Swiss Pension System a.k.a. Pillars for dummies and immigrants

Pillar 1

First Pillar is state pension. It’s a PAYGO system. You live in Switzerland, you contribute to a global pension system by paying a percent of your salary. It’s actually more than just a global state pension system, it’s more like a social insurance package.

There are tons of names and acronyms you may need to learn, since everything in Switzerland has to be named in at least 3 languages. The first name we meet is AHV/IV which are the Pillar 1 main social insurances. You pay these premiums for old age pension (AHV) and disability (IV). In Italian/French the two names become AVS/AI.

There are other benefits you get from Pillar 1, like unemployment insurance (ALV & ALV2) loss of income due to compulsory services (EO) and maternity pay (MSE). Full list on the AHV/AI website (available in English too).

How much do you contribute on Pillar 1?


It’s 6.225% of your monthly income charged on you and the same amount on your employer.

Unemployment insurance is split in two parts. There’s a concept of “maximum insured salary“, which is driven by law and it’s 148,200 CHF today, in 2016. You and your employer pay collectively 2.20% of your salary up to the maximum, then 1% on the remainder. In case you lose your job, you get 70% (or 80% if you have children) of your salary, capped to the maximum.

Here‘s a ridiculously detailed doc with all the official information about social insurances.

When and how much will I get back from pillar 1?

Well, let’s set aside unemployment, maternity and disability. Let’s look at the old age pension, i.e. the benefit you have when you reach pension age 65 (the AHV has an english name too and it’s the coolest name for a state thing I’ve seen so far. In English it’s named OASI. How cool is that? Wait… is it named OASI because it’s a mirage??).

pillar1pensionThe yearly pension you’ll get will be between MIN and MAX set by law. MAX is by definition twice the MIN. Today MIN is 14,100 (1,175 CHF per month), assuming your yearly salary is less than 14,100 CHF. Then there’s a linear zone till a salary of 84,600 CHF per year, when the MAX kicks in and your pension is capped at 28,200 (2,350 CHF per month, or twice the MIN).

This is how it works for a person who contributed into Pillar 1 for 44-45 years, from age 20 to age 64-65. In case you didn’t (you immigrated in Switzerland after age 20 or you leave the country before age 64-65), you will receive a pension (annuity) anyway when you reach age 64-65, but the amount is prorated based on the years you’ve worked.

Let’s say you’re single and your yearly salary is above 84,600 CHF, then you may assume you’ll receive a monthly pension of roughly 54 CHF per year of contribution starting at retirement age.

Example: you come to Switzerland to work 5 years and then you leave. One day in the future you’ll receive a letter saying “congratulation! This is your pension from now on: ~270 CHF per month!“.

This is based on the assumption that you can’t withdraw Pillar 1 benefits upon leaving Switzerland. I’ve spent some time to answer the question “can you withdraw Pillar 1 contributions when permanently leaving Switzerland?”. There are tons of misleading pieces of information on the net. While our pension consultant at Hooli keeps telling us every year “forget about that, Pillar 1 is forever” and while the internet seems to agree on this, I’ve found something interesting in official documents. This is the official guide from the immigration office that explains what happens when you leave Switzerland. Pages 12-15 are about Pillar 1 and leaving Switzerland. Apparently it depends on whether the destination country has stipulated a social security agreement with Switzerland or not. The countries listed in the section are non-EU countries (like USA, Australia, Canada…). In case your destination country has not an agreement with Switzerland, you may actually apply for a withdraw of your contributions plus your swiss employers’ ones, up to 8.4% of yearly gross salary (while you and your employer paid 12.5%). Digging deeper I’ve found that all EU-EFTA countries have an agreement which is part of the agreement on the free movement of persons. So essentially it’s true, Pillar 1 is forever!

… Unless you move into a country which is not in any agreement for 6 months, a country that doesn’t apply income tax on this money. Food for thought.

Plus, no way to transfer, withdraw or perform any reconciliation with other pension accounts everywhere else in the world. Swiss pension will be waiting for you in Switzerland and, in case laws won’t change, your pension day is already known. Mine is in 2042.

Things get complicated if your salary crossed MIN-MAX lines during working years, if you’re married, if you’re divorced, if you’re widow, if you’re unemployed, if you’re self employed, if you had to care for kids or elderlies or other relatives (you get contribution credits for bringing up children or caring for someone). Just to mention an example, married couples have a different MIN/MAX, which are 28,200 and 42,300, i.e. 2x and 3x the original MIN for singles. It means that the couple earns a pension which is capped at 150% the pension of a single individual instead of 200%. Unfair to the couple.

Pillar 1 is mandatory if you live in Switzerland, even if you don’t work, unless your partner works and already pays Pillar 1 contributions on a salary which is at least twice the MIN (~28K per year). Else you have to pay a minimum contribution regulated by law which today, year 2016, is 478 CHF per year.

Want to know more about Pillar 1?

  • Here‘s a nice detailed doc on Pillar 1 by AXA.
  • Here‘s a nice page on website, with a calculator.

Click on next page, let’s move to Pillar 2 🙂

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