Understanding the 3 Swiss Pillars in 5 minutes

Here's a guide to understanding the 3 Swiss pension pillars in 5 minutes. The goal is to estimate your budget for the later years of your life.

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Why this guide?

In Switzerland, retirement planning is based on three pillars*.

Their objective? To guarantee a stable income once retired and maintain their standard of living (and even before).

But how do they work? Who has to contribute? How much can you receive?

This guide explains the essentials to know, with concrete examples and answers to frequently asked questions.

The 3 pillars at a glance

Here is a summary of the 3 Swiss pillars

Pillar	Official name	Mandatory ?	What is it for?
1st pillar	AVS/AI	✅ Yes, for all workers	Cover the basic needs (accommodation, food).
2nd pillar	LPP (Occupational Pension Plan)	✅ Yes, for the employees (employer + employee). ❌ Not for self-employed individuals (except in certain cases).	Complete the first pillar to maintain their standard of living.
3rd pillar	3a (Private pension plan)	❌ No, but highly recommended	Optimizing your retirement (savings + tax advantages).

First pillar: Old-age and Survivors' Insurance (AVS)

The first pillar is a compulsory social insurance for all workers in Switzerland. It is financed by contributions deducted directly from your salary.

How does it work?

You contribute throughout your career.
Upon retirement, you receive a monthly annuity calculated based on:
- Of number of years of contributions.
- Of amount of your contributions (depending on your salary).

How much do we get paid?
The amounts vary, but here are the maximum ceilings (in 2026):

Single person : between CHF 1,260 and CHF 2,520/month.
Married couple : until 3,675 CHF/month (for both).

⚠️ Attention Very few people receive the maximum pension. To be eligible, one would need to:

Having contributed 44 years old (without interruption).
Having had a annual salary exceeding CHF 90,000 throughout his entire career.

At what age can one benefit from it?

Legal age : 65 years old (for men and women in 2026).
Early retirement Possible from: 63 or 64 years old, but with a reduction of the annuity (penalty).

Concrete example :
Jean, 65, contributed for 40 years with an average salary. He receives 1,800 CHF/month of the AVS.

2nd pillar: The LPP (Occupational Pension Plan)

The second pillar is a supplement to the 1st pillar to avoid a significant drop in your standard of living in retirement.
Unlike the AVS, Each worker has their own account (individual capital).

How does it work?

If you are an employee You and your employer contribute each month (the percentage varies depending on the employer).
If you are independent The contribution is optional (but recommended).
The funds are invested through your pension fund (returns depend on its performance).

How much do we get paid?
It depends:

Of amount contributed during your career.
Of the yields generated by your pension fund.

How to get your money back?
From 58 years old (up to age 70), you have 3 options :

Withdraw 100% as capital (into your bank account).
Receive a monthly income until the capital is exhausted.
Mix the two (e.g.: 50% in capital + 50% in annuity).

Note that if you choose an annuity, it generally represents 60% of your last salary And it's paid out until the capital is exhausted. And if you choose the lump sum, you receive the money directly into your bank account.

Concrete example :

Marie, 65, has CHF 240,000 in her 2nd pillar after 40 years of work at 80%. She chooses a monthly annuity over 20 years.
→ She will receive 1,000 CHF/month in addition to his 1st pillar (1,500 CHF).
→ Monthly Total : 2,500 CHF/month for 20 years.

Can you withdraw your second pillar pension before the age of 58?
Yes, but only in 3 cases :

Purchase of a primary residence in Switzerland.
Departure abroad (if you leave Switzerland permanently).
Starting a business (if you become self-employed).

⚠️ Attention In most cases, you cannot withdraw that a part of capital.

What if I have missing years?
If you haven't contributed between 25 and 65 years old (e.g., unemployment, studies), you can buy back those years (with tax advantages). Otherwise, you may be penalized depending on the pension fund.

3rd pillar: Private pension provision (3a)

The 3rd pillar is a personal savings account with tax advantages.

It allows you to:

Reduce your taxes (Contributions are tax-deductible).
Investing simply (growth ETFs, bonds, etc.).
Supplementing your retirement income.
Funding a project (buying a home, moving abroad).

Why is it indispensable?
Because the The first and second pillars are often not enough to maintain your lifestyle.

