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EXPLAINED: How does the Swiss pension system work - and how much will I receive?

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EXPLAINED: How does the Swiss pension system work - and how much will I receive?
How much pension will you receive for a happy retirement in Switzerland? Photo by Edu Carvalho from Pexels

Planning on retiring in Switzerland or want to make sure you’re in a good position when you do? Here’s what you need to know about retiring in Switzerland.

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Swiss retire relatively early, with a retirement age of 65 for men and 64 for women, although it is being gradually raised 

READ ALSO: What is Switzerland's retirement age - and will it rise?

Switzerland does have a strong pension scheme, although the amount you earn and put into it over your time in Switzerland is key. 

You can also switch your non-Swiss pension for a Swiss one in some cases (see below). 

The Swiss pension system consists of three pillars: state pension, occupational pension and the private pension. 

The pillars are laid out separately below. 

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Pillar one: OASI (Old Age and Survivor’s Insurance) 

The first pillar – otherwise known as the OASI (Old Age and Survivor’s Insurance) – seeks to cover the basic costs of life and is mandatory. 

This includes old-age insurance and survivors insurance (OASI/AHV/AVS), disability insurance (DI/IV/AI) and any supplementary benefits (EL/PC). 

EXPLAINED: Everything you need to know about retiring in Switzerland

The level depends on a variety of underlying factors, including the number of years you have chipped in, the amount of your income and contribution credits. 

You can receive contribution credits for bringing up children or for caring for other people. 

You will receive the full OASI pension in Switzerland if you and your employer have contributed without interruption from the age of 20 until retirement. 

You are also allowed to defer your pension for up to five years, which will increase the amount you receive each month. 

For a direct estimation of what you may receive, please check out the following official government link. 

It will take into account a variety of factors including where you live to provide you with an estimate. 

Pillar two: Occupational pension

The second pillar, the occupational pension, includes everything from the first pillar and is compulsory for employees who earn more than CHF21,300 per year. 

The goal of this pension is to allow retirees to retain their previous lifestyle in old age, or if they incur a disability. 

The more you contribute to this pension, the more you will receive in retirement. 

Together, the first two pillars aim to achieve a total pension income of 50 to 70 percent of pre-retirement earnings.

Benefits can be paid out as a pension, or as a lump sum in some cases. 

You will receive a minimum of 6.8 percent of your retirement savings per year once you retire.

According to an example laid out by the Swiss government in its retirement advice, people who have saved CHF400,000 in their pension will receive CHF27,200 a year, or CHF2,267 a month pursuant to this 6.8 percent figure.

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Pillar three: Private pension

The third pillar, which is optional, takes into account private savings and investments, such as property. 

There are two types of private pension plans: restricted and unrestricted. 

The restricted pension plan involves paying into a particular pension fund with a bank or insurance company 

The unrestricted plan involves all forms of investments and while it is more flexible than the restricted plan, it does not provide tax benefits. 

It is important to note that there is no official unrestricted pension scheme – it simply refers to the types of investments that one makes in order to provide for a better financial position in retirement. 

Therefore, it is impossible to lay out how much this will be due to the wide variety of pension options on the table. 

How do I switch my pension to Switzerland? 

If you want to move to Switzerland to retire, it’ll make things a little easier if you can transfer your pension. 

This will largely depend on the country you are coming from, with many countries having a bilateral arrangement which allows people to transfer their pensions into the Swiss pension scheme. 

This includes EU/EFTA countries along with Australia, the United States, Chile, Canada, Israel, Japan, Turkey and several others. 

Due to Brexit, the UK operates under a different system called a Qualified Recognised Overseas Pension Scheme which helps you put your funds in the one place. 

You will still only be allowed to claim that pension when you reach retirement age in Switzerland. 

More information is available on the official Swiss government website. 

Please note: As with all of our explainers, they are intended as a guide only and do not constitute legal or financial advice. Please discuss any financial decisions with a certified expert in the field. 

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Comments (1)

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Anonymous 2021/09/19 15:55
Ok as an introduction to the 3 pillars, but this article could go into much more detail, for example about the conditions of the 1st pillar and the fact that contributions to the 2nd pillar are tax deductible.

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