Pension 2nd pillar
For most people, retirement is still a long way to go – or not. It’s time for an overview of Swiss retirement provision! The ideal approach is to start thinking about it as early as possible. Below are some useful explanations, from Tellco and also Axa, major players in the pension fund world in Switzerland.
Many other sources are available on the net.
Retirement provisions in Switzerland are based on three pillars, with the aim being to avoid any financial worries following retirement.
A pension fund gives you considerable freedom in the second pillar.
How does the second pillar work?
These different types of insurance offer protection in the form of pensions, unemployment benefits and family allowances, as well as paying for costs incurred through illness and accidents.
Retirement provision with a pension fund in the second pillar is mandatory for all employed persons who are insured in the first pillar and earn at least CHF 21,150 a year. For instance, an employee meeting these conditions has a personal account with a pension fund. The employee and his employer pay an amount into this account on a monthly basis, with the size of the amount depending on his salary, age and pension plan. The employer determines the pension fund covering the employee.
What happens after retirement?
When you retire, you can choose between receiving your pension fund assets as a lump sum or as a lifelong monthly pension. The conversion rate in the mandatory OPA is currently 6.8%. If you have saved CHF 100,000, you will receive CHF 100,000 × 6.8% conversion rate = CHF 6,800 per year. Your pension fund regulations may contain a different conversion rate. In this event, both pensions will be calculated on your retirement (regulatory pension and statutory minimum pension), and the highest will be paid out.
What happens in the event of death or disability?
Should you die before you retire, your surviving beneficiaries will receive a share of your pension fund assets, either as a widow’s and orphan’s pension or as a lump-sum payment. Should you become unable to work before you retire, you will receive a disability pension or a lump-sum payment.
What happens if you change job?
If you change employer, you will be required to notify your current pension fund of your new one. Your pension fund assets will then be transferred from the pension fund of your former employer to your new employer’s. In this way, your total assets are always insured at one single pension fund. If you no longer have an employer, you are required to deposit your pension fund assets in a special account – a vested benefits account.
Can I access my money before I retire?
If you purchase a residential property for your own use, you can make an early withdrawal of a portion of your pension fund assets. If you sell the property again, the money must be repaid. Only if you permanently emigrate abroad or become self-employed can you withdraw the entire amount.
How exactly does insurance with a pension fund work?
The pension fund insures your annual salary of between CHF 21,150 and CHF 84,600 – these are the limits of the mandatory OPA. Within these limits, all pension funds offer identical legally defined conditions: currently at least 1% annual interest and a conversion rate of 6.8%.
Your pension fund benefits:
Your pension fund can insure an additional salary range (CHF 0 to CHF 846,000), it is not required to subtract a coordination deduction (CHF 24,675) from your salary. The pension fund can define the interest rate and the conversion rate. These conditions vary according to the pension funds and the insurance plan you negotiate with your employer.
Can I increase my pension fund assets myself?
In certain circumstances, it may make sense to pay more money into your pension fund than stipulated in your employment contract. For example, if you were without a fixed income for an extended period or would like to optimise your taxes: you could then make a “purchase” to increase your retirement savings. Furthermore, you can deduct this amount from your taxes, as with the third pillar .
Do you have further questions about your occupational pension? Our pension experts are happy to help you.
When a company starts hiring people, it must register with the AVS authorities.