The three-pillar system of Switzerland

In Switzerland, life in old age is secured by the three pillars of provision. In this blog post, we would like to briefly discuss each of the three pillars and explain how they work:

First Pillar

The first pillar consists of the old-age and survivors' insurance (AHV) and the disability insurance (IV). AHV is mandatory for every person living in Switzerland. AHV contributions are paid by employees, the self-employed, and non-working individuals, as well as by employers. The AHV pension, which is paid out in old age, is based on the number of years contributions have been paid into the AHV. The IV provides financial support for those who are unable to earn a normal income due to illness or accident. The IV is also financed by contributions from employees, employers, and the self-employed. The aim of the AHV is to ensure a minimum existence.

Second Pillar

The second pillar is the occupational provision (BVG). Employees working in Switzerland typically pay into the so-called pension fund monthly. The pension that is subsequently paid out is based on the amount paid into the pension fund. Employees who earn more therefore automatically pay more in and receive more pension in old age accordingly. The second pillar thus offers additional financial security in old age to maintain the usual standard of living.

Third Pillar

The third pillar is private provision and includes various voluntary provision and insurance options. A distinction is made between tied provision, pillar 3a, and flexible provision 3b. The great advantage of pillar 3a is that the paid-in contributions can be deducted from taxes. Unlike the AHV and occupational provision, the 3rd pillar is voluntary and must be taken out individually. However, it can be easily concluded with most insurance companies or banks. The goal of the 3rd pillar is to supplement the pensions of the first two pillars.

• Further information
   
• Calculate offer for fiduciary