Retirement provision: how big is your gap?

The Swiss retirement provision system is based on three pillars:

• state retirement provision (1st pillar)
• occupational retirement provision (2nd pillar) 
• private retirement provision (3rd pillar)

The aim of the Swiss retirement provision system is to provide the country's population with a reliable income for all life situations. For example, after retirement, in the event of the death of a partner or in the event of permanent disability due to illness or accident. 

1st pillar – state retirement provision

The 1st pillar is about ensuring subsistence. This pension is intended to cover the minimum necessary living requirements. The 1st pillar consists of old-age and survivors' insurance (OASI), disability insurance (DI) and the income compensation scheme (EO).

Find out more at vita.ch

2nd pillar – occupational retirement provision

The 2nd pillar ensures your accustomed standard of living. For occupational retirement provision, employees and employers pay at least the same amount into a pension fund. The employer can also volunteer to pay more.

Find out more at vita.ch

3rd pillar – private retirement provision

The assets in the 3rd pillar serve to close any pension gaps from the 1st and 2nd pillars. It also allows you to retire earlier or fulfill dreams and wishes after retirement.

Find out more at our article about the third pillar.

The biggest differences between a pillar 3a solution from a bank or an insurance company relate to the risk protection for you and your family, your savings goal and the period of insurance.

Risk protection for families and savings goal
With an insurance company, you take out an insurance contract under pillar 3a. This includes insurance coverage in the event of disability and/or death. This means that if you become disabled, your insurance will pay the annual amount due into pillar 3a for you. You will therefore continue to save for retirement, even if you can no longer work. Depending on the retirement provision solution you choose, you will also be paid a disability pension until retirement. In any case, you will meet your defined savings target. In the event of death, a lump-sum death benefit will be paid to your surviving dependents. This means that your loved ones will at least be protected from the financial consequences of this misfortune. You pay for this insurance coverage with a portion of your premium.

When you open your pillar 3a with a bank, the main focus is on the savings process. You and/or your family will not be protected against the financial consequences of disability or death. If you can no longer pursue your work, you will no longer be permitted to pay into pillar 3a. In this case, you will not reach your defined savings goal. 

Period of insurance
Insurance contracts under pillar 3a always have a fixed period of insurance. This usually extends until the normal retirement age. You undertake to pay a certain amount into the pillar 3a policy on a regular basis. 

After the third insurance year, however, you have the option of pausing payments for up to three years. Insurance coverage does not expire in this case. This means that you will continue to be fully insured if, for example, you go on parental leave or spend time abroad. The only consequence is that your savings target will be reduced by the amount of the paused payments.

Yes, provided you are affiliated with a pension fund. Otherwise, you can pay a maximum of 20 percent of your net salary into pillar 3a.

With a part-time workload, the employer and the employee pay less into old-age and survivors' insurance (OASI) and the pension fund. As a result, pensions will be smaller later on.

Yes, it does. If you leave your job, for example, you will cease to be eligible for risk benefits for death and disability in the 2nd pillar. Your retirement assets will be transferred to a vested benefits account. To ensure that there are no gaps in contributions to old-age and survivors' insurance (OASI), you should register with the OASI compensation office and pay the minimum contribution each year, unless you are married and the minimum contribution is paid via your spouse.

Request advice

It is best to contact your advisor to close any gaps with an individual solution.

Yes, it does. Depending on whether you are a single parent or married, the situation is different.

Single, non-working mothers.
As a single, non-working mother, you are classified as a non-working person. To avoid a gap, you should register with your compensation office and pay the minimum contribution. This applies if you are absent from work for one year or more. You will no longer be insured under the 2nd pillar. Your existing savings balance will be transferred to a vested benefits account. 

Married, non-working mothers
For OASI, the minimum contribution is paid via your spouse. However, you will no longer be insured under the 2nd pillar. Your existing savings balance will be transferred to a vested benefits account.

Request advice

It is best to contact your advisor to close any gaps with an individual solution.

First, you should make maximum use of pillar 3a. This is because the deductible contributions do not add up, but expire at the end of the year. On the other hand, possible pension fund purchases do not expire. You can also close any existing gaps in the pension fund in the following year. 

Note that pension fund purchases three years before retirement have an impact on how you will be permitted to withdraw your pension fund assets. Specifically, in this case, you will be required to withdraw your balance as a pension. In the event of a lump-sum withdrawal, the tax saved on the purchase is reclaimed.

