The Swiss retirement income system scored 72.3 on the 2022 Mercer CFA Institute Global Pension Index and a B grade in overall index value after evaluating the retirement income system’s adequacy, sustainability, and integrity. The Swiss retirement income system is comprised of an Old Age and Survivors’ Insurance at the national level, mandatory pensions at the occupational level, and private products at the individual level. Concerning last year, the Swiss index value increased by 2.3. For 2021 was 70.0.
National Level
The Old Age and Survivors’ Insurance (OASI) program was established in 1948 with the objective of covering the basic needs of retirees. It is financed mainly by a pay-as-you-go system, although it is also partially subsidized through federal and value-added taxes, as well as taxes on tobacco, alcohol, and gambling casinos. A resident is eligible for this program as soon as he/she has contributed to it for at least one full year. Participation is mandatory, including for those who are self-employed (contribution rate is from 4.35% to 8.1% of their gross income) and those without employment (contribution is from CHF 496 to CHF 24,800, depending on means and other factors). The contribution rate for general working individuals is 8.7% of annual income, split evenly between employer and employee at 4.35% each. Individual accounts are maintained for each person who contributes to the OASI fund and are used to determine the amount of the final pension. The retirement age for males is 65 and 64 for females.
If an employee is not a Swiss citizen, a minimum of 10 years of contributions and continued residence in Switzerland after retirement is required, unless there is a reciprocal Social Security agreement in effect.
The Federal Council adjusts pension levels every two years according to mean salary and price index or earlier if annual inflation exceeds 4%. As of January 1, 2019, the monthly OASI pension will range from CHF1185 to 2370. Married couples receive two separate, individual pensions; however, the combined amount may not exceed 150 percent of the maximum pension level. Early and delayed retirement is available, with reduced and increased benefits applied, respectively. Early retirement is possible at age 63 for men and 62 for women. In cases of early pension benefit withdrawal, the full benefit value is reduced by 6.8% for each year of early withdrawal.
Occupational Level
The Mandatory Occupational Pension program requires all employers to establish pension plans. The occupational pension works in conjunction with OASI, providing at least 60% of the retiree’s final income. The occupational level insurance is only obligatory for salaried workers with annual income of at least CHF21,330 from 2019, although it is available but voluntary to self-employed workers. Employees’ contribution changes incrementally by age: 3.5% from age 25 to 34, 5% from age 35 to 44, 7.5% from age 45 to 54, and 9% from age 55 to retirement. Employers must contribute at least equally to the sum of employee contributions, and may voluntarily cover part of their employees’ contributions. Exceptions to the mandatory occupational pension program offering are: (1) fixed-term employment contracts up to three months, (2) exclusively secondary employment where primary employment is already insured or person is self-employed, and (3) disability of 70% or more.
Employer benefit plans can be created by the government, private firms, professional associations, or unions. Workers are entitled to all available retirement assets when changing jobs. Early withdrawals can be made for special purposes like purchasing a home. Early retirement in the occupational program is possible and can begin at age 58. The minimum interest rate on the retirement assets is 1% (2020). The minimum conversion rate for both men and women is 6.8%. In the case of early or deferred retirement, the conversion rate will be adjusted commensurately.
Individual Level
There are two different types of private pension plans.
Restricted private pension plans are for those earning an income. Contributions are tax- deductible up to a maximum amount set by the Federal Social Insurance Office each year. As of 2019, those who already have occupational pension plans can pay up to CHF6,826 and those without preexisting plans (largely the self-employed) can pay up to 20% of their income, although the cap is set at CHF34,128. Workers cannot withdraw their savings freely.
Unrestricted pension plans are available to everyone. There is no limit on contributions, and these offer fewer tax advantages compared to the restricted plan.
Summary Sources
Federal Social Insurance Office, Switzerland. “Meaning and objectives of occupational pension funds.” Updated September 16, 2019. Accessed 04/23/2020.
Federal Social Insurance Office, Switzerland. “OASI Benefits and Financing.” Updated May 9, 2019. Accessed 04/23/2020.
Federal Social Insurance Office, Switzerland. “Purpose of old age and survivors’ insurance.” Updated December 22, 2014. Accessed 04/23/2020.
Federal Social Insurance Office, Switzerland. “Switzerland’s old-age insurance system.” Updated January 16, 2020. Accessed 04/16/2020
OECD. “Pensions at a Glance 2019.” November 27, 2019. Accessed 04/23/2020.
The Swiss Authorities Online. “The 3rd pillar – private pension plans.” Accessed 04/23/2020.
Social Security Administration. “Social Security Programs throughout the World: Europe, 2018 (Switzerland).” September 2018. Accessed 04/23/2020.
Current Issues
Although debated throughout the past decade, Switzerland has been unable to pass major pension reforms, until late 2021. In Spring 2021, the Swiss Senate voted to approve the AHV (old age and survivors’ insurance) reform, which includes increasing the retirement age of women from 64 to 65 (making the retirement age for women the same as for men), allowing for more flexible pension withdrawal, and increasing the VAT to contribute to pension financing. It is expected that these measures will save CHF10 billion between 2023 and 2031. After passing through the Swiss Senate, the bill faced strong opposition from lawmakers and those affected alike, but it also garnered some support and even inspired the calls for a referendum that would increase the retirement age even higher to 66 by 2032. In December 2021, the bill passed the lower house of parliament and was enacted into law. The provisions of the bill have not yet been implemented, while some changes are expected to occur in mid-2022, the new law will have to be subject to a popular ballot due to its provision regarding VAT, it remains unclear when a referendum might occur.
Summary Sources
Brotschi, Markus. “The battle over major pension reform.” Swiss Community. May 19, 2017. Accessed 07/01/2021.
Koltrowitz, Silke. “‘Revolt of the young’: Swiss to vote on reform of pension system.” Reuters. July 16, 2021. Accessed 07/22/2021.
Kunz, Markus. “AHV 21 reform: The most important changes compared with today.” Credit Suisse. March 15, 2022. Accessed 04/01/2022.
“Pension reform in Switzerland: a democratic balancing act.” SWI. April 15, 2021. Accessed 07/01/2021.
“Swiss parliament votes to raise retirement age for women.” Le News. June 11, 2021. ccessed 04/01/2022.
“Switzerland mulls raising the retirement age for women.” SWI. March 19, 2021. Accessed 07/01/2021.
“Switzerland increases the retirement age for women to 65.” The Limited Times. June 9, 2021. Accessed 07/01/2021.
“Unions decry ‘lack of respect’ for women in labour market.” SWI. June 7, 2021. Accessed 07/01/2021.
Weisser, Veronica. “Reforms for all three Swiss pension pillars.” UBS. January 28, 2021. Accessed 07/01/2021.
“Women speak out in favour of raising retirement age for Swiss women.” Le News. December 24, 2021. Accessed 04/01/2022.
Source: Georgetown University’s Center for Retirement Initiatives
Last Updated 4/1/22