Swiss pensions: how do you claim your funds?

Pillars 1, 2 and 3: how do you make sense of it all?

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The Swiss pension system is based on a simple yet robust structure: three complementary tiers that safeguard your future standard of living.

The concept: three floors for a single retreat

1. The first pillar (AVS – Old Age and Survivors’ Insurance): This is the compulsory state-run scheme. Its aim is to cover basic living costs. It operates on a pay-as-you-go basis: current contributions fund today’s pensions.
   
2. The 2nd pillar (LPP – Occupational Pension Scheme): Mandatory for employees, this pillar aims to maintain your previous standard of living (in addition to the AVS, the aim is to reach around 60% of your final salary).
   Unlike the AVS, this is an individually funded scheme: you pay contributions for yourself.
   
3. The 3rd pillar (private pension provision): This is the optional tier.
   It helps to fill gaps in your pension provision and offers attractive tax benefits, whether you are a resident or a cross-border worker.
   

Who pays contributions for what? (employees, self-employed, cross-border workers)

The situation varies depending on your employment status and where you live:

How much will you be paid?

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The amount of your pension is not left to chance; it depends on how long you have paid contributions and on your income.

• For the first pillar (AVS): To qualify for a full pension, you must have made contributions for 44 years (the retirement age is now the same for both men and women at 65).
  
  Any missing years will result in a reduction in the pension.
  
• For the 2nd pillar (LPP): The amount depends on the capital accumulated in your pension account and the conversion rate applied at the time of retirement (currently 6.8% for the mandatory portion).
  
  You will often have the choice between a monthly pension, a lump-sum payment, or a combination of the two.
  

The AVS: the pension you’ll receive no matter what happens

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The Old Age and Survivors’ Insurance (1st pillar) forms the foundation of your retirement. Compulsory for everyone working in Switzerland, including cross-border workers, it is designed to cover your basic living expenses.

The amount of your future pension depends mainly on the number of years you have contributed and your average income, which is why it is essential to understand how the AVS works so that you can plan for your entitlements.

The LPP: what your employer sets aside for you

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Occupational pension schemes supplement the state pension to help you maintain your usual standard of living.

It works like a personal savings account: your contributions and those made by your employer are paid into an account managed by a pension fund.

When you retire, you can choose between a monthly pension or a lump-sum payment – an option often favoured under the LPP by cross-border workers wishing to finance a property purchase.

It is a powerful pension tool that adapts to your career path.

The third pillar: savings you build up yourself

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Unlike the first two pillars, the third pillar is a voluntary, private scheme.

It is the ideal way to bridge any gaps in your pension provision and build up additional savings, whilst benefiting from immediate tax deductions.

For cross-border workers or residents, this is often the most flexible option, but it requires careful consideration of whether to withdraw from or contribute to your third pillar pension scheme, depending on your cash flow requirements.

Whether you choose a banking solution or an insurance policy, it allows you to tailor your retirement plans to your personal ambitions.

The AVS 21 reform: what’s changing for your pension

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The Swiss pension system has evolved to adapt to demographic realities.

This reform, which came into force on 1 January 2024, levels the playing field and offers greater flexibility in planning for the end of your career, whether you are a resident or a cross-border worker.

The reference age is being raised to 65 for women

This is the key change: the retirement age, now referred to as the ‘reference age’, has been set at 65 for both men and women.

• For women: The transition from 64 to 65 is being phased in gradually.
  If you were born between 1961 and 1969, you are part of the ‘transitional generation’ and are eligible for compensatory measures (pension supplements or a smaller reduction in the event of early retirement).
  
• The practical implications: This harmonisation simplifies the calculation of your AVS pension, but requires you to pay closer attention to your contribution years to avoid any gaps.

Early retirement or deferral: how it affects your pension

The reform offers a great deal of flexibility: you can now choose your retirement date “à la carte”, between the ages of 63 and 70.

1. Planning ahead for retirement: You can start receiving your pension from the age of 63 (and even from the age of 62 for women in the transitional cohort).
   
   
2. Deferring your pension: If you continue to work after the age of 65, you can defer the start of your pension payments for a period of between 1 and 5 years. Your pension will be increased by a deferral supplement. This is an excellent way to maximise your future income, particularly if you continue to make contributions via your 2nd pillar (LPP).
   
   
3. Partial retirement: An interesting new development is that it is now possible to bring forward or defer only part of your pension (between 20% and 80%). This allows for a smooth transition into retirement without a sudden drop in your income.

How to claim your Swiss pension: a step-by-step guide

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The transition from working life to retirement does not happen automatically. 

