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COST OF LIVING

EXPLAINED: How does the Swiss pension system work – and how much will I receive?

Planning on retiring in Switzerland or want to make sure you’re in a good position when you do? Here’s what you need to know about retiring in Switzerland.

Published: 9 August 2021 16:10 CEST
Updated: 28 February 2023 14:41 CET
EXPLAINED: How does the Swiss pension system work - and how much will I receive?
How much pension will you receive for a happy retirement in Switzerland? Photo by Edu Carvalho from Pexels

Swiss retire relatively early, with a retirement age of 65 for men and 64 for women, although it is being gradually raised 

READ ALSO: What is Switzerland’s retirement age – and will it rise?

Switzerland does have a strong pension scheme, although the amount you earn and put into it over your time in Switzerland is key. 

You can also switch your non-Swiss pension for a Swiss one in some cases (see below). 

The Swiss pension system consists of three pillars: state pension, occupational pension and the private pension. 

The pillars are laid out separately below. 

Pillar one: OASI (Old Age and Survivor’s Insurance) 

The first pillar – otherwise known as the OASI (Old Age and Survivor’s Insurance) – seeks to cover the basic costs of life and is mandatory. 

This includes old-age insurance and survivors insurance (OASI/AHV/AVS), disability insurance (DI/IV/AI) and any supplementary benefits (EL/PC). 

EXPLAINED: Everything you need to know about retiring in Switzerland

The level depends on a variety of underlying factors, including the number of years you have chipped in, the amount of your income and contribution credits. 

You can receive contribution credits for bringing up children or for caring for other people. 

You will receive the full OASI pension in Switzerland if you and your employer have contributed without interruption from the age of 20 until retirement. 

You are also allowed to defer your pension for up to five years, which will increase the amount you receive each month. 

For a direct estimation of what you may receive, please check out the following official government link. 

It will take into account a variety of factors including where you live to provide you with an estimate. 

Pillar two: Occupational pension

The second pillar, the occupational pension, includes everything from the first pillar and is compulsory for employees who earn more than CHF21,300 per year. 

The goal of this pension is to allow retirees to retain their previous lifestyle in old age, or if they incur a disability. 

The more you contribute to this pension, the more you will receive in retirement. 

Together, the first two pillars aim to achieve a total pension income of 50 to 70 percent of pre-retirement earnings.

Benefits can be paid out as a pension, or as a lump sum in some cases. 

You will receive a minimum of 6.8 percent of your retirement savings per year once you retire.

According to an example laid out by the Swiss government in its retirement advice, people who have saved CHF400,000 in their pension will receive CHF27,200 a year, or CHF2,267 a month pursuant to this 6.8 percent figure.

Pillar three: Private pension

The third pillar, which is optional, takes into account private savings and investments, such as property. 

There are two types of private pension plans: restricted and unrestricted. 

The restricted pension plan involves paying into a particular pension fund with a bank or insurance company 

The unrestricted plan involves all forms of investments and while it is more flexible than the restricted plan, it does not provide tax benefits. 

It is important to note that there is no official unrestricted pension scheme – it simply refers to the types of investments that one makes in order to provide for a better financial position in retirement. 

Therefore, it is impossible to lay out how much this will be due to the wide variety of pension options on the table. 

How do I switch my pension to Switzerland? 

If you want to move to Switzerland to retire, it’ll make things a little easier if you can transfer your pension. 

This will largely depend on the country you are coming from, with many countries having a bilateral arrangement which allows people to transfer their pensions into the Swiss pension scheme. 

This includes EU/EFTA countries along with Australia, the United States, Chile, Canada, Israel, Japan, Turkey and several others. 

Due to Brexit, the UK operates under a different system called a Qualified Recognised Overseas Pension Scheme which helps you put your funds in the one place. 

You will still only be allowed to claim that pension when you reach retirement age in Switzerland. 

More information is available on the official Swiss government website. 

Please note: As with all of our explainers, they are intended as a guide only and do not constitute legal or financial advice. Please discuss any financial decisions with a certified expert in the field. 

Member comments

  1. Ok as an introduction to the 3 pillars, but this article could go into much more detail, for example about the conditions of the 1st pillar and the fact that contributions to the 2nd pillar are tax deductible.

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For members

SHOPPING

REVEALED : Are ‘discount’ supermarkets in Switzerland really cheaper?

Lidl, Aldi and Denner claim their prices beat those of large Swiss retailers. But is this really the case?

Published: 18 April 2024 11:40 CEST
REVEALED : Are ‘discount’ supermarkets in Switzerland really cheaper?

Common consumer goods (except one) are typically more expensive in Switzerland than in neighbour countries — sometimes by much.

This includes food.

READ ALSO: Why Switzerland is the most expensive country in Europe

That is especially the case of largest Swiss chains, Migros and Coop, while Denner, Lidl, and Aldi say their food prices are significantly lower.

To find out whether this claim is actually true, journalists from RTS public broadcaster’s consumer programme went shopping in each of these supermarkets. 

They purchased the same 30 products in each of the five supermarkets on the same day, to ensure that the price comparison is as accurate as possible.

Not what you’d expect

In each of the stores, the investigators purchased only the lowest priced items from the supermarkets’ budget lines.

It turned out that most money was spent at Denner, widely considered to be one of the lowest-priced supermarkets.

The total for the 30 items came to 181.67 francs — more than was spent at the country’s more expensive stores, Migros and Coop, where identical basket of goods cost 170.37 and 167.82 francs, respectively.

(That, in itself, is surprising as well, because Migros typically has lower prices than Coop).

As for the other two supermarkets, these purchases cost 166.59 francs at Aldi and 162.05 at Lidl.

So the difference in price between Migros and Coop versus Aldi and Lidl is minimal. But what is even more surprising is that the cost of groceries at ‘cheap’ Denner is actually highest of the lot, by between 11 and nearly 20 francs.

Migros and Coop performed quite well in the comparison survey because most of the items purchased in those stores came from their budget lines, M-Budget and Prix-Garantie, respectively, both of which were introduced to compete with Aldi and Lidl.

But how important is price? Patrick Krauskopf, a professor of anti-trust law, told RTS: “German, French, English, Spanish and American consumers pay a lot of attention to price. In Switzerland, consumers place more emphasis on quality of service. Price is almost secondary.

“Distributors have realised this and have stopped competing fiercely on price.”

Big versus small

While this particular analysis focused on supermarket chains, another survey, conducted at the end of 2023, looked at prices in small grocery shops. 

Common logic has it that it is cheaper to shop in supermarkets than a local corner store, because big retailers purchase products in large quantities, which means lower prices for consumers.

However, prices in some local shops were found to be “up to 30 percent cheaper than Migros and Coop.” 

The reason is that in order to cut costs, small grocers may buy their products from the most cost-effective suppliers, a tactic which includes importing some items.

Another reason for lower prices is that unlike major supermarkets, which ‘pretty up’ their stores for better presentation of products, these small retailers are ‘no-frill’ shops. This means little money is invested in décor, so there are no extra costs to pass on to consumers.

 READ ALSO: Why it might be cheaper to avoid the big supermarkets in Switzerland
 

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