Payroll management in Switzerland: our advice
Since 2005, the law on occupational pension provisions (LPP) specifies that men have the right to pension benefits as soon as they reach the age of 65 and women as soon as they reach the age of 64.
Pillar 1 includes the AVS (Old age and survivors’ pension), the AI (disability insurance) and the APG (allowance for loss of earnings in the case of military or civil service and maternity).
The occupational pension fund or Pillar 2 completes the AVS/AI/PC or Pillar 1. Together, the two insurances should allow those insured to maintain their previous standard of living to a great extent. The goal is to reach approximately 60% of the last salary when adding the two pensions together. (Definition provided by OFAS)
Active insured persons may take all of a part of their capital instead of an old age pension when they reach retirement age. The pension fund must be informed of this decision within the time limits specified.
The amount of the monthly contributions to be paid to the pension fund is shown on the personal pension provision certificate. You will receive an updated certificate at least once a year stating the amount of the contributions and the benefits.
It is important to inform your pension fund of the change in your situation. In the case of a divorce, the LPP assets to be shared between the spouses are those acquired during the marriage. The assets acquired prior to the marriage are not shared. There is also a division when one of the spouses receives a disability pension or a Pillar 2 old age pension.
The occupational pension provision or Pillar 2 is financed on the basis of parity between the employer and the employee.
Anyone who receives an annual salary of over CHF 21,510 in 2021 from the same employer must be insured under the LPP. The insurance for death and disability risks begins on 1 January following the date of the person’s 17th birthday. Savings for an old age pension begin on 1 January following the date of the person’s 24th birthday.
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Pillar 3 corresponds to a voluntary pension provision taken out with a bank or an insurance. It is a supplement to Pillars 1 and 2 through the constitution of a capital and an adapted risk coverage (if desired). For example, a bank account, shares or a life insurance.
Whether it is a Pillar 3a or 3b, there is no minimum amount. It is always possible to increase or decrease the amount paid into a Pillar 3, depending on one’s budget.
A cross-border worker can open a Pillar 3. Please note however that as of 2021 a tax exemption is only possible if the worker obtains the statute of quasi-resident (90% of the household’s taxable revenues come from Switzerland).
It is important to think about one’s pension provisions as soon as possible to ensure a sufficient income on retirement. The Pillar 3 may be a good solution. We suggest that you consult one of our counsellors.