The first level is the state pension scheme, consisting of old-age, survivors' and disability insurance. The main legislative bases: the Federal Act on Old-Age and Survivors' Insurance (Loi fédérale sur l’assurance-vieillesse et survivants; Bundesgesetz über die Alters-und Hinterlassenenversicherung). The main function of this scheme, which covers all residents and workers in the country, is to ensure a minimum subsistence income.
The second level of the pension architecture is a supplementary scheme providing pension payments to persons who have been employed. The main legislative basis: the Federal Act on Occupational Old-Age, Survivors' and Disability Insurance (Loi fédérale sur la prévoyance professionnelle vieillesse, survivants et invalidité; Bundesgesetz über die berufliche Alters-, Hinterlassenen,- und Invalidenvorsorge). This scheme is mandatory for the vast majority of the working population. This means that contributions to the pension fund are compulsory when salary reaches a certain level, which is fixed each year by government decree. Self-employed persons, who own their own business and do not receive a salary, may make contributions on a voluntary basis. The main objective of the scheme is to provide pensioners with a standard of living that existed before retirement.
Finally, the third level consists of individual pension plans. Such pension contributions are available to the working population (both employees and the self-employed) and are entirely voluntary. However, the state provides tax incentives to encourage individual pension savings.
The retirement age in Switzerland is 65 for men and 64 for women. It should be noted that initially, in the 1948 law, the retirement age was the same for everyone: 65. Then it was lowered for women to 62. In 1994, the age was progressively raised to 64. This means that women born in 1938 or earlier retire at 62. Women born between 1939 and 1941 retire at 63, and all those born after 1942 become pensioners at 64.
In recent years, there has been much talk by some political parties about the need to raise the retirement age to 67. It is quite possible that a draft amendment to the legislation will be put to a referendum in the near future.
The right to receive benefits under the first level of the pension system arises after making regular contributions to the pension fund for at least one year. All employed persons are required to make contributions. Unemployed persons officially resident in Switzerland are also required to pay pension contributions starting from January 1 of the year following the year in which they turn 20 (for example, if a person turns 20 on July 1, 2012, they start making contributions on January 1, 2013).
The minimum monthly benefit upon reaching retirement age, in the case of regular contributions for the full period (44 years for women, 45 for men), is currently 1,160 francs. The maximum amount is 2,320 francs (twice the minimum pension). These figures change every year and are set by a special decree of the federal government.
Payments of ordinary first-level pensions can be made outside Switzerland. Pensions are 'exported': to Swiss citizens; to nationals of European Union countries leaving Switzerland for permanent residence in an EU country; to citizens of other countries with which a corresponding bilateral agreement has been signed.
No such bilateral agreements exist with the countries of the former USSR. Thus, citizens of these countries are not able to receive pension payments after leaving Switzerland for permanent residence in Russia or Ukraine, even if they hold a second citizenship (Swiss or from an EU country).
As for the second level, currently mandatory pension contributions are made on annual salaries from 24,360 francs to 83,250 francs. The figures are indexed each year. Thus, a person earning 20,000 francs per year is not required to make contributions to the pension fund. A person earning 150,000 francs per year pays only on the amount of 83,520 francs. All the rest is not covered by the second level.
Upon reaching retirement age, a monthly pension is paid from the accumulated capital. The so-called conversion rate (taux de conversion; Umwandlungssatz) is used to calculate payments. It also changes constantly: in 2012, the rate was 6.85% for women and 6.90% for men. In 2014, the rate was 6.8% for everyone.
If a retired man's pension capital is 400,000 francs, he will receive 27,600 francs annually (6.90% of 400,000). Monthly payments will be 2,300 francs.
In 2010, during a referendum, the Swiss rejected a proposal to gradually reduce the conversion rate to 6.4% by 2016, which would have meant a reduction in pensions.
Regarding payments under the second level of the pension system, it should be emphasized that a person leaving Switzerland is entitled to receive the entire accumulated pension capital. However, if they move to a European Union country, they lose this option and will receive standard monthly payments.
The right to withdraw their pension capital is also granted to persons starting their own business, i.e., moving from employee status to self-employment. In addition, before reaching retirement age, part of the second-level pension capital can be used to purchase a primary residence.
The third level of the pension system is not mandatory. In practice, people who want to supplement their regular pension open a special pension account at a bank. They deposit a certain percentage of their salary more or less regularly, as their means allow. The funds may be invested by banks in various market instruments (stocks, bonds) at the client's request.
The capital in these pension accounts is blocked until retirement age. However, the amounts deposited into such accounts may be deducted from the taxable base. For example, a person who earned 60,000 francs in a year and deposited 6,000 francs into their pension fund will pay taxes on an income of 54,000 francs.
Early withdrawal of pension capital is possible in the following cases:
– five years before reaching retirement age;
– when purchasing real estate;
– to repay a mortgage loan;
– when starting a business;
– when moving abroad for permanent residence;
– upon receiving a disability pension.