The social insurance system in Switzerland rests on three pillars (three-pillar principle)
- First pillar
This is compulsory for all and includes old age and surviving dependants’ insurance/disability
insurance/income compensation insurance (AHV/IV/EO)
- Second pillar
This is compulsory and is the occupational insurance for persons who are gainfully employed
- Third pillar
This is voluntary and includes fixed pension plan 3a, flexible pension plan 3b, and private savings
Everyone who lives or works in Switzerland is covered by obligatory insurance in the form of Old Age and Survivors' Insurance (AHV), Disability Insurance (IV) and the Ordinance on Compensation for Loss of Income (EO).
The employer pays half of the premium contributions for those in gainful employment. Persons who are not gainfully employed must also pay minimum contributions to the AHV/IV and the EO, currently Fr. 475.00 per year.
There is an important exception: if the spouse contributes at least double this amount, or currently Fr. 950.00 per year, then spouses who are not gainfully employed are also covered by the insurance and need not make their own contributions.
If you are unable to pay the AHV contributions for the unemployed, the canton or community you live in is obliged to pay your contributions (article 11, paragraph 2 of the AHV law). These regulations apply to all residents, irrespective of whether they are Swiss, foreign or seeking asylum. If you were already in Switzerland before starting work, e.g. as an asylum seeker or a student, we recommend that you ensure that your AHV contributions have been paid from the date you entered the country. AHV contributions that have not yet been paid can be paid retrospectively within five years. If the subsequent payment of large amounts is difficult for you, try and make arrangements with the social insurance institution to pay in instalments. For citizens of EU countries, contributions paid abroad (EU countries) are included in the calculation.
All persons who are gainfully employed are required to pay contributions to the pension fund starting at age 18 and at a current gross income of Fr. 20,880.00.
Employers have to pay at least half of these contributions. When an employee changes jobs, the saved money is transferred to the pension insurance of the new employer. Insurance contribution gaps arise if a person in part-time gainful employment does not earn the minimum required annual wages or if a person was older when s/he started work and has not worked for the complete insurance period. The paid-in amounts are reserved for old-age pensions. Exceptions: The accumulated contributions from employers and employees (capital payment) will only be paid out in the case of definitive emigration to a non-EU/EFTA country, becoming self-employed or purchasing a home.