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Healthcare and pensionsPensionsBVG/LPP
BVG/LPP

Pillar 2 - the occupational pension

Pillar 2 is a type of private pension and, along with pillar 1 and pillar 3a/3b, is one of the three pillars of the Swiss pension system:

  • Pillar 1: the state pension (OASI – AHV/ARS)
  • Pillar 2: the occupational pension (pension schemes subject to the Federal Act on Occupational Old Age, Survivors' and Disability Pension Provision (BVG/LPP)
  • Pillar 3: the private pension, comprising pillar 3a and pillar 3b

The pension system

The occupational pension (BVG/LPP) forms the second pillar of the social security system in Switzerland. Together, pensions from the first and second pillars should amount to around 60-70% of an employee's most recent salary. This should allow employees and their families to maintain their standard of living at an acceptable level.

Overview

  • Statutory occupational/company pension (BVG/LPP)
  • Statutory accident insurance (UVG/LAA)
  • Vested benefits upon leaving a pension scheme
  • Voluntary contributions to supplement BVG/LPP and UVG/LAA
The employer pays at least half of the second pillar contributions. The other half is paid by the employee, unless the employer pays some of these contributions on their behalf.
The employer pays at least half of the second pillar contributions. The employee pays the other half. It is only available to those on annual salaries of at least CHF 21,330 per employer (as at 2020).

The occupational pension is compulsory for all employees from the age of 18 who have a minimum annual income of 21,330 francs and a maximum annual income of 85,320 francs. However, in the first years of employment, only the risks of death and disability are covered. Once the employee reaches the age of 25, capital is accumulated for the old-age pension as well. Old-age pension savings continue to accumulate until the employee stops working or retires.

Who is not covered by an occupational pension?
People who are not employed, people with a gross annual salary of less than 21,330 francs, self-employed people and employees with a contract of three months or less are not covered by the statutory occupational pension.  

You can find more information on the different life situations here.

Is it worthwhile making an additional purchase in the occupational pension plan?

If you have contribution gaps because of interrupted employment or an increase in salary, for example, you can close these gaps by making voluntary, additional tax-privileged payments into your company's pension scheme.

The insurance benefits provided by the pension depend on the personal assets available in the individual pension scheme. If you want to remain fully insured, you need to close any contribution gaps. Additional contributions to the pension scheme can be deducted from your taxable income for that year.

Pensioners who are unlikely to reach the subsistence minimum with the income from their first and second pillars will be entitled to compensation in the form of supplementary benefits to ensure that the subsistence minimum is reached. In order to qualify, you must not have assets valuing more than 100,000 francs (200,000 francs for couples). If your income is less than 80,000 francs and you do not have many assets, it is not worth making additional voluntary contributions (based on calculations by the Swiss Employers Confederation).
It is normally the responsibility of the employer to transfer the pension assets from the current to the new pension scheme. The old employer usually notifies its pension provider of the employee's departure. The old pension provider then contacts the employee and asks where to transfer the pension capital. If, for some reason, the capital cannot be transferred, the old pension provider must send the money to the Substitute Occupational Benefit Institution within two years. This institution looks after the money until the lawful owner claims it.

What do I have to consider with the 2nd pillar / occupational pension plan?

The benefits provided by individual pension schemes vary considerably and are defined in the pension scheme regulations. How these regulations translate into concrete benefits for individual members can be seen on the pension statement. The pension statement is sent to members annually.
The employer and employee each pay half of the pension scheme contributions. Some employers, however, pay a larger share of the contributions. This effectively increases the net salary.
How does the employer handle the coordination deduction? The coordination deduction is currently 24,885 francs. Generous employers will voluntarily reduce the coordination deduction. For example, they might adjust the coordination deduction to reflect the part-time employment percentage. By doing this, they enable employees with an income below the legal threshold of 21,330 francs per year to join an occupational pension scheme. In this scenario, the employer is automatically obliged to contribute to the pension scheme as well.
Unmarried and unregistered partners are not legally entitled to the benefits of their partner's pension fund. However, many schemes will also pay pensions to life partners under certain conditions. If this benefit is available, it will be stated in the pension scheme's regulations.

Make sure that your pension assets are transferred to the new pension scheme. If you hand in your notice and do not start a new job straight away, you should arrange for your pension assets to be transferred to your choice of vested benefits foundation.

Compulsory salary contributions to pillar 2

AgeMax. employee in %Max. employer in %
21 - 24--
25 - 353.53.5
35 - 455.05.0
45 - 557.57.5
55 <9.09.5

Ideally, contributions to the pension over a period of 40 years will amount to 500% of the coordinated salary. Accordingly, the total retirement savings capital will comprise five times the coordinated annual salary plus the accrued annual interest.

Employers are free to pay the employee contributions if they wish or make further payments into the pension scheme. These additional employer payments, just like any occupational pension contributions, are salary components that are not taxed as income or wealth.

Pension tips for every life situation

Whatever your situation in life, there are different aspects to consider if you want to live the life of your choice in old age. You can find the most important here:

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Tips for young people

Who knows what the future will bring? Flexibility and independence are important to young people. Nevertheless, it makes financial sense to start saving for a pension early on. Find out why here.

Tips for young people
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Travel without regret

More and more people nowadays are fulfilling the dream of taking a longer time-out, often to travel, even around the world. Find out here how this might affect your pension.

Tips for globetrotters
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In your mid-life years

What you decide now will shape your financial future. When it comes to pensions, you need discipline and patience. We explain how to find the right strategy for you and your goals.

Tips for adults
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Pensions for people with families

Being responsible for a family raises specific questions with regard to pensions. Find out here which solutions are available that fit your needs.

Tips for families
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Your own home thanks to pension savings

The capital you accumulate by means of pension savings can help you realize the dream of owning a home. Find out here what to watch out for.

Tips for financing a home purchase
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Self-employed and self-responsible

Entrepreneurial freedom brings with it extra responsibility for many things. If you want to save for retirement, you need greater discipline and more expertise. Here are some valuable tips.

Tips for self-employed people
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How to prepare properly for retirement

When you retire, your financial situation will change significantly. The decisions you make now will determine your standard of living in retirement. We explain what matters.

Tips for retirees
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Retirement: decision time

The time has nearly come for you to retire. Now you need to decide whether to withdraw your capital in one go or draw a monthly pension. We explain how to make the right choice.

Pension or lump sum?

The subject of pensions is complex. There is often not enough time to research everything in detail. If you wish, you can seek advice from our partner service Optimatis. Our experts have the information that you may spend a long time searching for. Benefit from their expertise by arranging a no-obligation consultation.

The independent partner service Optimatis and its qualified staff will work with you to establish a clear overview and produce a snapshot of your current situation. Optimatis can offer you the solution that best fits your needs from the wide range available on the market – a good reason to seek advice from an independent expert.

You just need to request an appointment and a specialist advisor will be in touch with you. During the meeting, you can decide how and whether you wish to proceed with the solutions proposed.

Have you started to save privately for retirement?

The earlier the better.
Request no-obligation advice

Pillar 3a: comparison of current interest rates

Tax calculator for the pillar 3a

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