The Swiss Social Security and Pension System (1/3) 1st Pillar: State Pension Provisions

Switzerland has a very comprehensive social security system that is unique in its kind.
The system is based on three "pillars" and each pillar aims to help retired individuals and their immediate family to maintain their accustomed lifestyle.
The first pillar, which this article focuses on, contains the Old Age and Survivors/Disability Insurance (short OASDI) also known as the Swiss state pension.
The second pillar includes the occupational pension scheme (short BVG/LPP) and the third pillar contains private pension provisions.
Each pillar secures different entitlements and falls under different regulations.
In addition, employers are obliged to take out a range of insurances for their employees. Some insurance premiums are fully covered by the employer, whereas the employer may ask the employee to contribute to other insurance premiums.
Finally, the mandatory Swiss health insurance is a significant cost to a household. The insurance premiums are considered a private cost, which is rarely covered by the employer.

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First pillar – OASDI and its characteristics

The first pillar social security or state pension is often referred to as AHV/ALV in German or AVS/AC in French and is meant to cover the basic needs of an individual and their immediate family. The state pension is set-up as a pay-as-you-go-system meaning that the contributions collected are spent immediately to the current beneficiaries.

The first pillar not only includes benefits in cases of retirement and disability, but also compensates loss of income due to compulsory services (military, civil service etc.) or maternity leave. Although it is covered by separate legislation, the first pillar system also includes the mandatory unemployment insurance, ALV/AC. In case someone involuntarily becomes unemployed, the insurance will pay 70% (80% if supported children live in the household) of the insured salary for up to 520 workdays depending on the individuals age and months of contribution made to the ALV/AC. Another 120 days may be added, if the individual is close to the ordinary retirement age (64 for women and 65 for men).

Every individual who resides in Switzerland is required to pay contributions to the OASDI regardless of the employment status. The obligation to contribute starts from the first day of January after the age of 17 is reached for employed individuals. For those who are not employed, the obligation to contribute starts from the first day of January after the age of 20 is reached.

Retirement age for women is 64 and for men is 65. You may begin withdrawing old-age pension benefits up to two years prior to official retirement age but you must accept a cut of benefits and you may defer state pension benefits up to five years with a benefit surcharge.

A special rule applies for married couples/individuals in a registered partnership: if only one individual is employed and contributes at least twice the minimum amount, the compulsory contributions for the individual who is not employed are considered included in contributions of the working spouse.

As an employed individual, your entire gross employment income (with a few exceptions) is subject to OASDI contributions. The total contributions are equally split between you and your employer. For 2020 the employee contributions are:


Old Age Pension (AHV/AVS)


Disability Pension (IV/AI)


Loss of Income (EO/APG)




ALV/AC 1 (up to CHF 148,200)


ALV/AC 2 (above CHF 148,200)


Total contributions

6.375% / 6.875%


Other mandatory insurances as part of the Swiss social security system

Accident insurance

Employed individuals are insured against accidents during and outside of their employment activity. Their employer is required to provide an occupational and non-occupational accident insurance, if the employee is employed for more than 8 hours a week. Contributions for the occupational accident insurance premiums are fully funded by the employer, whereas the premiums for the non-occupational accident insurance may be fully funded by the employee. The contributions depend on the insurance policy and are capped at an insured salary of up to CHF 148'200 (for 2020). The accident insurance usually covers medical expenses, loss of income, disability/survivor's pension and impairment compensation. A supplementary accident insurance can insure additional benefits or higher salaries.


Daily sickness benefits insurance

The employer is required to continue paying employees their salaries for a certain period during illness according to labor law. Many employers choose to take out a voluntary daily sickness benefits insurance instead that pays their employees 80% of their salaries during extended absences due to sickness for maximum 720 days within 900 consecutive days. The insurance premiums are usually split between employer and employee and depend on the insurance policy.


Health insurance

All residents in Switzerland are obligated to take out a health insurance with an approved Swiss health insurance provider no later than three months after their arrival in Switzerland. The only exception is, when someone is covered in their home country based on a social security treaty. This may be the case when someone is assigned to Switzerland and such exception typically also covers the spouse/registered partner and any children. Many employers have made agreements with a preferential insurance provider, which may lead to a lower insurance premium. But as the health insurance is a strictly private matter, the individual may opt for any of the approved Swiss insurance providers. There is a range of international health insurance providers offering qualitatively good health insurances at attractive prices. However, they are mostly not approved for Swiss health insurance purposes.


In addition to the insurance premiums, there is a deductible to make toward the health bill, which is referred to as the annual "franchise". The minimum annual deductible is CHF 300 and the maximum deductible is CHF 2'500. The higher the deductible, the lower is the insurance premium. If you have a good health, it may be worth considering a higher deductible to save insurance premium costs.

Author: Per Melberg

Per Melberg is a Managing Partner at Exactio Ltd., a Swiss based advisory company that is specialized in providing professional tax and social security advisory services to individuals living and working in Switzerland. He has lived in Switzerland for more than 20 years working with international staff all over the world. He is dedicated to use all his experience supporting mobile individuals and their families moving to and from Switzerland.

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