2nd pillar in Switzerland: How does it work?

2nd pillar in Switzerland: How does it work?
The 2nd pillar is part of the Swiss pension system. Find out how it works in our article.

Table of contents

Swiss 2nd pillar

What is the 2nd pillar in Switzerland?

The second pillar is one of the components of the Swiss pension system. Its main aim is to ensure that, once retired, workers can maintain more or less the same standard of living as before. It supplements the first pillar (AVS), which guarantees coverage of basic needs.
The combination of 1st pillar (AVS) + 2nd pillar (LPP) together cover around 60% of income received during working life.

Our expert advice

In order to maintain a comfortable standard of living similar to that of your working life, it is strongly recommended that you supplement your pension plan with an insurance policy. 3rd pillar .

How can I benefit from the 2nd pillar?

To benefit from your 2nd pillar when you retire, you'll need to have made sufficient contributions during your working life. Contributions are made in monthly instalments.
 
The employer makes a monthly BVG/LPP deduction from the employee's salary with the pension fund of his choice. The employer's share is also included in the BVG contribution. So there's nothing for you to do.

Who contributes to the LPP?

You will be required to contribute to the LPP (2nd pillar) if you meet the following conditions:
You can still take out voluntary 2nd pillar insurance if you do not meet these conditions, particularly if you are self-employed or have a short-term employment contract (maximum 3 months).

How do I withdraw my 2nd pillar?

The 2nd pillar can be withdrawn at various stages of life, including retirement. However, throughout your professional career, you can also benefit from these funds, albeit subject to certain conditions.
The 2nd pillar can be withdrawn at various stages of life, including retirement. However, throughout your professional career, you can also benefit from these funds, albeit subject to certain conditions.

2nd pillar: withdrawal tax

When you withdraw your 2nd pillar, you will have to pay municipal, cantonal and federal taxes. Tax rates vary from canton to canton.

Withdrawal tax is a progressive rate, depending on the amount withdrawn and the canton of residence. For example, it is lower in the German-speaking cantons, while it is higher in French-speaking Switzerland.

2nd pillar and vested benefits

When you work in Switzerland, you and your employer contribute money to a "pension credit" for your retirement, managed by a pension fund.

If you change jobs, the money you have accumulated (known as "vested benefits") must be transferred either to your new employer's pension fund, or to an institution of your choice.

It is essential to ensure that the money is transferred and to choose the institution that suits you best. You will receive a certificate once the money has been transferred.

2nd pillar in the event of divorce

In the event of divorce or dissolution of a registered partnership, each spouse is entitled to half of the 2nd pillar assets and vested benefits accumulated by the other during the marriage or partnership.

Here's how the 2nd pillar is divided between the spouses in the event of divorce:

Spouse n°1: He or she must transfer half the benefits acquired during the marriage to his or her former spouse. After the divorce, this share will be transferred by his pension fund to the fund chosen by the former spouse.

Spouse n°2: He or she will receive half of his or her former spouse's vested termination benefit accumulated during the marriage. This half will be transferred to the pension fund of his or her choice.

2nd pillar in the event of death

In the event of death, the law determines the beneficiaries of your vested benefit credit, mainly the surviving spouse or heirs, who generally receive the amount in a single payment.

If you leave no spouse or minor children, we recommend that you check with your pension fund whether and how you can designate other beneficiaries. Depending on the rules of your pension fund, an annuity may also be payable.

Frequently asked questions about the 2nd pillar in Switzerland

In Switzerland, the 2nd pillar is part of the pension system designed to maintain workers' standard of living after retirement.

Employees and employers contribute monthly. Funds can be withdrawn on retirement or in special circumstances, such as the purchase of a principal residence or a permanent move abroad.

Check your pay slips to see whether contributions are being made to your occupational pension scheme. Every year, your pension fund should send you a certificate showing your savings and future benefits.

If you need to track down pension savings from previous jobs and are unable to contact former employers or funds, contact the 2nd Pillar Central Office for help.

You can withdraw your 2nd pillar capital to buy a home under certain conditions conditions:

It is possible to withdraw your BVG to buy a house or apartment, but only the property will be your own. principal residence.

Up to 50 yearsAt age 50, you can withdraw your entire 2nd pillar. After age 50, you can only withdraw a portion.

You can withdraw your 2nd pillar when you leave Switzerland under certain conditions conditions:

It is possible to withdraw your BVG when you leave Switzerland definitively.

If you move to an EU or EFTA country and are insured for old age in that country, only the part of the benefit exceeding the statutory BVG/LPP minimum may be paid out in cash; the remainder must remain in Switzerland until retirement or in the event of death/disability.

In Switzerland, a pension fund is an institution that manages employees' occupational benefits (2nd pillar).

You can find out more about how pension funds work at Swiss Confederation website.

You can withdraw your 2nd pillar in the following situations:

  • To the retirementwhere you can choose to receive all the capital instead of converting it into annuities.
  • For the purchase of a real estateby withdrawing the funds in the form of capital.
  • By becoming independentto bring funds into the business.
  • During a departure from Switzerlandunder certain conditions.