Strengthen your 2nd pillar

The second pillar, the LPP (Occupational Pensions Act), is Switzerland's occupational pension system. It is mandatory for all employees earning more than CHF 22,050 and is designed to ensure a sufficient income during retirement. Additionally, self-employed individuals can voluntarily establish a 2nd pillar plan.

The 2nd pillar comprises two primary components: retirement savings and coverage for death or disability. Throughout their careers, employees and their employers contribute to an occupational pension fund managed by provident institutions, commonly called pension funds. Upon retirement or in the event of death, benefits are disbursed in the form of an annuity or a lump sum, depending on the accumulated contributions. This system is a vital complement to Switzerland's first pillar of social security, providing essential financial stability during retirement.

To withdraw your 2nd pillar in Switzerland, you have several options depending on your situation. If you reach the legal retirement age of 65, you can choose to receive monthly pensions. However, if you permanently leave the country, start a self-employed activity, or purchase a primary residence, you can request the early withdrawal of your 2nd pillar. This can be in the form of a lump sum or annuity, depending on the applicable rules. It's important to consult your pension institution or a financial advisor to understand the tax implications and specific terms related to your situation before making a decision.

To buy back 2nd pillar years in Switzerland, you should determine whether it's possible based on your circumstances and your pension fund's regulations. Generally, it is possible to buy back missed years of pension provision, although this may vary between institutions depending on your accrued savings.

You should typically contact your pension fund or pension institution for specific details on the process and costs associated with buying back missed contribution years. You can also find this information on your annual certificate provided by your pension fund. If you need personalised advice on how to proceed, please don't hesitate to contact one of our advisers.

The 2nd pillar is crucial for self-employed individuals in Switzerland, providing them with an avenue for occupational pension provisions and financial security during retirement. Unlike employees, whose 2nd pillar contributions are typically managed by their employers, self-employed workers must make individual contributions to their pension funds. These contributions allow them to accumulate funds for their future retirement and provide benefits in case of disability or death.

The 2nd pillar, therefore, offers self-employed individuals essential social protection and the opportunity to maintain their standard of living in retirement, making it an integral part of their long-term financial planning.

Unlike the AVS, pension funds, except for civil servants, belong to the private sector in Switzerland. This means that all companies and self-employed individuals have a certain degree of freedom in choosing the pension fund they want to join. Some collective agreements may limit this choice (e.g., in catering or construction), but each company can subscribe to a framework plan. Evaluating the company's financial stability, reserve funds, organisational structure, costs, and the range of services offered is essential to determine whether it is the ideal partner for providing its employees with the most critical pension provisions.

Additionally, the pension fund plays a role in shaping the company's social policies and values. It is becoming increasingly common for this pension tool to be used to retain or even attract new talent.