First Pillar: All you need to know to retire in Switzerland
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The retirement system of Switzerland is a system with three pillars. Each pillar is paid differently and will cover different needs. The first pillar is the state pension.
If you are working in Switzerland, it is essential to know these three pillars. Even if you do not plan to retire in Switzerland, understanding how they work will help you plan your retirement.
This article discusses the first pillar in detail. It should contain everything you need to know about the first pillar to retire in Switzerland.
I use the French acronyms in this article. But the figure at the top of this article has the acronyms in English as well.
Introduction to The three pillars
Here are the three pillars of retirement in Switzerland:
- The first pillar (state pension). This first pillar will grant a pension to every Swiss employee after retirement. It is a state pension between 1175 CHF and 2350 CHF per month if you have worked every year since you were 20. Each employee in Switzerland finances this pillar.
- The second pillar (occupational pension). The second pillar will grant a pension to every Swiss retired employee. You will only receive money from this pension if you work and have an annual salary of more than 21150 CHF (currently). You will pay for this pillar with a deduction of your salary each month.
- The third pillar (private pension). The third pillar is a personal saving system. While the first two pillars are mandatory, the third pillar is optional. You can only save a certain amount each year into the third pillar. The essential part is that the third pillar has tax advantages.
Every pillar will improve your quality of life after retirement. The first pillar is only there to cover your basic needs. With the first pillar, the second pillar should cover from 75% to 80% (on average) of your last salary. And the third pillar, which is optional, should help you cover the missing part of the second pillar.
The first pillar
The first pillar is a state pension.
Every Swiss person registered with this global insurance will receive this pension. The Assurance-Vieillesse et Survivants (AVS) insurance is what makes the first pillar. This insurance covers the basic needs of every person in Switzerland after retirement.
This pension is paid by every Swiss employee (and independent people) after 17 years old through a deduction from their salary.
You pay for the AVS insurance and two other insurances: the insurance for invalids (AI) and when you serve in the army (APG). Each month, 8.7% of your raw salary goes to the AVS, 1.4% to the AI insurance, and 0.45% to the APG insurance, for a total of 10.55%.
Employees pay half of the full contribution, and the employer pays the other half. Therefore, you should see a deduction of 5.275% each month for these three insurances together.
These contributions can change every year. For instance, in 2020, the contribution for AVS insurance (the first pillar) increased from 8.4% to 8.7%.
For completeness’ sake, we also need to talk about Unemployment Insurance. It is not directly related to the retirement system. But you will also pay for it monthly. You will also pay 1.1% of your salary for it. If you get more than 148’200 CHF per year, you will pay 0.5% of the part higher than this number. This insurance will cover the needs, for some time, of people who lose their jobs and cannot find a new one.
Unemployed people also have to pay this fee. People who do not have a salary have to pay the minimum fee of 478 CHF per year, starting from their 20-year birthday. An exception is if their spouse pays at least twice the minimum fee (956 CHF) per year. For instance, I have enough salary that my wife does not have to pay AVS.
If you have a significant net worth, the minimum fee will increase. For instance, with a one million net worth, you must pay 2054.60 CHF (as of 2020) as a minimum each year. There are exceptions if paying this fee would reduce your living standards too much. You can use this calculator to see how much the tax is for unemployed people.
How much will I get from the first pillar?
The full pension is a minimum of 1225 CHF per month, up to a maximum of 2450 CHF per month. How much you get depends on several factors:
- How much income you got during your working life.
- The number of years you have contributed to the first pillar.
- Contributions for caring for children or relatives.
First, the amount of your salary determines the amount of the full pension. The minimum pension is up to a salary of 14’100 CHF per year. To reach the maximum pension, you must have an average annual salary of 88’200 CHF. You can see in the previous image how that scales. Between those two milestones, the full pension scales linearly.
The second factor is how many years you paid the AVS insurance. To get the full pension, a man should pay for 44 years and a woman for 43. If you have missing years, you will receive a pension prorated for the years you have paid the insurance.
The third factor is when you care for children below the age of 16 or care for relatives. During the years when you are in this situation, you cannot have contribution gaps. Even if you did not pay during this time because you had no income, it would not count as a gap in your contributions.
The first pillar and marriage
Importantly, a married couple cannot receive two full pensions, only 150% of a full pension (3525 CHF per month).
Fortunately, the minimum is still 200% of the minimum pension (2350 CHF monthly). It is unfair to married couples with both a large income. But some things are unfair to married couples in Switzerland (taxes, for instance).
This first pillar of pension also covers the case of widowed people. If the dead spouse were eligible for a pension, the surviving spouse would receive this pension.
Several things need to be considered in the case of divorce. First, each spouse will get a pension based on half the combined income during the marriage. The care contribution credits are also divided in half. If one of the divorced spouses dies without retirement, the other spouse will get 80% of the deceased pension.
The first pillar and early retirement
The first pillar only covers official retirement, at 65 for men and 64 for women.
If you want to retire earlier, you can ask for a pension one or two years in advance. However, this means you will get a reduced pension of 6.8% per year of advance. You can also take it later, as seen in the next section.
