22 June 2021, text: Martin Hügin, photo: Gettyimages
In Switzerland, provision for retirement is based on three pillars: Old Age and Survivors’ Insurance (OASI), Occupational Old-Age, Survivors’ and Disability Benefit Plans (LOB) (referred to colloquially as the “pension funds”), and voluntary private pension provision (3rd pillar). The benefits provided by these three pillars are the main factors in determining the funds available to you in retirement. That’s why it’s worthwhile knowing where you have to pay which contributions and where have you the option of doing so. This three-part series contains the key facts.
As of an annual minimum salary, employees are obliged by law to insure themselves with a pension fund. The pensions granted by these funds are financed through annual retirement credits, which are paid in equal parts by the employee and employer. The employer may also finance a higher share. Self-employed persons can also join a pension fund, but have to finance their retirement credits on their own.
If you take a career break or stop working altogether, you are generally no longer insured with your pension fund and have to park your accumulated capital temporarily, e.g. in a vested benefits account. In such cases – e.g. with low earners and those who are not gainfully employed, and thus do not belong to any pension fund – it is worth taking a close look at your provision for retirement and making up any shortfalls via the 3rd pillar.
Annual minimum insured salary (as at 2021): CHF 21,510 (LOB entry threshold)
Annual maximum insured salary (as at 2021): CHF 86,040 (LOB upper limit)
Portions of your salary in excess of the LOB upper limit can be insured in the pension fund’s supplementary system. The design of the respective pension solution is decided on by the employer’s board of trustees, which comprises both employee and employer representatives.
Voluntary pension fund payments: Are possible; the regulations of the respective pension fund apply. Advance planning and consultation are advisable, especially as regards tax deductibility.
Annual retirement credits as a percentage of the salary in accordance with the LOB mandatory system
The pension solution may provide for higher contributions.
Statutory minimum interest rate on mandatory portion of retirement savings: 1% p.a.
Statutory conversion rate on mandatory portion of retirement savings (as at 2021): 6.8% (corresponds to a pension of CHF 6,800 p.a. per CHF 100,000 in savings) Capital withdrawal possible instead of a pension; the respective pension fund regulations apply.
Early drawing of LOB pension: The respective pension fund regulations apply; pension reductions apply.
Postponement of LOB pension: Possible, if provided for in the pension fund regulations.