What Employees from Foreign Countries Need to Know about the Pension System in Switzerland
Pensions in Switzerland are based on three pillars: 1. AHV/IV (old age, survivors' and disability insurance); 2. BVG (employee benefits insurance); and 3. private pension provision (pillars 3a and 3b). Insurance under the first and second pillars is mandated by law. Pillars 3a and 3b are voluntary.
All people who work in Switzerland are obligated to pay into the first pillar (AHV). If you are employed and earn more than CHF 21,510 a year, you must also be insured under the second pillar (BVG). If you earn less, you can voluntarily join a pension fund – if the pension fund allows this, and your employer agrees and also makes a contribution. Self-employed persons can choose to join a pension fund voluntarily. Contact the AHV office for your canton if you are uncertain.
First Pillar: State Pension (AHV)
- In Switzerland, you must pay into the AHV starting no later than January 1 following your 17th birthday if you are employed.
- For each year in which you do not make contributions because you are not working in Switzerland, your AHV benefits will be reduced.
- If you are moving to Switzerland for the first time, you cannot close the gaps for the period prior to your move – either with additional contributions or by transferring pension credits that you accumulated in other countries. You start from scratch.
- If you were insured under a social security system in another country where you worked, you have the possibility of obtaining benefits from these institutions upon retirement.
- If you leave Switzerland again, you may get back the money you have contributed, depending on the circumstances. However, it is not possible to transfer the money to a social security system in another country.
Second Pillar: Employee Benefits Insurance (BVG)
- Starting January 1 after your 17th birthday, you have second pillar insurance if your income is more than CHF 21,510 per year. In the first years, only the risk of death and disability are covered; starting on January 1 after your 24th birthday, you will also begin to save for your retirement pension under employee benefits insurance (BVG).
- The financial benefits you receive when you retire depend on the amount you contributed to the second pillar during your period of employment.
- If you did not pay regularly or began to save later, you can close the gaps and make additional contributions. Your pension fund statement from your pension fund shows you just how big those gaps are. The same document shows the amount the pension fund would pay in the event of your death or disability.
- In the event that you leave Switzerland again and move to an EU/EFTA country, restrictions apply to the transfer of the pension assets saved.
Third Pillar: Voluntary Pension Provision
- Contributions to the third pillar are voluntary. You receive only your savings and the return they generate.
- If you leave Switzerland or buy an owner-occupied residence (house or apartment), you can withdraw some or all of your retirement savings early and close the account; the disbursement is taxed separately from your other income and at a lower, special rate.