Swiss Pension Pillar 1: an Overview

Jul 11, 2018 4:30:24 PM

As part of one of the world's best pension systems, the Swiss state scheme is also known as the first pillar. In conjunction with this retirement provision that covers basic needs, company pensions form the second pillar. Together, the two sources of income aim to help retirees maintain their standard of living during retirement. An optional top up is available using the third pillar that comprises local Swiss products, such as those offered by leading Swiss pension plan providers.  

If you plan to retire in Switzerland and would like to understand the state pensions system, read on for essential information. 

Understanding the Benefits

In 2016, the Mercer Global Pension Index rated the Swiss state system as the sixth most efficient and sustainable in the world, ahead of the UK, Canada and Germany. After contributing for one year, anyone can claim a Swiss pension. The amount payable varies; how much you receive is a result of a calculation based on the number of years of contributions paid and the average earnings during those years. 

British nationals benefit from bilateral arrangements with Switzerland and, consequently, are entitled to receive a Swiss state pension on retirement – but only if still living in the country. The minimum retirement age is 65 years for men and 64 for women. It is also possible to defer taking income for between one and five years, after which the level of monthly payments rises. The amount increases by 5.2 per cent each year. Nonetheless, the current tendency is towards early retirement, which may be possible from age 58. Under the current bilateral social security agreements, years built up in the Swiss system are transferable as years contributed under the UK National Insurance scheme. 

Making Pillar 1 Contributions

Like most other pension systems, contributions made while working in Switzerland are tax deductible. All adults over twenty years of age who live and work in the country are obliged to make first pillar pension payments directly from their gross salary to AHV, the name given to the state agency and derived from the initial letters in German for old age and disability. 

For a full Pillar 1 pension, it is necessary to make uninterrupted payments from age twenty until retirement. Otherwise, the entitlement is pro-rata. Employees who work in Switzerland on temporary contracts are exempt from making social security contributions and are not, therefore, eligible for a Swiss Pillar 1 pension. 

Estimating How Much a First Pillar Pension Will Be

Using the Swiss pension calculator tool available on this page, potential retirees can calculate their future entitlements. At the time of writing (2018), Swiss pensions vary between the minimum CHF 1,175 and 2,350 per month. 

The maximum payable to a married couple is 1.5 times the total sum due to the highest claimant ie CHF 3525 per month. 

Drawing the benefits

To apply for a Swiss state pension, you should write to the office to which you paid your last contribution. It is advisable to contact them around three months in advance. 

Finally, surviving spouses, partners or children may be able to claim death benefits in respect of the demise of the recipient. 

Click here to learn more about Swiss pension products

Here at Belgravia Wealth Management, our expert advisers specialise in answering pension transfer questions as well as helping expats who live in Switzerland to select the best local Swiss products for their hard-earned savings and investments. We understand the UK and Swiss pensions thoroughly, as well as the questions that expats ask when considering a pension transfer or a Swiss pension plan. Should you require further information or wish to discuss your financial arrangements for your retirement, including the first pillar of the Swiss state retirement scheme, please contact us here.

We will be delighted to assist.