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How does the retirement and pension system work in Switzerland?

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Retirement pension in Switzerland
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Many workers ponder the matter of how to finance their retirement. The pension system in Switzerland is essentially based on what is called "the three pillars". Defined by the Swiss constitution, this system allows every individual once they reach retirement to get money from three different sources. We provide here an explanation of this retirement pension system in Switzerland.

First pillar: old age insurance

More commonly named AHV (AVS in french), this pension is received automatically by any individual who has reached the retirement age in Switzerland. In theory, its amount should be enough to cover their vital needs, but must be complemented by the second and third pillars in order to ensure a comfortable living standard.

Second pillar: professional insurance

The professional insurance is a solution which allows any economically active person to automatically (and compulsorily) spare money they will get through their pension. Indeed, the pension system in Switzerland forces every employer to participate in the second pillar. Each employee, by the end of each month, will notice that a little amount of their salary has been deduced. That deduction (called LPP deduction) corresponds to a percentage of the salary. This LPP annuity is paid to a pension fund of the employer's choosing. Once the individual reach retirement age, all the money "levied" will be made available to them.

Third pillar: life insurance

When in theory the first and second pillar should be enough to ensure adequate living standards during retirement, the pension system in Switzerland also relies on a third pillar: individual pension fund. This solution is not imposed by law, meaning each individual is free to subscribe or not to an individual pension. Many solutions are available, the most common being life insurance which consists in paying a specific sum to a society. Upon reaching retirement, the total figure paid, plus interest, will be made available to the person. The interests highly depend on the insurance policy chosen.

Contact a retirement pension adviser in Switzerland

There are many societies and individuals providing advice on retirement pension and third pillar solutions. With Credit-service, you can benefit from a direct contact with a reliable and professional adviser, with an expertise on pensions in Switzerland, who will be able to answer your questions and inform you. Do not hesitate to fill in our contact request form to be promptly contacted by an adviser. Naturally, this solution is for free of charge and non-binding.

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