Our advisors will answer your personal questions in a personal meeting. They will address your individual retirement provision situation and explain whether you have any gaps. At the end of the meeting, you will know how to close these gaps. And you will also know what you can do to ensure that you have enough money for a relaxed retirement in old age.

Death and disability insurance provides good protection. With this life insurance, you protect your family against the financial risks that arise if you become or remain disabled or in the event of your death. Find out more about the products Disability Insurance and Protection for loved ones.

Good advice starts with the soothing sense of being in the right hands. For us, your wishes and goals are the top priority. That's why we create your individual investor profile and your personal investment strategy with you. It is important to us that you know and understand how we invest your assets and what you can expect from your investments. We also make you aware of possible risks to your livelihood and of your pension situation. We offer you comprehensive advice and take account of both your investments and your insurance.

We take account of all assets for your personal investor profile. This means that an up-to-date asset list, account and custody account statements from your bank, or your last tax return are helpful. These documents make it easier for us to provide individual advice and save you from additional clarifications.

When providing advice, we stick to our four-stage model consistently: Securing your livelihood – Accumulating wealth – Optimizing capital – Identifying additional scope. In the first tab, we explain the model in detail.

There is no such thing as the best investment strategy. Otherwise everyone would invest in that way – and you wouldn't need advice. But there is such a thing as the best investment strategy for you, your financial situation and your goals. The greater the profit opportunities, the higher the investment risks. Your strategy depends on the level of fluctuation that you can and want to accept. We clarify these questions with you in the investor profile. We then use this to derive the best investment strategy for you.

The greater the profit opportunities, the higher the risks. Or: The lower the investment risks, the smaller the profit opportunities.

• Money market investments receive fixed interest and have a term of 12 months at most. Because they are invested for a short, defined period, fluctuations are low. If money is invested for longer than 12 months, we speak of a capital market investment.
• Bonds are more risky than savings accounts but less risky than shares. By buying or subscribing to a bond, you grant a company or state a loan that is paid back after the end of the term. You receive interest in return. Bond prices may fluctuate, for example if interest rates increase, but generally do so less than share prices.
• Shares provide a stake in a company and allow the shareholder to share in their success. Share prices fluctuate, depending on the company's success, but also on market developments, changes in interest rates and the economy, and political events. Successful companies pay dividends to shareholders as a profit share. 
• Real estate is a material asset. You can invest directly or indirectly, for instance in real estate funds or shares in real estate companies. Real estate is subject to fluctuations in value, triggered by demand and changes in interest rates in particular. 
• Alternative investments include investments in commodities, hedge funds or infrastructure funds, which do not belong to a traditional asset class. They are not usually very liquid and have a complex structure. Alternative investments enable you to make better use of investment opportunities and to diversify your assets more broadly.
• Derivative instruments are options on underlying assets, such as shares. Their price depends on the underlying asset. With a share option, you can, for example, buy (call option) or sell (put option) a share at a specified price. Derivative instruments are complex. They are only suitable for investors who understand the mechanisms and can shoulder the risks (total loss).

Assets include all permanent property and rights. A distinction is made between monetary items such as cash, bank assets or bonds and material assets such as shares, precious metals, real estate or commodities.

These are the four most important risks:

• Liquidity: Before you invest, you should ensure that you have sufficient liquid funds at all times to be able to pay for unexpected expenses, for instance dental work. In this way, you avoid the risk of having to sell long-term investments at quite possibly the most stupid moment. 
• Inflation: When money falls in value, we speak of inflation. If, for instance, you invest your assets in a savings account, there is a risk that your money will lose value and so purchasing power due to inflation.
• Concentration risk: History teaches us that all markets, sectors and companies go through good and less good times. For this reason, you should never stake everything on one chance, for example by investing in just one asset, but should spread the risk broadly (diversify). 
• Currency: Higher interest in foreign currencies is attractive. The flip side of the coin is the currency risk. For instance, in the year 2000 many investors invested in U.S. dollars at a price of CHF 1.80. One U.S. dollar is now worth less than one Swiss franc. Despite higher interest rates, the investment failed to pay off. That's why you should also diversify your investments with respect to currency.