Concrete example :
Clémentine, 65, touches:

1,400 CHF/month of the AVS (1st pillar).
1,000 CHF/month of the LPP (2nd pillar, for 10 years).
→ Total : 2,400 CHF/month for 10 years, then 1,400 CHF/month after 75 years.

But his lifestyle costs 4,000 CHF/month.
→ Lost earnings :

1,600 CHF/month between 65 and 75 years old.
2,600 CHF/month after 75 years.

Fortunately, Clementine has a 3rd pillar well filled, she can supplementing his income and avoid this decline in living standards.

Comparison of the 3 pillars

Here is a comparison of the 3 pillars:

Criteria	1st pillar (AVS)	2nd pillar (LPP)	3rd pillar (3a)
Mandatory ?	✅ Yes	✅ Yes (for employees)	❌ No
Amount of contributions	% of the salary (set by the State)	% of the salary (variable depending on the employer)	Free (annual limit)
Yield	None (distribution system)	Depends on the pension fund	Depends on your investments
Retirement age	65 years old (63-64 years old with penalty)	58-70 years old	60 years old (or earlier under certain conditions)
Taxation	Taxable income	Taxable annuity or capital	Tax advantages of the contribution
Possible use	Monthly annuity	Capital or annuity	Capital, annuity, home purchase, moving abroad

Conclusion: What are the key takeaways?

The first pillar (AVS) East OBLIGATORY and covers the basic needs, but it is often insufficient.
The 2nd pillar (LPP) East mandatory for employees and allows maintain one's standard of living. You can withdraw it as a lump sum or as an annuity at an advanced age.
The 3rd pillar (3a) East Optional but essential For :
- Supplement your income retired.
- Benefit from tax advantages.
- Funding projects (accommodation, departure abroad).

FAQ Understanding the 3 Swiss Pillars in 5 minutes

What are the 3 Swiss pillars?

The 3 Swiss pillars are a pension system Designed to ensure a stable retirement income. They consist of:

AVS (1st pillar) : compulsory social insurance to cover basic needs.
The LPP (2nd pillar) : occupational insurance to maintain your standard of living.
The 3a (3rd pillar) : private savings with tax advantages.

Why are the 3 pillars important?

Because they complete each other. Indeed, the AVS alone is not enough to live decently in retirement. What's more, The second pillar depends on your employer, while the third pillar allows you to’to optimise your savings and your taxes.

Who is required to contribute to the 3 pillars in Switzerland?

The first pillar (AVS) East OBLIGATORY for all workers.
The 2nd pillar (LPP) East OBLIGATORY for employees, but optional for freelancers.
The 3rd pillar (3a) East optional, but highly recommended to supplement your income.

At what age can one receive the 1st pillar (AVS) benefits?

The legal age is 65 years old. However, It is possible to take early retirement as soon as 63 or 64 years old, but with a reduction of the annuity.

How does the 2nd pillar (LPP) work?

The second pillar is funded by monthly contributions (employer + employee). Afterwards, In retirement, you can choose between:

Withdraw 100% in capital.
Receive a monthly annuity.
Mix Both options.

Can you withdraw your second pillar pension before the age of 58?

Yes, but uniquely in 3 cases:

Purchase of a primary residence in Switzerland.
Final departure abroad.
Starting a business (if you become self-employed).

What are the advantages of the 3rd pillar (3a)?

The 3rd pillar offers several advantages :

Tax reduction (Contributions are tax-deductible).
Simple investment (ETFs, savings accounts, etc.).
Supplemental income retired.
Project funding (buying a home, moving abroad).

How much can you earn with the 3 pillars?

It depends on your salary, of your years of contribution and your investment choices. For example :

1st pillar : between CHF 1,260 and CHF 2,520/month.
2nd pillar : variable (e.g. 1,000 CHF/month for a capital of 240,000 CHF).
3rd pillar : depends on your personal savings.

Can you buy back missing years in the 2nd pillar?

Yes, it is possible to buy back missing years (gaps in insurance coverage) to supplement your contributions. On the other hand, It is often more sensible to first fill in your 3rd pillar.

Why is the 3rd pillar essential?

Because The first and second pillars are generally not enough to maintain your lifestyle. Indeed, Without a third pillar, you could lack CHF 1,600 to CHF 2,600/month retired.

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