending your employment relationship

Employed persons can start normal retirement as soon as they reach AHV retirement age. Many people assume that this will automatically terminate their employment relationship, but that is not the case. You must officially terminate your employment relationship by giving notice or concluding a contractual agreement. It has previously been customary to do this at the end of the month in which you have your 64th or 65th birthday. However, the AHV 21 reform will come into force on January 1, 2024, which means that, from 2028, for both men and women it will be at the end of the month in which they turn 65. Pensions are paid out for the first time in the following month.

Pillar 1 pensions: Applying for your AHV pension

AHV is the mandatory social insurance system. It secures a minimum standard of living upon retirement and in the event of disability or death. You should notify the compensation office that you wish to draw your AHV pension three to six months before starting retirement. This will ensure there are no delays in payment. Application forms are available online, or from your local AHV compensation office.

The amount of retirement pension you receive will be calculated based on your contribution period and income level. If you have a full contribution period, i.e. you have paid all your AHV contributions continuously from the age of 20 until the reference age, you will receive a full AHV pension. As of 2023, the full pension is a minimum of CHF 1,225 and a maximum of CHF 2,450 per month. Spouses who are both retired may not collectively draw more than 150% of the maximum pension for single persons – that is, a maximum of CHF 3,675 per month.

If your contribution period is incomplete, you will receive a partial pension. The greater the contribution gap, the lower the partial pension.

Pillar 2 pensions: Choose how to withdraw your BVG pension

The minimum requirements for employee benefits insurance from a pension fund are governed by the Federal Act on Occupational Retirement, Survivors' and Disability Pension Plans (BVG). Together, Pillars 1 and 2 cover at least 60% of your final salary – enabling you to maintain your accustomed standard of living. The BVG allows pension funds to set a normal retirement age age that is different from the reference age. From January 1, 2024, all pension funds must allow early withdrawal from the age of 63 at the latest and, if you continue to work beyond the reference age, allow for continued insurance until the age of 70.

Some pension funds contact insured persons or their employer a few months before they are due to reach the reference age in order to make arrangements to pay their pension. Other pension funds expect employers to notify them that their employee is retiring. If you have any questions, please contact your HR department or pension fund.

You should start thinking well in advance about whether you would like to receive your retirement assets from the pension fund in the form of a pension or lump sum. To determine your BVG retirement pension, the assets you have accrued are converted into a fixed annual retirement pension based on a conversion rate.If you opt for a cash payment, you will need to apply to your pension fund in good time, depending on the regulations.

Pillar 3 pensions: Drawing your private pension

The third pillar covers private pension provision and is voluntary. It enables you to build up an additional financial cushion for retirement. In addition, private pension provision is the ideal way to systematically close any pension gaps. It consists of tied pension provision (Pillar 3a) and flexible pension provision (Pillar 3b). A normal payout is possible at the earliest five years before you reach the reference age at the earliest and usually on the birthday when you reach the reference age at the latest, unless you can prove that you are still gainfully employed. For more information, contact the bank or insurance provider that manages your third pillar account.

Your Pillar 3a account or safekeeping account must be withdrawn as a lump sum in one go, when it will be subject to a tax on lump-sum payments. It may be advantageous to hold multiple Pillar 3a accounts and to spread your withdrawals over different tax years.