If you die or are left unable to work after an accident or an illness, state and occupational retirement provision come into play. Generally however, such pensions are not sufficient to enable you to continue to enjoy your accustomed standard of living. With this in mind, you should insure yourself and your family against these risks:

• Disability: In Western Europe, one in every four people is unable to work due to illness or accident – at least temporarily. If you insure yourself against loss of income, you close the benefit provision gap for yourself and your family.
• Death: Nobody likes thinking about death. Nevertheless, you should take out term life insurance to provide assistance in the event of death. It means that your family will not need to worry about finances and their future in the midst of their grief. 

In our comprehensive investment advice and in our 4-stage model (Stage 1: Securing your livelihood), we set great store by protecting against risks that threaten your livelihood.

Diversification means the distribution of risk. A beach vendor who only sells sunglasses will do good business on sunny days, but will sell very little when it rains. Had they supplemented their range with umbrellas, they might also make sales on rainy days. This principle also applies to investments: If, for example, you invest in just one company, the danger of total loss is greater than if you had invested in many companies. Or in one share fund that invests in many companies and so spreads risk broadly. Diversification costs hardly anything and is most easily realized with investment funds.

Now. The earlier you begin, the more quickly it pays off thanks to the compound interest effect. For instance, if you want to save up CHF 100,000 and expect a yield of 3.75 percent, you would have to put aside CHF 688.10 each month for 10 years – or just CHF 155.50 each month if you have 30 years to reach your savings target. The basis for a successful monetary investment is a medium- to long-term time period and the right investment strategy for you.

Stay calm and don't act rashly based on fear or panic. In times of uncertainty, it is important to stick to the strategy with discipline. Ups and downs are part of the stock market. In the long term, investments in securities – and in shares in particular – pay off.

Price corrections are an opportunity to get on board. So in times of uncertainty, you shouldn't stop investing with a savings plan or monthly payments. If you leave your money in a savings account, it will keep on depreciating in value due to inflation (see "What are monetary risks?"). 

In Investing in times of uncertainty, you can read what Zurich experts are recommending now.

Prices for energy, food and commodities are increasing. Inflation has a stronger influence on monetary assets such as cash, bank balances and bonds than it does on material assets such as shares, precious metals and real estate. For this reason, it makes sense to invest in material assets too. In times of uncertainty, the knowledge of professionals is even more valuable. That's why we recommend that our customers seek advice. Arrange a personal consultation now. We will review your strategic asset distribution and make suggestions as to how you might optimize your investment strategy.

In Investing in times of uncertainty, you can read what Zurich experts are recommending now.

In 2023, the regular retirement age is 64 for women and 65 for men. This means that both the OASI pension and the benefits from your occupational pension fund will only be paid out after your 64th or 65th birthday. Following the OASI reform of 25 September 2022, the regular retirement age for women is expected to gradually increase to 65 starting from 2025.

It is never too early to start planning for your retirement. What the money will be used to finance, depends on your wishes and plans. Would you like to retire early? Travel the world after you retire? Or are you saving for your children's education? As a rule, we recommend you start thinking about your retirement around the age of 50.

If you withdraw your pension fund as an annuity, you will receive a steady income for the rest of your life. If you choose a lump sum payment, you will receive your entire pension funds in one installment. Whether a lifetime annuity, a lump sum payment or a combination of the two is more suited to your situation, depends on a variety of factors: your requirements for security, your financial flexibility, your dreams and plans after your retirement. 

As a rule, the old age and survivors’ pension (OASI) and the money from your 2nd pillar pension fund are paid out as a lifetime annuity. However, these are often not sufficient to preserve the standard of living to which you are accustomed. The money from the first two pillars is often less than your previous income. Irrespective of the resources at your disposal following retirement, this gap can be minimized or closed. For example, with a lifelong, private pension or with a payment plan. Get advice from our specialists. We analyze your personal situation and show you the various options available to you.

The OASI pension, i.e. benefits from the first pillar, can be drawn at the earliest two years before regular retirement. As soon as the OASI reform comes into effect, it will be possible to draw a portion of your pension (between 20% and 80%) early and defer the rest. 

With the second pillar, your occupational pension fund, you have the option of taking out your pension benefits as a lump sum, as an annuity or a combination of both.

Many pension funds already offer the option of partial retirement. For example, those who reduce their working hours from 100% to 60% at the age of 63 can then draw 40% of their annuity or pension capital. Under the OASI reform, all pension funds are obliged to facilitate this form of partial retirement.

