Three-Pillar System

Swiss retirement provision rests on three pillars, and the Federal Constitution names all three: the state's old-age, survivors' and disability insurance, the occupational pension, and your own private provision. Each pillar has its own job, its own source of money and its own rules. Together they are meant to give you an income once you stop working.

Who pays into each pillar, what happens to the money, what it's for, and whether you have to take part:

The AHV is compulsory for everyone who lives or works in Switzerland. On a salary, you and your employer each pay 5.3% for it, together with disability insurance (IV) and income compensation (EO), and the federal government adds 20.2% of what the AHV spends each year. The pension fund is compulsory for employees who earn more than CHF 22,680 a year with one employer, the 2026 threshold, and employers pay at least half of the contributions. The third pillar is up to you: Pillar 3a lets you put away up to CHF 7,258 a year, the 2026 maximum with a pension fund, and deduct it from your taxable income. Whatever else you save is the free part of the third pillar, Pillar 3b.

The pillars work in different ways. The AHV is pay-as-you-go: the contributions of today's workers pay today's pensions, and nothing is saved for you personally. The pension fund and Pillar 3a are savings: what goes in builds up in an account in your name, with interest or investment returns, until you retire.

The first two pillars share an aim. The Constitution says the AHV pension should cover basic living costs adequately, and that together with the pension fund it should let you keep your accustomed standard of living in an appropriate way. The Federal Social Insurance Office puts a figure on it: the AHV and the mandatory pension fund together are meant to replace around 60% of what you earned before retiring.

Here's what the AHV and the mandatory pension fund pay a year on four salaries, as a share of the salary, with the 2026 figures:

On CHF 50,000, the AHV pays CHF 25,948 a year and the pension fund CHF 9,818: 51.9% and 19.6% of the salary, CHF 35,766 together, with 28.5% not covered. On CHF 80,000, they pay CHF 30,927 and CHF 22,331: 38.7% and 27.9%, CHF 53,258 together, with 33.4% not covered. Both end up above the 60% target, the smaller salary by more: the AHV replaces a larger share of a lower salary.

Above CHF 90,720, neither grows any more: the AHV is at its maximum of CHF 32,760 a year, and the mandatory pension fund insures no more of the salary, so in the example it pays at most CHF 26,802. That makes CHF 59,562 a year on CHF 120,000 and CHF 180,000 alike: 27.3% and 22.3% of CHF 120,000, with 50.4% not covered, but 18.2% and 14.9% of CHF 180,000, with 66.9% not covered.

Around 60% is a target, not a promise. Each missing AHV contribution year lowers your pension for life, as a rule by at least 1/44. And under the legal minimum the pension fund first deducts the coordination deduction of CHF 26,460 from a salary, so part-time work or a low salary leaves little insured.

Real careers also differ from the example. Most salaries rise over the years, and both pensions build on the whole career, so they replace less of a last salary than the example shows. Your fund may insure more than the legal minimum, though, such as the part of a salary above CHF 90,720. Your own figures are on your pension certificate, the Vorsorgeausweis, and your AHV account extract, the IK-Auszug. Whatever the first two pillars leave uncovered is the gap the third pillar is for.