Understanding how pensions work in Switzerland

Whether you’re planning to work in Switzerland, or you’re a foreign worker who has spent part or even all of your career there: you certainly have several questions about the Swiss pension system. How does it work? How do you claim your pension? Let’s take a look in this practical guide.

The Swiss pension system is less complex than you might think: it’s known as the “3-pillar system”. These are the fundamentals on which Swiss society relies to guarantee a comfortable retirement for all Swiss workers.

The 3-pillar system: AHV/AVS, LPP and private pension provision

• The first pillar is mandatory social insurance, made up mainly of the Old Age and Survivors’ Insurance (AHV/AVS) and Disability Insurance (IV/AI). All workers, whether Swiss or not, are covered by AHV/AVS. Note that there are also so-called supplementary benefits (EL/PC) for individuals with more specific needs.

• The second pillar covers occupational pension provision and retirement insurance (LPP/BVG). Here too, the Swiss LPP applies to cross-border workers. Governed by a federal law on occupational pension provision, it allows all contributors to build up entitlements that are transferable, and in some cases even withdrawable, depending on the situation.

• The third pillar is private pension provision. It is in principle optional, but in practice it remains popular with the vast majority. It allows Swiss residents to supplement their second pillar and build up a more substantial retirement savings pot. Pillar 3 is split into two categories (known as A and B). In short, 3A is regulated and offers tax deductions, but is reserved for Swiss tax residents only. Its capital can only be withdrawn at retirement or in special cases, such as buying property or leaving Switzerland. The other option, 3B, is a more flexible form of savings, easily accessible and open to cross-border workers. Its only drawback: it does not offer tax advantages.

What rights do foreigners, cross-border workers and former employees have ?

Whether you’re an expat, a cross-border worker or a former resident, your contributions in Switzerland are not lost. The rules depend on your situation:

• If you stay in the European Union: your years worked in Switzerland are taken into account thanks to bilateral agreements between member countries. In practice, you will receive an AHV/AVS pension proportional to your contributions, paid directly into your country of residence. Note that EFTA countries also benefit from this arrangement (Iceland, Liechtenstein, Luxembourg and Norway).

• If you leave Europe: you can request the cash payout of your LPP/BVG capital (the 2nd pillar). But on one condition: you must no longer be subject to mandatory insurance in an EU/EFTA country.

• If you’re a cross-border worker: your Swiss entitlements (AHV/AVS and LPP/BVG) are added to those you’ve built up in your home country. You will therefore receive a mixed (multi-country) pension, calculated by each state based on your periods of employment.

• To keep your unemployment benefit entitlements: the U1 document summarises your periods of employment and the contributions made in Switzerland. Don’t forget it — it’s essential if you go to work in another EU country. This form will, for example, be requested by France Travail (formerly Pôle emploi) in France to calculate your unemployment benefit entitlements after working in Switzerland.

The key thing to remember is that any former worker who has left Switzerland keeps their pension entitlements. To claim them, you need to apply to the relevant AHV/AVS compensation office and LPP/BVG pension fund.

Legal retirement age, early retirement, AHV/AVS reform, mixed pension: retiring in Switzerland isn’t something you can improvise. Your choices will have a direct impact on the amount you receive.

Legal retirement age and the option of early retirement

In practice, you can claim early retirement up to two years earlier. But the price to pay will be a lower AHV/AVS pension. Logically, the earlier you retire, the greater the reduction: expect around 6.8% less per year of early retirement.

The 2024 AHV/AVS reform: what’s changing for women

Since 2024, the retirement age for women has been gradually rising from 64 to 65, to align with that of men by 2028. Women close to retirement benefit from transitional measures, but the trend is clear: people need to work longer.

Deferred or mixed (multi-country) retirement: how does it work ?

You can postpone your retirement by working 1 to 5 more years, which increases your pension. And if you’ve worked in Switzerland and in other countries (EU/EFTA), your entitlements are also added together: each country pays its share. The result: a combined pension!

Each pillar follows its own rules. To claim your Swiss pension without losing any entitlements, you therefore need to know the main steps for claiming your AHV/AVS. With the right approach, you can also bring your 2nd and 3rd pillar back home without any trouble.

How to claim your 1st pillar (AHV/AVS) ?

The Old Age and Survivors’ Insurance (AHV/AVS), the 1st pillar, is claimed from the compensation office where you contributed. But be careful, the application must be made six months before you retire. If you live in the EU or EFTA, the application will also go through the pension body in your country of residence. Keep in mind that without a written application, no AHV/AVS pension will be paid.

How to claim your 2nd pillar (LPP/BVG) ?

Occupational pension provision (LPP/BVG), the 2nd pillar, is claimed from your former employer’s pension fund. You then have a choice between:

• Receiving a monthly pension.
• Withdrawing your contributed capital: between 25% and 100% depending on the fund’s regulations.
• Or a mix: a partial monthly pension along with part of your capital.

Be careful, as this choice is irrevocable and requires planning ahead. In the worst case, this process can take up to 2 years depending on the fund.

How to claim your 3rd pillar (private pension provision) ?

Private pension provision, the 3rd pillar, is based on individual savings (bank or insurance). You can withdraw your funds five years before or after the legal retirement age. The capital is generally paid out in a single lump sum, but a pension is also possible depending on the contract. Again, the application must be made to the managing body.

In short, there are many ways to easily claim your AHV/AVS contributions. To receive them, you might think that opening a Swiss bank account is necessary. But think again: innovative solutions like b-sharpe let you get a Swiss IBAN in just a few clicks and at a lower cost, receive your payments into it, and easily convert your CHF into EUR at a competitive exchange rate.

The Swiss system isn’t set in stone: as the population ages, regular reforms adjust its rules and funding.

• The retirement age for women is gradually being aligned with that of men, at 65, by 2028.
• VAT dedicated to AHV/AVS is also increasing: in 2024, the rate rose from 7.7% to 8.1%, and could increase by a further 0.7 points in 2026. The stated aim: to maintain the financial stability of the 1st pillar.

But rest assured: these adjustments don’t call into question how attractive the system is. Sure, the cost of living in Switzerland is high, but so are salaries — on average 2.5 times higher than in France. The result: your contributions generate a solid pension, well above the European average.

In practice, employees and self-employed workers pay around 8% of their gross salary into AHV/AVS. As a result, the amount of your pension will depend on your average income. But be careful: your contributions to the 1st pillar are only part of your overall contributions. It’s the combination of all three pillars that will determine the level of your pension.

Factors that influence the amount of your pension

Several factors can affect the final amount of your pension:

• Credits: granted to parents with dependent children or to caregivers.
  
• Contribution gaps: every missing year reduces the amount of a pension. This particularly affects cross-border workers who have only worked part of their career in Switzerland.
  
• Family situation: married couples are subject to a joint cap, often lower than two individual pensions combined.

In short: your career, your family status and your pension provision choices will directly affect your entitlements. To maximise your pension, we recommend adopting a clear personal strategy for your pension provision choices.