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The Swiss Three Pillar Pension System

As an introductive information to the Swiss Pension System based on three pillars, please find below a very brief summary on the main features:

1^ST PILLAR (IN GERMAN AHV/IV)

The so called first Pillar is the Swiss state pension system (a PAYGO system) has three components:

• AHV (Old-Age & Survivor Pension)
• AI (Invalidity Insurance)
• APG (Income compensation insurance)

How is the system financed?

• Contribution from employees, employers, self-employed, individual non-in gainful employment (students, housewives)
• Public authorities: direct funding, part of VAT, gambling proceeds

Contribution levels:

• Student not working: 482 CHF yearly (minimum contribution)
• Employee 5.125% / Employer 5.125% = 10.25% total
• Self-employed: up to 9.65%

Objective: to cover basic living expenses adequately

When does it start : from the 1^st of January following 17^th birthday

Full pension criteria: 44/43 years to get 28,440 CHF (single) / 42,660 CHF (couple)

2^ND PILLAR (IN GERMAN BVG)

The information below summarizes a “vast & complex” subject.

German BVG – Altersguthaben / die Zweite Säule

English – Occupational Pension Scheme / the second pillar (funded pension plan)

Purpose: article 113 - Swiss Federal Constitution, “the 2^nd pillar enables the insured person to maintain his/her previous lifestyle in an appropriate manner”. The 2^nd pillar is compulsory since 1985. It has 2 main part components:

• Old-Age SAVINGS (start at 25 years old up to 64/65)
• Survivor & Invalidity INSURANCE (start at 18 years old up to 64/65) – Legally 6% of all contributions paid must to fund insurance protection against death & disability

3^RD PILLAR (IN GERMAN DRITTE SÄULE)

The 3^rd Pillar is a private pension scheme. It is optional and financed entirely by the person. The aim of voluntary personal provisions is to cover gaps between the accustomed income of an insured person up until retirement and the 1^st & 2^nd pillar benefits (supposed to provide up to 60% of one’s previous income)

2 types of Third Pillars: 3a pillar (TIED) / 3b pillar (FLEXIBLE)

2 types of institutions: bank (Third Pillar account) & insurance (Third Pillar policy)

Who is an insurance Third Pillar for: individual who:

• Want to stay in Switzerland (for the foreseeable future)
• Want to protect his family
• Want to buy a property in Switzerland

For 2020, the maximum tax-deductible allowance in the pillar 3a is:

• CHF 6,826.- for employed persons who are members of a pension fund
• 20% of net earnings for self-employed persons who are not members of a pension fund, up to a maximum of CHF 34,128.-

To enable us to certify your savings contributions for this year, your payments must be received by the insurance company or the bank before December 29^th, 2020 the latest. However, to be on the safe side, we advise you to order your payments before December 24^th, 2020.

The total amount of your contributions is fully tax-deductible.

The tax deduction is not automatic. Individuals must announce they have contributed to a third pillar for the tax-deduction to be effective (done through your return).

To understand more about the Swiss Pillar System or to set up your 3rd Pillar email us today at hello@thechoicealliancegroup.com or call us: +41 225017094.

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