Pillars 1, 2 & 3

The Swiss social insurance system


The three retirement provision pillars

3 pillar system

The Swiss social security system is split into three branches with their own specific characteristics and goals that help retired individuals continue to live according to the lifestyle that they have chosen in retirement.

There are three pillars to the Swiss social security system and these comprise of the following:

  1.  Old Age and Survivors/Disability Insurance
  2.  An occupational pension plan
  3.  Private investment options


First and second pillar provisions are intended to enable you as an individual to secure your accustomed standard of living. Private retirement planning is in addition to these arrangements and can fill any gaps in your existing provision.

First pillar: State pension provision

The first pillar comprises

  • AHV pension (Old-age and surviving dependants insurance) – This is mandatory for all Swiss residents. However the scheme fails to achieve its goal of securing a minimum level of income. In this case, supplementary benefits can be claimed, depending on the pension recipient’s asset and income situation.
  • Disability Insurance (IV)
  • Compensation for loss of earned income during military service (EO)
  • Unemployment Insurance (ALV)


Second pillar: Occupational pension provision

  • The second pillar is based on the laws on occupational pension provision (BVG) and accident insurance (UVG)
  • Categories of individuals insured under second pillar provision is restricted in comparison to the first pillar
  • Employees with income higher than CHF 21,060 are automatically insured by a second pillar pension fund
  • UVG and BVG insurance are mandatory for all employees while the self-employed can join on a voluntary basis.
  • Lump Sum additional Supplementary Payments- Employees that moved to Switzerland from abroad could be entitled to buy missing years in their BVG pension scheme. There are a number of advantages to this such as tax deduction, free of wealth tax, income and withholding tax during the contribution period. 20 per cent  of their insured salary can be bought for the first 5yrs. There are a number of restrictions including a blocking period therefore it is advised that advice is taken before making this decision.


Third pillar: Private pension provision

  • The state also supports private pension provision, known as the third pillar.
  • Offers partial tax advantages
  • Branches out into two further pillars Pillar 3a- fixed retirement savings schemes and Pillar 3b- flexible retirement saving schemes
  • Pillar 3a offers tax exemptions while Pillar 3b does not
  • Savers have a free choice of savings arrangements

A number of Pillar 3 products are available on the market and enable the scheme user to do the following:

  • Ability to continue contributions after leaving Switzerland
  • Ability to grow your funds by investing in several types of funds
  • Adding insurance such as income protection
  • Adding death cover to protect your dependents
  • Arranging to provide your income in the event of your inability to work due to illness
  • Ability to purchase property by withdrawing capital early or pledged against a property deposit in Switzerland in combination with pillar 2.