Depending on the terms of your pension fund, you can often draw the benefits from your pension as early as 58 or 60. However, the consequence of this is that the pension capital / annuities paid out will be permanently lower than in the case of ordinary retirement. This is because the pension capital that you have saved will be correspondingly smaller. 

Currently, you may draw funds from pillar 3a five years before regular retirement age, i.e. at age 59 for women and 60 for men at the earliest.

A financial or retirement plan is a life plan. Up to age 58, building up your assets is the key focus. After your 58th birthday, the focus shifts to planning the third phase of your life. 

To help with your financial and pension planning, our specialists can work out a concept that suits you using your needs and goals. In doing so, we will take into account your current living situation and the benefits from all three pillars. We will identify gaps in your coverage and show you how to minimize or fill these. Since your personal circumstances can change with time, just like your plans and wishes, you should regularly go over your plan and make changes if necessary. 

A financial and retirement plan gives you clarity. You are building the foundations on which you can make the right financial decisions.

As a rule, you should begin thinking about the topic of early retirement as early as possible, but no later than from the age of 50. Start thinking about the question of when you want to retire as soon as possible. Because early retirement is costly: first, you have to bridge the gap financially between early retirement and the time you begin receiving your OASI pension. Second, the final years of contributions have a significant influence on pension fund capital thanks to the accrued interest on your total assets, and you will have to reckon with noticeable losses. Finally, you will no longer be receiving your earnings from gainful employment. 

Tip: the pension certificate issued by your pension fund illustrates how much the amount of your occupational retirement pension will vary depending on the date of your retirement. This will provide you with an initial, rough overview.

There are four forms of retirement:

• Regular retirement: The regular retirement age for women is 64, for men it is 65. 
• Early retirement: Early retirement describes the situation in which you stop work before the regular retirement age. Early retirement is possible from 58 onwards — depending on where you live and which pension fund you belong to.
• Semi-retirement: Semi-retirement is a more gradual retirement spread over multiple steps. The interval between the steps is at least a year. This requirement also varies depending on your place of residence and pension fund.
• Deferred retirement: Deferred retirement refers to retirement after you have already reached the regular age of retirement. Women can defer their retirement until their 69th birthday. Men can defer their retirement until their 70th birthday. This can vary depending on your pension fund. 

To find out which type of retirement is best for you, please contact your customer consultant. We at Zurich will be happy to answer your questions.

The answer to this question differs from person to person. As such, there is no general answer to this question. The decisive factor here is the individual requirements of each pensioner. 

The biggest expenses are:

• Living and household expenses
• Costs for illness and accident insurance including deductibles
• Mobility and leisure expenses
• Insurance
• Taxes

You should compare these expense with your expected pension income and other assets. For more detailed information, please contact your customer consultant.

This varies from person to person and depends on many factors: do you own your own home? Are you expecting to pay for training or further education for your children? Are you planing any big trips? On average, you can expect to receive about 60% of your previous salary when you enter into regular retirement based on the first and second pillars – however, most people need about 80% of their previous salary. This is why it's important to make private provisions for your retirement, for example, using the third pillar. 

This question must be answered on an individual basis. In the medium term, costs for mobility and leisure will decrease. However,  individual health and care costs can increase. You may incur extraordinary costs right after retirement, such as for home renovations, travel, etc.

To answer these questions, it is sensible to make a model calculation based on your future outgoings and income. This involves comparing your individual pension fund and OASI income with your personal outgoings. In addition, there is the question of whether it is sensible to withdraw a specific amount form the pension fund as a lump sum. 

For more detailed information, please contact your customer consultant.

Women are eligible to receive their OASI payments from their 64th birthday, men from their 65th birthday. To ensure that you receive the funds in your bank account, you must register in good time at the compensation office at which you most recently paid in pension contributions.

The Swiss retirement provision system is based on three pillars:

• state retirement provision (1st pillar)
• occupational retirement provision (2nd pillar) 
• private retirement provision (3rd pillar)

The aim of the Swiss retirement provision system is to provide the country's population with a reliable income for all life situations. For example, after retirement, in the event of the death of a partner or in the event of permanent disability due to illness or accident. 