If you want to retire earlier than two years before the official retirement age, you will only be eligible for the pension when you reach retirement age. Before that, you must rely on your net worth to cover your expenses.
Official calculator
If you want an official estimation, there is a cool official tool for estimating your pension.
Remember that this is only an estimation, not an official number. But in my experience, it seems pretty accurate. It can compute the results based on your income and marital status.
If you have not worked in Switzerland your entire life, you can enter your income for each year and get a good picture of what you will get based on the holes in contributions.
The first pillar and leaving Switzerland
If you leave Switzerland, you will usually still be entitled to the pension. So, once you reach retirement age, you will receive your pension.
However, there are a few exceptions. For instance, if you are not Swiss and move to a country without a social security treaty, you will lose the first pillar pension.
If you lose the right to the first pillar pension, you are generally entitled to reimbursements of your first pillar contributions.
In any case, it is mandatory to announce that you are leaving the country. If you want all the details, you can read about them on the official Switzerland website.
Optimize your first pillar
You cannot do much to optimize your pension from the first pillar. Since it is mandatory, you are already paying for it.
It is essential to avoid any years when you do not pay the AVS insurance. All these years will significantly reduce the amount you will receive. If you go to a foreign country for a long time, you should continue to pay the minimum each year to avoid penalties.
Even living abroad after retirement, you should receive your pension. But the country where you retire should have a social security agreement with Switzerland.
When you are studying, you should also pay the minimum to avoid any missing years. If you missed a year of contribution, you could pay for it in the next five years. After five years, you cannot compensate for it anymore.
If you are moving to Switzerland, you will not be able to fill your gaps. These gaps can be filled if you are in Switzerland and then living abroad for a few years for instance.
If you want to increase your pension, the biggest thing you can do is increase your salary. Although it may not be evident, you should probably try to increase your income regardless of the pension.
There is one other thing you can do to increase your pension. You can delay the time at which you start to receive the first pillar pension. If you delay the pension by one year, you will get a pension increase by 5.2%. It increases to 10.8% for two years, 17.1% for three years, 24% for four years, and 31.5% after five years (maximum delay). It is a gamble on your life expectancy. If you expect to live until 100 years old and can afford to delay the pension, you should delay it for five years.
Accounting
I do not account for the first pillar in my net worth. There are several reasons for this.
- You do not only pay this insurance for yourself. It is global social insurance. The people with more salary will pay more for people with a smaller salary.
- Then, since I plan to retire in Switzerland, I will never touch the capital, only the pension.
- I am not entirely confident it will still exist once I reach the official retirement age.
However, I should account for this in my computation of my Financial Independence (FI) ratio. Since it is a guaranteed pension after retirement age, you will need less money stashed for your needs. But it is a bit weird to account for it, and I still have not done it. Indeed, it is only starting at the official retirement age. And your retirement may begin early.
Another argument for not accounting for the first pillar is that it may not be solvent once I reach retirement age. It is a somewhat pessimistic point of view. But the population is rapidly aging, and Swiss couples have fewer and fewer children. I prefer to ignore it for now in my strategy, and I will rethink it when I am closer to retirement. If you are optimistic about it or close to retirement, you should account for the first pillar in your retirement strategy.
FAQ
What is the first pillar in Switzerland?
The first pillar of retirement in Switzerland is a state pension. Every person in Switzerland is eligible for this state pension.
How much will I receive from the first pillar?
This will depend on your salary. The minimum is 1175 CHF per month, and the maximum is 2350 CHF per month. The minimum is up to a salary of 14’100 CHF per year, and the maximum is 84’600 CHF per year.
How can I optimize my first pillar?
You cannot do much to optimize for your first pillar. You need to make sure you pay for it every year. Having holes in your contribution will lower the money you receive.
Conclusion
The first pillar is the first part of the Swiss retirement system. It should cover the basic needs of every retired Swiss person. Employees pay it from their salary, and unemployed people pay a minimal amount each year. The pension is quite low (2350 CHF per month at most).
Most people cannot live only on this pension after retirement. The other two pillars are here to complete your needs during retirement.
Next, I cover the second pillar, which is an occupational pension that should make up a significant part of your retirement income.
What about you? Do you have any tips regarding the first pillar? Do you have any questions about the first pillar?
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Here you can request an official estimate https://www.ahv-iv.ch/en/Leaflets-forms/Online-pension-estimate-ESCAL
I submitted the form but the calculations are confusing. For working 5 years in Switzerland I’m getting 250 franks while my wife who didn’t work in the country is getting several times more.
Hi Nik,
That’s a cool estimator, I did not know this.
Keep in mind that this is an estimate, you need more numbers to get it right. But in my case, it seems fairly accurate for both me and my wife.
Hi,
I am leaving soon, with pain in my heart beautiful Switzerland after 5 years working here, going on early retirement (62 years) back to the family and grand child in the Netherlands.
Do you know how this works with the first pillar, is this a one time pay off or do you have to wait until official retirement and get a monthly payment?
Many thanks and very helpful information so far.
