Pension system at a glance
The Swiss pension system is based on a three pillar system
1st pillar: Governmental retirement provision (AHV/IV/EL)
Swiss Federal old-age and survivors' insurance (AHV) is intended to cover the means of subsistence in old age or in the event of death, while disability insurance (IV) comes into play in the event of a disability. If the payments from AHV or IV are not sufficient, the gap is covered with supplementary benefits (EL). AHV, IV and EL are mandatory insurances.
2nd pillar: Occupational retirement provision (BVG)
Occupational retirement provision is intended to ensure the continuation of the accustomed standard of living after retirement; the risk benefits of death and invalidity are also insured. Unlike the 1st pillar, with the 2nd pillar everyone saves for themselves; the conditions are defined by the employer within a certain framework. For employees, BVG affiliation is mandatory for an annual salary of CHF 22,050 or more, but not for the self-employed.
3rd pillar: Personal retirement provision (pillar 3a/3b)
Personal retirement provision can be used to plug any gaps in income upon reaching retirement age - AHV and BVG generally cover only 60 to 75% of the last salary. Payments into the 3rd pillar are voluntary, but are tax-advantaged.
The decline in income after retirement is underestimated by many. It is therefore worth analyzing one's own pension situation as early as possible in a professional financial planning process. This leaves more time to cover any pension shortfall.