First, second and third pillars

Last update: January, 2024

The Swiss pension system consists of three pillars: state provision (first pillar), occupational provision (second pillar) and private provision (third pillar). These three pillars aim to provide financial protection for people in Switzerland during old age, in the event of disability or in the event of death.

  1. First Pillar - AVS/DI/IPG: This is the Old Age, Survivors' and Disability Insurance. Its objective is to guarantee the minimum subsistence level. It is a compulsory system and covers all residents in Switzerland, including people without gainful employment. I can tell you right away that it is barely enough for mere survival, making great sacrifices.

  2. Second Pillar - LPP: This is the Occupational Pension Plan. Its purpose is to maintain the accustomed standard of living in old age. This pillar is compulsory for employees and employers are required to join a pension fund and pay part of the contributions. LPP benefits cover retirement, disability and death. In theory, it covers accidents and illness, but in practice in 99% of cases it only covers illness. Unlike the name, definitely not enough to maintain the same lifestyle (considering first and second pillar together).

  3. Third Pillar - Private Pension: This pillar is optional and allows you to set up a private pension plan with which you can protect yourself in your old age, but also save on taxes and insure risks such as death and disability. This pillar consists of two parts: the tied individual pension plan (3a) and the unrestricted individual pension plan (3b). Captive individual pension provision allows you to accumulate a sum of money during your lifetime until retirement with a bank or insurance company, with advantageous interest rates and the possibility of deducting contributions from your taxes. Free individual pension provision, on the other hand, can take the form of cash, savings accounts, life insurance, investments.

The 3a is highly recommended for its good [fiscal advantages].(https://www.ch.ch/it/pensionamento/previdenza-per-la-vecchiaia/il-terzo-pilastro--previdenza-privata-/#vantaggi-fiscali-di-un-terzo-pilastro).