The Swiss pension system is based on a three-pillar model: the state pension system (first pillar), employee benefits insurance (second pillar), and private pension provision (third pillar).
The state pension system comprises Federal Old Age and Survivors' Insurance (AHV) and Federal Disability Insurance (IV). The first pillar is mandatory and, together with any supplementary benefits (EL) due, it aims to guarantee a basic standard of living in retirement or in the event of disability or death. The AHV was introduced on January 1, 1948; Federal Disability Insurance (IV) has been offered since 1960. All persons who reside or are employed in Switzerland, as well as Swiss nationals living abroad who are employed by the Swiss Confederation, are included in the mandatory insurance.
Employee benefits insurance (BVG) and accident insurance (UVG) form the second pillar. The Federal Act on Occupational Retirement, Survivors' and Disability Pension Plans (BVG) entered into force on January 1, 1985. In conjunction with the state pension system, employee benefits insurance is designed to guarantee maintenance of the accustomed standard of living after retirement. All employees who earn an annual salary subject to AHV contributions that exceeds CHF 21,510 are subject to the BVG. The mandatory insurance coverage begins from the age of 17. Employees accrue retirement assets and are also insured against the consequences of disability and death as a result of illness. Accident insurance covers benefits in the event of disability and death as a result of accident, as well as the costs of treatment following an accident.
The third pillar makes it possible to specifically close any gaps that exist in a person's pension coverage. In contrast to normal savings, it offers some tax advantages. Private pension provision can take the form of tied pension provision (Pillar 3a) or flexible pension provision (Pillar 3b).