Occupational pensions: when, how, what and where?

In Switzerland, the pension system is based on three complementary pillars:

1. 1st pillar: state insurance (AHV/IV, the Swiss old-age and survivors' insurance and disability insurance) to cover basic living needs;
2. 2nd pillar: occupational pension provision (BVG), designed to supplement the AHV and maintain your standard of living;
3. 3rd pillar: voluntary private savings (e.g. 3a and 3b) to fill any gaps.

The overall aim of the first two pillars is to cover around 60–70% of income before retirement, while the 3rd pillar can fill any remaining gaps.

What occupational pension provision (the 2nd pillar) is

Occupational pension provision is the compulsory collective insurance for people in Switzerland whose income from employment is above a certain threshold. It is run by pension institutions or pension funds, which invest the contributions so as to build up retirement capital.

Who has to be insured under the 2nd pillar

In general, the following are required to join the second pillar:

• employees earning more than the set minimum threshold (for example, around CHF 22,680 a year from 2025 onwards);
• workers from the age of 17 for risk cover (death/disability) and from the age of 25 for building up retirement savings.

The employer is responsible for registering employees and handling contributions. Self-employed people are not obliged to join but can do so voluntarily.

How occupational pension provision is funded

Contributions to the 2nd pillar are based on the coordinated salary, meaning the part of income that counts for pension purposes, usually between a minimum and a maximum (e.g. from around CHF 22,680 to CHF 90,720).

• Employer: pays at least half of the contributions;
• Employee: pays the other half of the contributions;
• the total capital built up starts to grow through retirement credits and interest.

Benefits insured under the 2nd pillar

Occupational pension provision covers three main risks:

1. Old age: a pension on reaching retirement age;
2. Disability: a pension if the worker becomes permanently unable to work;
3. Death: benefits for survivors (e.g. spouse or children) in the event of death.

These benefits help maintain a stable financial base even when one of these events occurs.

How capital builds up and how it is paid out

Over your working life, contributions are credited as pension capital, which grows through:

• retirement credits, which increase with the worker's age;
• interest, calculated on the amounts accumulated;
• any voluntary buy-ins to increase your savings.

When you retire, you can choose how to receive the benefits:

• a regular monthly pension;
• a one-off lump-sum withdrawal (under certain conditions);
• a combination of pension and lump sum.

What happens when you change jobs or leave Switzerland

• When you change jobs, your 2nd pillar capital usually follows the worker, transferring to the new pension plan.
• If you leave Switzerland for good, in certain cases you can withdraw the funds you have built up (e.g. to buy a home or to set up your own business).

Current status of the BVG reform

In September 2024 Swiss voters rejected a proposed reform of occupational pension provision that would have introduced changes to strengthen the funding of the 2nd pillar and improve cover for people on low incomes or working part-time.

This means the system remains essentially as it is, but it is still a subject of political debate and possible future adjustments.

Why it matters to you and your business

As well as being a legal obligation, occupational pension provision helps to ensure:

• long-term personal financial stability;
• greater security for families and employees;
• tax advantages under certain conditions;
• appeal as an employer by offering good pension provision.

Conclusion

Occupational pension provision (the 2nd pillar / BVG) is one of the key elements of financial security for workers in Switzerland. Knowing how it works, what benefits it offers and how it can fit into your personal and company pension strategy matters for every individual and every business.