1st pillar – state retirement provision

The 1st pillar is about ensuring subsistence. This pension is intended to cover the minimum necessary living requirements. The 1st pillar consists of old-age and survivors' insurance (OASI), disability insurance (DI) and the income compensation scheme (EO).

2nd pillar – occupational retirement provision

The 2nd pillar ensures your accustomed standard of living. For occupational retirement provision, employees and employers pay at least the same amount into a pension fund. The employer can also volunteer to pay more.

3rd pillar – private retirement provision

The assets in the 3rd pillar serve to close any pension gaps from the 1st and 2nd pillars. It also allows you to retire earlier or fulfill dreams and wishes after retirement.

Find out more at vita.ch

The biggest differences between a pillar 3a solution from a bank or an insurance company relate to the risk protection for you and your family, your savings goal and the period of insurance.

Risk protection for families and savings goal
With an insurance company, you take out an insurance contract under pillar 3a. This includes insurance coverage in the event of disability and/or death. This means that if you become disabled, your insurance will pay the annual amount due into pillar 3a for you. You will therefore continue to save for retirement, even if you can no longer work. Depending on the retirement provision solution you choose, you will also be paid a disability pension until retirement. In any case, you will meet your defined savings target. In the event of death, a lump-sum death benefit will be paid to your surviving dependents. This means that your loved ones will at least be protected from the financial consequences of this misfortune. You pay for this insurance coverage with a portion of your premium.

When you open your pillar 3a with a bank, the main focus is on the savings process. You and/or your family will not be protected against the financial consequences of disability or death. If you can no longer pursue your work, you will no longer be permitted to pay into pillar 3a. In this case, you will not reach your defined savings goal. 

Period of insurance
Insurance contracts under pillar 3a always have a fixed period of insurance. This usually extends until the normal retirement age. You undertake to pay a certain amount into the pillar 3a policy on a regular basis. 

After the third insurance year, however, you have the option of pausing payments for up to three years. Insurance coverage does not expire in this case. This means that you will continue to be fully insured if, for example, you go on parental leave or spend time abroad. The only consequence is that your savings target will be reduced by the amount of the paused payments.

The time to start paying OASI contributions depends on whether or not you are gainfully employed.

• As a gainfully employed person: You start paying OASI contributions the year you turn 18.
• As a non-gainfully employed person: You start paying contributions no later than the year you turn 21. It does not matter whether you receive an income or not. 

Are you studying and not in paid employment? In that case, you should pay the minimum amount of CHF 514 to your OASI compensation office in 2023. Otherwise, you will be missing contribution years. This may result in your OASI pension being reduced upon retirement.

If you do not pay in the minimum contribution, your OASI pension will be smaller upon retirement. To avoid pension reductions, women need to demonstrate 43 years of contributions and men need 44. You have the option to make up for any missed contribution years within five years. After that, this option expires.

In Switzerland, anyone with earnings from gainful employment subject to OASI contributions can pay into pillar 3a. Therefore, this includes gainfully employed students and apprentices. The amount they can pay in depends on whether they are affiliated with a pension fund. If they are, they can pay in a maximum of CHF 7,056 in 2023. Gainfully employed students and apprentices who are not affiliated with a pension fund may pay in a maximum of 20% of their net earnings from gainful employment. They may deduct the amount paid from their taxable income when filing their tax return.

Students without earnings from gainful employment subject to OASI contributions cannot pay into pillar 3a.

Especially when you are young, securing your salary is important. After all, you haven't been working for very long. Imagine having to make do with 60 percent of your current salary for the rest of your life. Protect yourself with disability insurance.

Build up additional capital for the future with unit-linked life insurance. Since the investment horizon is very long, we recommend choosing an investment with a high equity ratio.

Only if you earn more than CHF 22,050 per year. This is the entry threshold to be included in the pension fund. Of course, pension funds can also offer more advantageous solutions to provide you with insurance at a lower income.

Yes, it does affect your occupational retirement provision (pension fund). However, in most cases, missing contributions can be minimized with higher wages. In addition, you can still make pension fund purchases at a later date.

If you are studying, paying the minimum OASI contribution each year is important. In 2023, this will be CHF 514. These minimum contributions will also be compensated for later on by the higher pay you can expect.

Even while studying abroad, you should pay the minimum OASI contributions and take out additional insurance against long-term disability. Preexisting disability insurance can also be continued when you're abroad.