Understanding your Swiss pension as a foreigner
If you're working in Switzerland, this Swiss pension guide explains how the Swiss pension system works, the types of Swiss pension funds and Swiss pension calculators.
If you have lived and worked in Switzerland for a certain amount of years, you may be eligible to claim payments from the pension authority, AHV Switzerland, and other Swiss pension funds you paid into, even if you no longer reside there. Depending on Swiss bilateral agreements with your home country, instead of receiving a pension it is also possible to receive a refund on tax contributions you made while working in Switzerland.
Ranked sixth in the world by the Mercer Global Pension Index (2016), the Swiss pension system is overall efficient and sustainable, putting it above countries such as Germany, the UK and Canada. In general, Switzerland's pension scheme with its three-pillar structure can ensure sufficient living allowances for retirement.
The first pillar is the Swiss old-age pension and invalidity insurance – known in German as Alters-und Hinterlassenenversicherung (AHV Switzerland), in French as Assurance vieillesse et survivants (AVS) and in Italian as Assicurazione vecchiaia, superstiti e invalidità (AVS) – funded by compulsory Swiss social security contributions by employees and employers. The second pillar is based on company Swiss pension schemes (Berufliche Vorsorge/Prévoyance Professionelle), which are mandatory for employees receiving a specific salary threshold. Finally, the third pillar is made up of private pension investment schemes, which are voluntary.
In this guide, we look at the structure of the Swiss pension system for foreigners, Swiss retirement age and pension eligibility, the average pension in Switzerland, and how to claim your Swiss pension as an expat.
Who is eligible for a Swiss pension?
Anyone who lives and works in Switzerland (employed or self-employed) over the age of 20 must make compulsory Swiss social security contributions to AHV Switzerland. Anyone who has made compulsory contributions to the AHV for at least one full year can claim a Swiss pension.
The amount of Swiss state pension you receive is calculated on the number of years you contributed and your average income during the insurance period. To receive the full Swiss pension, an individual and their employer must have made uninterrupted payments from the age of 20 until Swiss retirement age. For those who don’t meet these criteria, a proportional Swiss pension allowance is calculated.
Those who work in Switzerland temporarily, who are exempt from contributing to social security, will not be eligible for a Swiss pension.
Swiss pension calculator
What is the legal Swiss retirement age?
The official Swiss retirement age, from when an AHV Swiss pension can be drawn, is 65 for men and 64 for women. Read Expatica's guide on retiring in Switzerland for more information.
However, Switzerland has one of the highest employment rates of older individuals among industrialised nations, with many pensioners deferring their AHV to stay in gainful employment. Claiming the Swiss state pension can be postponed between one and five years, with the benefit of receiving a higher average pension in Switzerland up to 5.2 percent more per year. If you do decide to work past the Swiss retirement age, you will still be required to make compulsory contributions for earnings in excess of CHF 1,400 per month or CHF 16,800 per annum.
The last decade, however, has seen an upward trend in early retirement in Switzerland. Even though public policy does not promote early retirement, it is possible to draw a Swiss pension at 58 years old. This will result in a pension reduction, however, of between 3.4 percent and 6.8 percent for each year of early retirement. Additionally, early retirees need to declare themselves as non-employed, but still make AHV contributions until they reach legal Swiss retirement age, unless their spouse makes AHV contributions of at least CHF 965. Other conditions may apply in certain cases, such as a minimum residency period in Switzerland per year or a certain income threshold.
Employees who have an occupational Swiss pension, on the other hand, can only retire early if their Swiss pension fund’s regulations allows it. You can read more about early retirement in Switzerland on the Swiss government's website.
Swiss pension system for foreigners
For foreign nationals who are from a country that has a bilateral pension agreement with Switzerland – which includes EU and EFTA member states, Australia, San Marino, Canada, Israel, Japan, Turkey, Chile, Macedonia, USA, Croatia, Philippines, Bosnia and Herzegovina, Serbia, Montenegro and Uruguay – you will be entitled to a Swiss pension, even if you no longer live there. While it’s possible to claim a AHV Swiss pension from abroad, different conditions apply according to each country, which can be checked at the relevant pension office.
When a bilateral agreement exists, Swiss pensions cannot be refunded or transferred to another pension scheme, and can only be received once you reach the full Swiss retirement age. Once you leave Switzerland you are not able to make any additional contributions to the AHV Swiss pension system. Your Swiss pension leaving Switzerland will also only comprise of a partial AHV pension based on your contributions and income during your eligible work period.
In addition, if you have also made contributions to a state pension scheme in your home country or another country with a social security agreement with Switzerland, you may also be able to receive these pension allowances alongside your Swiss pension. However, it’s worth noting that QROPS is no longer available in Switzerland for UK citizens wanting to transfer UK company and personal pensions to an offshore pension scheme. This is because Swiss QROPS failed to meet the UK's HMRC requirements.
If you do decide to leave Switzerland and retire in your home country or another country, you must notify the Swiss pension fund office before you leave Switzerland. They will then send your application to the Swiss Compensation Fund in Geneva to process your claim to receive your Swiss pension abroad, which is usually paid out in the national currency of where you reside.
For those from a country where there isn’t a bilateral agreement, once you leave Switzerland you will no longer be eligible for a Swiss state pension abroad, even if you have been receiving an AHV pension while living in Switzerland.
