In Switzerland, the pension system may seem complex: AVS; 2nd pillar; 3rd pillar A and 3rd pillar B; linked or unlinked. But the answers to our questions are generally straightforward: How much will I earn? How and when to plan my retirement?
What age can I retire?
The Swiss system is one of the most generous in Europe. The pension is paid from 65 for men and 64 for women. The amount depends on the conversion rate applied to the capital accumulated in occupational pensions throughout the career. A legal LPP minimum is set at 6.8% for the compulsory part.
Several annuity models coexist:
Splitting: the conversion rate of 6.8% is applied to the mandatory part, while another conversion rate is used for the extra-mandatory part. Insurance companies use this model.
The single conversion rate is applied to all pension assets (mandatory and extra-mandatory). It is the so-called wraparound pension funds that adopt this system.
Let’s start with the financial aspect, usually the first concern of workers preparing for retirement. And for that, you have to understand the Swiss system well so that everything is clear. Expert advice is available at F B K Conseils.
In Switzerland, pension provision is based on the 3-pillar system:
The first pillar
The 1st pillar, also called the AVS, is compulsory and operates on a principle of solidarity. All workers – salaried and self-employed – contribute from the age of 20 up to 10.1% of gross salary. The contribution to the AVS is paid 50% by the employee and 50% by the employer to the State.
How much can you get with the AVS?
At the time of retirement, the calculation of the amount of the pension will depend on:
- Average annual income
- Number of years of contribution
- Applicable bonus
At most (by earning an average of 84,600 francs per year and contributing since the age of 20), you can receive 2,350 francs monthly from the AVS. The minimum amount is 1,175 francs per month (earning less than 14,100 francs per year). It is enshrined in law that the maximum pension cannot be higher than twice the minimum pension.
The second pillar: occupational pension
The pension fund represents the second pillar, which is also mandatory. Its legal bases are the federal law on occupational pensions for old age, survivors and invalidity (LPP) and the law on compulsory accident insurance (LAA). The benefits provided by the pension fund aim to maintain your standard of living.
The third pillar: private pensions
Voluntary private provision is divided into two separate pillars: the linked pillar 3a and the free pillar 3b. It makes it possible to close any pension gaps and cover additional individual needs.
It’s never too early to make plans for your retirement, and it’s always worth seeking help to ensure you make the most of your provision. Contact F B K Conseils today for informed advice.