Occupational retirement benefits are an important part of your retirement provision. But how do they work and what are the differences between the 1st, 2nd and 3rd pillars? Here are the most important features.
Switzerland’s 3-pillar system
The Swiss pension system consists of three pillars, which together form your occupational benefits. The first pillar is the Old-age and survivors' insurance (AHV). The second pillar covers occupational retirement benefits (BVG), also known as your pension fund. The third pillar is private provision. You can make payments to this voluntarily to improve your pension provision.
Key Terms
Old-age and survivors' insurance is the state's basic insurance for retirement and disability in Switzerland. You will normally pay into this automatically once you are employed.
Occupational retirement benefits, also known as the second pillar or pension fund, are used to ensure your living standards in retirement. You will pay into this automatically as soon as your salary is higher than the coordination deduction.
The coordination deduction refers to the salary share for which no contributions to the occupational retirement benefits need to be made. The coordination deduction is stipulated by law. However, employers may voluntarily reduce the coordination deduction and/or adjust it according to the level of employment. This has the advantage that more money is saved automatically, which is particularly relevant for lower salaries and working hours.
The pension fund is an institution that delivers the occupational retirement benefits. It manages the assets of the insured and ensures that the pension assets are invested well and attract interest for the benefit of the insured. The pension fund pays benefits upon retirement, disability or death. We, Profond, are a pension fund.
The pension certificate is issued by the pension fund and provides an overview of your individual occupational retirement benefits situation. We recommend that you file the current pension certificate with your important documents. You can find your pension certificate on ProfondConnect.
The third pillar of occupational benefits includes private pension schemes that can be used individually to increase financial security in retirement. Providers of 3rd pillar solutions are typically banks or insurance companies.
Don't forget!
Remember to transfer your retirement assets (vested benefits) to the new pension fund every time you change your job. Find out how to do this here.
Occupational retirement benefits podcasts
Robert Nowacki as guest at FinanzFabio
“Worauf du bei einer Pensionskasse achten solltest”
Listen now (Only in German)
Christiana Smith as a guest at MoneyMatters
“Was macht eigentlich eine Pensionskasse?”
Listen now (Only in German)
Further information