However, under certain circumstances you can apply for a reimbursement of your contributions to the AHV. The total amount of employee and employer contributions will be refunded to you without interest. The total sum awarded will also take into account any previously paid AHV pension or benefit allowances; your average Swiss pension will be reduced if it exceeds the anticipated pension allowance as decided by the Swiss Compensation Fund.
You can apply for your reimbursement from abroad using an online form found in the Formulare/Allgemeine Verwaltungs formulare section of the AHV Switzerland website. With your application you will also need to supply:
- your AHV insurance card
- confirmation of leaving Switzerland
- proof of nationality (passport or national ID card)
- proof or current address.
The process can take up to several months and payments will be made into your personal bank account once finalised.
The three-pillar Swiss pension system
The Swiss pension scheme is based on a three-piller insurance system: Old-Age Survivors Insurance (OASI), which is also known as the AHV, occupational Swiss pension funds and private pension investments. These pillars are all accessible to foreigners living and working in Switzerland.
While the first and second pillars are compulsory, most retirees in Switzerland also opt for third-pillar, private Swiss pension funds to boost their funding for retirement. Like most aging European countries, Switzerland faces a rising gap between total contributions and payouts, meaning it is not advised to rely solely on the basic Swiss pension for retirement income.
Swiss old-age pension
AHV or OASI is the nation-wide, state-run insurance scheme in Switzerland. According to Swiss pension fund regulation, it operates on a pay-as-you-earn (PAYE) model and is designed to provide retirement pensions, survivor’s pensions and disability allowances. Participation is mandatory, whereby anyone employed, self-employed and unemployed over the age of 20 must make compulsory contributions.
If you are employed, employees and employers make equal contributions that total 4.2 percent of their annual salary, which is directly debited from your salary and paid to the tax office.
For self-employed workers, the rate applied is calculated on annual income, but is generally 7.8 percent. This can be reduced to 4.2 percent if annual income is less than CHF 56,400.
With regards to unemployed individuals, the contributions are set by calculating assets and income received through social benefits.
Those who meet the minimum contribution period of one year of full payments are then able to draw a Swiss state pension when they reach Swiss retirement age.
Company Swiss pension funds
The second pillar includes an occupational benefit plan, or Berufliche Vorsorge, based on company pension funds. The second pillar is included as part of the basic Swiss pension scheme. Combined with AHV, the two pillars intend to cover up to 60 percent of a person’s final salary.
This scheme is designed to top up the Swiss state pension and, unless you have an income lower than CHF 21,150 per year from one employer, employees are obliged to pay contributions on their earnings between CHF 24,675–84,600. These compulsory insurance schemes can be run by company, state or private Swiss pension funds.
In all cases, employees and employers both make contributions into the Swiss pension fund, but the contribution rates vary depending on the company scheme and the individual’s age, ranging from 7 percent up to 18 percent. The employer, however, is obliged to make at least equal contributions to what the employee pays.
Although this Swiss pension plan is aimed at employees who earn over the salary threshold, it is also possible to make voluntary contributions for those who don’t meet the salary threshold or have an employer who is exempt from paying AHV contributions. This also applies to self-employed individuals who want to top up their pension allowance, paid to the appropriate Swiss pension fund.
With regards to tax on contributions and benefits from company Swiss pension funds, both employee and employer contributions are tax-deductible, including any additional contributions made by employers that exceed the annual threshold.
Private Swiss pension funds
The third pillar of the Swiss pension system is individual occupational insurance. This is categorised into the following desginations:
- restricted pension plans with an insurance fund;
- unrestricted pension plans through savings, investments and private insurance policies.
Both schemes are voluntary and funded solely by the individual. They can be arranged with a range of private institutions, typically banks and insurance companies. This pillar can be an effective way to guarantee more retirement income, although some Swiss pension funds are riskier than others.
As a way to subsidise private pension savings, significant tax breaks apply to private pension contributions, which can be deducted from taxable income and are only taxed at the time of payment. They are also subject to preferential interest rates and the interest earned on contributions is tax exempt.
Furthermore, private pension schemes can typically be accessed earlier than Swiss retirement age. With restricted pension plans, it’s possible to take early withdrawal for matters such as buying your home, whereas many of the unrestricted pension schemes can be accessed any time.
It’s important to note, tax benefits will only apply for gainfully employed persons who are living and pay taxes in Switzerland.
How to claim your Swiss pension as an expat
When planning for your retirement, as with any big financial decision, it is always recommended to seek professional advice and guidance from a solicitor or financial advisor.
To claim the AHV Swiss state pension, you will need to make a written request for your pension withdrawal to the office where you made your last contribution payment. Information on finding the appropriate compensation office can be found on the governemnt and AHV websites. To ensure your pension isn’t delayed, you should send your request at least three months before reaching Swiss retirement age.
Company pensions in Switzerland, the second pilar, are usually paid out as an annuity on reaching the required retirement age, but you should contact your pension scheme provider prior to retirement. It is also possible to request a quarter lump sum payment, but this will depend on the regulations of the pension scheme.
As for contributions made to the third pillar – private Swiss pension funds – it’s generally possible to withdraw the entire amount at once. This can be done as early as five years before or as late as five years after the required retirement age if you continue working. This will be paid out by your private Swiss pension fund, so you will need to contact them to access your pension income.
Naturally, plenty of time and forward planning are the best ways to enjoy a financially comfortable retirement in Switzerland.
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