Hi,
There is no one-time payoff of the first pillar. It’s always a pension. And it can’t be gotten in advance just because you leave Switzerland. So, you will have to wait until retirement. You can take it in advance (up to 2 years) but this will lower your pension significantly.
If you leave to a country with a social security treaty, then you will get your pension at retirement as a monthly payment. If you leave to a country without a treaty, you will not get a rent, but in principle, you can get reimbursed for your contributions. Since the Netherlands are in the EU, you should be good with a pension.
Hi!
I have come to Switzerland with 40 years. Can I pay the first pillar for the 5 years prior to my arrival? If yes, is it worth doing that to increase my retirement? Or better to invest that money?
Hi Itziar,
In theory, you should be able to pay for these 5 years. But I am not entirely sure how it works for somebody that arrives in Switzerland.
As to whether it is worth it, I am not entirely sure. Since you have about 20 years missing, I am thinking that this is not worth it to fill up 5 years. If you have 5 years only missing, it could be more interesting to fill them up as an optimization.
In your case, your first pillar pension will be limited regardless. So, it is probably better you focus on the other two pillars and on your investments, if any. They will probably be more helpful for your retirement in Switzerland.
Hi Mr Poor Swiss,
for a couple where only 1 person is working, will the retirement from the 1st pillar be calculated like for a single person (so with a maximum of 2350 CHF) or can we expect something higher as a couple?
thanks.
Hi Waldo,
It depends, but in general, you can expert a full couple pension (150% of a single pension).
That will depend on whether the person working contributes enough for the second person together. If the working person pays twice the minimum (about 1000 CHF) per year, the non-working spouse is counted as contributing fully and therefore the couple will receive the full couple pension.
So, the working person has to contribute more than 2000 CHF per year to the first pillar.
Thanks for the info. I should ask the pension office in Zurich if I can contribute retroactively for the one year I was abroad.
Good plan! Normally, you should be able as long as it’s in the last 5 years.
I also see a “Cotisation assurance materinté (GE)” in my salary certificate, which amounts to 0.046 CHF. I guess this is specific to Geneva, right?
Hi Ilias,
That’s interesting, I had never seen that before.
it seems indeed specific to Geneva and could even be specific to your second pillar foundation.
Apparently, they handle this specifically, while it’s handled as a bucket for other states.
Thanks for stopping by!
Hi, I have just migrated to Switzerland, at the age of 46 years. Also my annual salary is 120k. How do I estimate my first pillar pension assuming I will retire at 65 years.
Hi,
Normally, a salary of 120k per year should give you access to the maximum pension of 2350 CHF per month. However, since you have not contributed for many years, it will be reduced. Normally, you are supposed to contribute 44 years. In your case, you will contribute for 19 years.
So, you should be entitled to 19/44 * 2350 = 1014 CHF in my opinion. This is what I think. If you want the full correct figure, you should contact the first pillar officials and they should be able to confirm this.
Thanks for stopping by!
Hello and thank you for the detailed explanation about the Swiss pension system. You claim that you are not an expert but your posts are surely detailed and explanatory :-).
Quick question about the absolut minimum that can be claimed from the first pillar. I read that one must work at least one year in Switzerland in order to be eligible for a pension from the first pillar. Let’s say a person comes to Switzerland, works for 3 years with an annual gross salary of 120.000 CHF and then decides to leave. I guess this person will be eligible to claim few hundred CHF per month after he/she meets the retirement age. Am I correct?
Thanks!
Hi HM,
I believe you are correct. If you work 3 years, you should be entitled to 3/44 of the pension. The thing I do not know for sure is how they will compute the average if you only work for some years:
* If they compute the average based only on the years you are working, you will receive 3/44 of the 2350 CHF per month (maximum full pension) which is about 160 CHF a month
* If they compute the average based on the 44 years (counting zero for when you do not work), you will receive 3/44 of the 1175 CHF per month (minimum full pension) with about 80 CHF per month
This is only my understanding, you would have to contact the official people to make sure :)
Thanks for stopping by!
Both scenarios make sense – thank you!
Hello,
Thanks for your posts, they are extremely helpful!
I am 24 years old, I live abroad and I plan to return to Switzerland soon. I never contributed to any of the pillars and I’m not sure if I can do this abroad. Do you know how I could do this?
Hi Luis,
Unfortunately, you cannot contribute to your pillars unless you are in Switzerland with a Swiss salary.
So, you will be able to contribute to them once you come back to Switzerland and start working.
Thanks for stopping by!
Hi,
Thanks for a great post. I was employed in Switzerland until spring 2015, lived abroad for some years, and now back again working in Switzerland since summer 2020. Is it worth for me to consider paying for AVS for the years I wasn’t working in the country?
I’m aware it was more than five years since I moved away from Switzerland, but is it possible to pay for the last four years or so?
Thanks!
Hi Pat,
If you plan to retire in Switzerland, it’s worth doing it. It will make a significant difference in your pension.
You may not be able to do it for the first missing year, but normally, you should be able to do it for the other four years.
In any case, it won’t cost you anything to contact the AVS administration of your state and ask them about it!
Thanks for stopping by!