1ST PILLAR – Swiss Pension Pillar System
The 1st Pillar is the pension provided by the state. Its purpose is to provide you with a source of revenue to cover your basic financial needs.
How much are your contributions?
Retirement (OASI), disability (DI), income compensation (IC), and unemployment contributions are deducted from your salary. The obligation to pay contributions ends when the person retires (women age 64/men age 65).
You will contribute with a percentage of the gross salary. The employee and the employer each pay half of the total contribution, i.e. 4.35 % for the AVS / AHV contribution.
The state pension is always received as an annuity. It doesn’t have a transfer value, so it can never be withdrawn as a lump-sum. The amount of your pension is based on your earnings, the years contributed, and the credits you received from periods spent raising children or caring dependents.
Your level of contributions will be considered when calculating your pension allowance.
The yearly pension you’ll receive will be between the minimum and maximum set by law. Currently, minimum is up to CHF14,340 per year. This is what you would receive if you retire contributing with less than CHF21,150 per year. Then, there’s a linear zone up until a salary of 86’040 CHF per year, which is the maximum, and will entitle you to CHF28,680.
You should contribute for at least 12 months.
For the maximum allowance, men should contribute for 44 years and women for 43 years.
If you don’t contribute for this long, the amount is prorated based on the years you have contributed. If you decide to retire early, you should continue paying AHV/IV/EO contributions until you reach your standard retirement age.
The maximum pension for a single person can’t exceed twice the minimum pension.
Married Couple’s Pension
Each partner receives an old-age or disability pension equivalent to half the amount of their combined income. The total of both individual pensions can’t exceed 150% of the maximum pension. If this amount is exceeded, both individual pensions are reduced accordingly.
The number of credits
Under certain conditions you could gain additional “contribution periods”, defined as credits, for the years in which you participated in educational and care activities.
Education credits are applied if you have been responsible for children under 16. The credits will be attributed by the number of years, but it’s independent of the number of children.
Persons who look after relatives with moderate to severe disabilities are eligible for care credits.
Education and care credits will increase the average annual income, which warrants a higher pension. If, in a particular period, a person is entitled to both education and care credits, only the education credits will be applied.
When can you receive your pension?
For men, retirement age is currently 65 and for women, it is 64.
You can choose to retire up to 2 years before reaching the regular retirement age, but the pension will be reduced by 6.8 % for each year of early retirement. However, you could also defer it by a maximum of 5 years. The deferral will increase the pension allowance from 5.2% for 1 year up to 31.5% for the 5 years.
If you retire early, you still should continue making contributions to the 1st pillar until you reach your regular retirement age.
Adjustment for inflation
Pensions are adjusted every 2 years.
The increase is calculated using 50% of the nominal salary index, calculated by the Federal Statistical Office, and 50% of the Swiss consumer price index.