To avoid any gap in your income, you should apply to several different organisations in advance.

Apply for your AVS pension (6 months in advance, via the compensation fund)

The first-pillar pension is never paid automatically. 

You must submit a formal application approximately six months before reaching the qualifying age (65). 

This procedure must be carried out through the last social security fund to which you paid contributions. For cross-border workers with a mixed employment history, it is often necessary to coordinate this application with the pension authorities in your country of residence. 

Planning ahead gives the pension fund plenty of time to check your contribution history and calculate your AVS pension accurately, without rushing.

Withdrawing your 2nd pillar savings: a pension, a lump sum, or both?

Withdrawing funds from your occupational pension scheme offers greater freedom, but requires careful strategic planning well before you retire.

• Options: Depending on your pension fund’s rules, you can choose between a lifetime monthly pension, a lump-sum withdrawal of your entire capital, or a combination of the two.
  
• The critical deadline: If you opt for a lump-sum withdrawal (either full or partial), most institutions require several months’ notice, or even a year in advance.
  
• Tax implications: A lump-sum withdrawal triggers immediate taxation. This is a key point to bear in mind when managing a LPP pension for cross-border workers, particularly as the payment of a large sum involves currency conversion, where every basis point counts.

Withdrawing funds from your 3rd pillar: permitted cases

The third pillar is a private pension scheme that normally matures when the holder reaches the statutory retirement age. 

However, you can request the payment of your funds no earlier than five years before the reference age. 

In addition to retirement, certain life events allow for early withdrawal:

• The purchase of a main residence.
  
• The transition to self-employment.
  
• Switzerland’s final departure.
  
• Disability or death.

The flexibility of withdrawals from or contributions to the third pillar makes it a highly popular pension scheme, but be sure to check the notice periods for cancelling your contract (with your bank or insurance company) so that you can access your funds when the time comes.

Cross-border workers or expats: pitfalls to avoid

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Working across two countries comes with its own set of challenges. 

To ensure a smooth transition into retirement, you need to consider not only the amount of your pensions, but also how they are coordinated and transferred.

You have paid contributions in France AND Switzerland: what happens next?

There is no single Franco-Swiss pension scheme. 

If you have worked in both countries during your career, you will receive two separate pensions, each calculated in accordance with the relevant national rules. 

Switzerland will pay you your AHV pension in proportion to the number of years you have contributed in Switzerland, whilst France (CNAV) will do the same for your periods of contribution in France.

Thanks to bilateral agreements, the years you have worked in Switzerland are taken into account by the French authorities when determining your “full rate” (length of insurance), thereby preventing any reduction in your French pension.

You’re leaving Switzerland: what happens to your three pillars?

If you leave Switzerland permanently (to move to France or elsewhere), what happens to your assets depends on the relevant pillar:

• Pillar 1: You cannot withdraw the capital. You will receive a pension when you reach the statutory retirement age.
  
• 2nd pillar: If you move to an EU/EFTA country (such as France), you can only withdraw the “mandatory portion” of your LPP for cross-border workers as a lump sum if you are no longer subject to compulsory social insurance in your new country. Otherwise, this portion remains frozen in a vested benefits account until you reach retirement age.
• Pillar 3: This is the simplest option. Leaving Switzerland permanently is grounds for a full early withdrawal. 

This is often the ideal time to review the withdrawal of your 3rd pillar savings so that you can reinvest those funds in your new country of residence.

Transferring your pension savings to France without losing out on the exchange rate

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Once your rights have been activated, the question of the transfer arises. 

Receiving money in CHF into a EUR account can be expensive if you let your bank handle the transaction by default.

Monthly income or lump sum: two different investment strategies

• Monthly income: This exposes your daily budget to exchange rate fluctuations every month. To stabilise your income, it is essential to automate your transfers at a competitive rate.
• Lump-sum withdrawal: Receiving a large sum (from the 2nd or 3rd pillar) is a critical decision. 

A difference of just 1% in the exchange rate can result in a loss of several thousand euros on a pension fund. 

It is essential to compare the rates before confirming the transfer.

How b-sharpe actually affects your payments

At b-sharpe, we understand that every euro counts when you stop working. 

Unlike traditional banks, which often charge opaque and high currency exchange fees (between 2% and 3%), we offer transparent rates that are close to the interbank market rate. 

By using our solution to transfer your Swiss pension, you maximise the amount actually credited to your French account. 

It’s a simple, secure process and, above all, one that’s tailored to the lifestyle of cross-border workers who want to make the most of their years of contributions without being fleeced by bank charges.

Frequently asked questions about Swiss pensions