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The 3 pillars of Swiss pension provision

Retirement · May 22, 2026 · 3 min read

1st pillar (AVS), 2nd pillar (LPP), 3rd pillar (private): how the Swiss system works and how to optimise it.

The Swiss 3-pillar system explained

The principle

Switzerland organises old-age, disability and survivors' provision around 3 complementary pillars. The aim: maintain living standards at retirement (~60% of last salary with pillars 1 + 2).

1st pillar: AVS / AI / APG (state)

  • Aim: cover vital needs
  • Mandatory for any active or Swiss resident
  • Funding: 10.6% salary contributions (5.3% employer + 5.3% employee) on full salary (no cap)
  • Minimum AVS pension (full 44-year career): CHF 1,260/month (2026)
  • Maximum AVS pension: CHF 2,520/month
  • Married couple: max CHF 3,780/month
  • Also includes: AI (disability), APG (maternity/paternity, military service), PC (supplementary if needed)

2nd pillar: LPP / Occupational pension

  • Aim: maintain living standards (with 1st, ~60% of last salary)
  • Mandatory for employees with annual salary > CHF 22,680 (entry threshold 2026)
  • Funding: 7–18% on coordinated salary (CHF 22,680–88,200) by age:
    • 25–34: 7%
    • 35–44: 10%
    • 45–54: 15%
    • 55–65: 18%
  • Contributions 50/50 between employer and employee
  • Built capital = what you receive at 65 as pension or capital
  • Annual pension = capital × conversion rate (~6.8% but reforms ongoing)

3rd pillar: private individual provision

Pillar 3a (linked)

  • Voluntary but heavily tax-incentivised
  • Annual limit 2026: CHF 7,258 (employee) or 20% of net income up to CHF 36,288 (self-employed)
  • Fully tax-deductible: 20–40% tax saving by canton and income
  • Capital locked until 5 years before AVS age (60 men/women)
  • Early withdrawal possible for: home purchase, self-employment, leaving Switzerland, disability
  • Options: bank account (3a) or life insurance (3a)

Pillar 3b (free)

  • Voluntary and unrestricted
  • No contribution limit
  • No tax deduction (rare exceptions)
  • Capital available at all times
  • Includes: life insurance, savings accounts, investments

Coverage visualisation

  • 1st pillar (AVS): ~20–30% of last salary (basic)
  • 2nd pillar (LPP): ~30–40% of last salary
  • Total 1+2: ~50–60% of last salary at 65
  • 3rd pillar (private): fills ~40% gap to maintain 100% living standard

Ongoing reforms

  • AVS 21 (2024): women's reference age harmonised to 65 (gradual raise since 2025)
  • LPP reform (voted 2024, awaiting effect): lower conversion rate, more people included
  • BVG modernised: better coverage for part-time and low incomes

Classic optimisations

Average employee

  1. Max out pillar 3a (CHF 7,258/yr): tax saving CHF 1,500–3,000/yr
  2. Check your LPP: fund, conversion rate, buyback option
  3. Consider complementary LAA insurance (non-occupational accidents)

Manager / high earner

  1. 3a (CHF 7,258) + LPP cadre plan (up to 25% of income)
  2. LPP buybacks: fully deductible, exit after 3 yrs (conditions)
  3. Pillar 3b life insurance: family protection + transmission

Self-employed

  1. Maximum 3a: 20% of income, up to CHF 36,288
  2. Voluntary LPP affiliation: funds for self-employed
  3. Provision reserve + optimised retirement capital

Tips

  • Review your LPP statement annually (sent by your fund in January)
  • Start pillar 3a from first job: compounding over 30–40 yrs is enormous
  • Compare 3a providers: Frankly, VIAC, finpension (low fees, ETF), traditional banks
  • Plan transmission: LPP and 3rd pillar beneficiaries take priority over will
  • Consult a certified adviser for complex estates (LPP, pillar 3, real estate, expatriation)

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