The Swiss pension system, with its three pillars, aims to provide financial stability to Swiss citizens in their old age, in the event of handicap, and in the event of death. Our retirement plan is one of the most secure in the world. It dates back to the establishment of Old-Age and Survivors’ Insurance (AHV), Disability Insurance (IV/DI), and Loss of Earnings Benefits (EO) in 1948, and has demonstrated its worth over many decades.
Since 1972, the three-pillar structure has been established in the Swiss Federal Constitution. It is built on the interaction of state-provided basic livelihood security, employer-provided occupational benefits insurance, and tax-favored private pension provision. The Swiss pension system is a critical component of people’s social and financial security in Switzerland.
A first pension pillar (basic state old-age and survivors’ insurance scheme), mandatory second pillar occupational pensions, and private (voluntary) pensions make up Switzerland’s pension system (third pillar). Switzerland is one of the rare countries where the three pillars contribute nearly equally to old-age income due to the mandatory second pillar system.
The first pillar of the Swiss social insurance network is the old-age and survivor pension insurance (AHV – Alters- und Hinterlassenenversicherung), which attempts to cover pensioners’ fundamental requirements. In 1948, the national (federal) public pillar was established, absorbing pre-existing cantonal systems (some of which date back to 1904). In 1960, disability benefits were made available.
The AHV is required and mostly funded on a pay-as-you-go basis. Since 1999, VAT proceeds have also been used to partially support the AHV. All Swiss citizens, as well as those in productive employment, are covered by the plan.
Once a person has paid contributions for a full year, they are entitled for an AHV pension. Men begin to be eligible at the age of 65, and women begin at the age of 64. The exact rewards are determined by the number of years you contributed and your relative average salary throughout the course of the insurance period. If a person has paid into the program for the same number of years as others born in the same year, they will receive a full pension. A proportional pension can be drawn if the person has not contributed to the plan for the entire period.
Although a pension can be collected before attaining formal retirement age, the amount of the income is reduced (by between 3.4 percent and 6.8 percent for each year the pension is drawn early) A pension can be taken one to five years after the retirement age. Depending on how many months the payment is delayed, the amount paid increases by 5.2 percent to 31.5 percent.