The 2nd pillar of the Swiss occupational pension scheme complements the first pillar. Its main objective? To provide you with a comfortable income once your working days are over.
If you feel the call to move abroad, if you have an entrepreneurial spirit or if you are interested in buying a house, the second pillar offers you the possibility of withdrawing the capital you have saved before you reach retirement age.
So not only does it prepare you for the future, it also supports you in your current projects, offering you flexibility and financial security at every stage of your journey.
Table of contents
What is the 2nd pillar?
The 2nd pillar is governed by the Loi sur la Prévoyance Professionnelle (LPP) and is one of the pillars of social insurance in Switzerland. It supplements the 1stpillar (AVS) to guarantee an adequate income once you retire.
Contributions to the 2nd pillar are generally shared between employer and employee. However, some companies voluntarily decide to pay a higher proportion of the contribution.
Contributions to the 2nd pillar begin from the 1er January following the date on which the insured turned 24, i.e. the year in which they turn 25 for retirement savings and from the 1er January following their 17th birthday, i.e. the year in which they turn 18 for death and disability risk insurance.
The amount of the contribution varies according to the age of the insured.
Minimum BVG rate according to age
The minimum legal contribution rates for the 2nd pillar, depending on the age of the insured, are as follows:
Age | Rate as a % of coordinated salary (between CHF 25,725 and CHF 88,200) |
25 to 34 | 7% |
35 to 44 | 10% |
45 to 54 | 15% |
55 to 65* | 18% |
* 64 for women.
BVG/LPP 2023 coordination deduction (coordinated salary)
The purpose of the coordination deduction is to set the amount of salary that will be covered by the pension fund. This amount is equal to seven-eighths (7/8 = 87.5%) of the maximum annual AVS pension, which is currently CHF25,095 Swiss.
However, this figure may vary depending on the pension fund regulations.
The coordination contribution must be deducted from the gross salary, as this sum is already covered by the AVS compensation fund.
How do I calculate my BVG contribution?
In Switzerland, contributions to the Occupational Benefit Plan BVG are based on the coordinated salary, which corresponds to the portion of annual salary exceeding the coordination deduction.
The contribution percentage depends on the employee's age (see above).
An employee aged 35 to 44 contributes 10% of their coordinated annual salary. This contribution is split equally between the employer and the employee (50/50).
Let's take the example of Mr Muller, aged 42 with a coordinated salary of 44,620 CHF (gross salary - coordination deduction).
His total BVG/LPP contribution would be CHF4,462, or 10% of his coordinated salary.
Thus, Mr Muller's share of the 2nd pillar contribution would be CHF2,231, 50% of the total contribution.
It is important to note that this information is indicative and may vary depending on the pension fund's pension regulations.
2nd pillar purchases
A purchase from the 2nd pillar is made with your pension fund. A purchase is a way of filling gaps in your occupational pension provision. Your salary may have changed over time.
To make a purchase, simply contact your pension fund and ask them to provide you with the amount you can purchase, complete the form, make the payment and carefully keep the certificate provided by your pension fund.
The second pillar purchase is deductible from your taxable income. But in order to take full advantage of the tax deductibility, you must not withdraw your 2ndth pillar within 3 years of the purchase.
If you withdraw from the 2nd pillar following a purchase, the tax authorities will carry out a tax recall, which consists of "retaxing" you as if you had not made a purchase.
Withdrawing your 2nd pillar
The 2ndpillar is generally received in the form of an annuity or capital once you reach retirement age. However, there are other ways in which this capital can be used for life projects.
Withdrawal of 2nd pillar for the purchase of a principal residence
To finance a property with your 2nd pillar, you need to submit an application to your pension fund. The steps to follow are as follows:
- Complete the dedicated form, available to download from your pension fund's website or get in touch to have it sent to you.
- Provide all the supporting documents requested.
Il est important de noter que, pour les personnes mariées, le consentement écrit du conjoint est obligatoire pour libérer les fonds.
Once your application has been validated, and if the LPP conditions have been met, your pension fund will transfer the funds directly to the notary, who will act as intermediary with the bank.
An alternative to early withdrawal is pledging the 2nd pillar. This option, subject to the same conditions as early withdrawal, can offer better financing terms for property purchases.
It should be noted that BVG can only be used to finance a principal residence, whether a house or a flat. It cannot be used for asecond home or a investment property.
Theprimary residence may be located in Switzerland or abroad, which may particularly affect cross-border buyers.
Withdrawal to start self-employed activity
It is possible as part of starting an independent business to draw on your 2nd pillar assets, if the business requires a significant initial investment.
However, certain criteria must be met:
- Cessation of your salaried employment: If your salaried employment earns you more than CHF 21,510 per year, the withdrawal of your 2nd pillar will not be successful.
- Démarrer une activité indépendante : Pour cela, il faut que votre statut d’indépendant soit reconnu par votre caisse AVS. Ce statut est accordé aux entreprises en Raison Individuelle (RI) et aux sociétés en nom collectif (SNC).
Remarque : Il est possible d’ensuite faire passer la RI ou SNC en Sàrl ou SA.
- Application deadline : After becoming self-employed, there is generally a deadline of 12 months to apply to your pension fund to withdraw your BVG credit.
- Spouse's or partner's consent: For married people, the spouse's written consent is required for 2nd pillar withdrawals.
It is important to note that withdrawing from the 2nd pillar and becoming self-employed are decisions that should not be taken lightly.
As a self-employed person, the contributions you pay towards your pension (AVS) depend on your company's results. You will then need to build up your occupational savings with a 2ndth or 3rd pillar to guarantee yourself a comfortable pension once you reach retirement age.
More information : 3rd pillar benefits for the self-employed
Withdrawal for permanent departure abroad
Good news for those who want to go where the weather is good all year round. Withdrawal of the 2nd pillar for definitive departure from Switzerland is possible, but the terms and conditions vary depending on the destination chosen.
If you are moving outside the EU/EFTA :
- You are free to withdraw your entire 2nd pillar when you leave Switzerland.
- The sum received will be subject to withholding tax.
If you are moving to an EU/EFTA country :
- The Agreements on the Free Movement of Persons apply regardless of age.
- The minimum BVG retirement savings capital (compulsory portion) cannot be paid out in cash, but must be kept in Switzerland until retirement age.
- You can only withdraw this cash credit if you can prove that you are not subject to social security in your new country of residence.
- You can receive contributions in excess of the compulsory BVG portion.
Procedure to follow :
- Inform your pension fund of your definitive departure.
- Provide proof of this departure, return your work permit, and the OCPM will issue you with a certificate.
- If you are moving to an EU/EFTA country, submit a certificate confirming that you are not affiliated to the new country's social security scheme.
It is important to bear in mind that the tax treatment of this withdrawal may vary depending on the country of destination.
The credit balance will still be taxed in Switzerland and may also be taxed in your new country of residence.
In some cases, it is possible to reclaim tax paid in Switzerland.
Impôt sur retrait du 2ème pilier en Suisse
Switzerland taxes benefits in capitals at a rate that represents 1/5 of the tax rate.
It is the canton of residence that collects the tax. You must send a copy of the proof from your pension fund to the tax authorities in your canton.
For people residing abroad, taxation of the capital benefit is done at source.
Amount of 2nd pillar tax according to French-speaking cantons :
Tax on 2nd pillar withdrawals
canton of Geneva, municipality of Geneva
Withdrawal amount | CHF 50,000 | CHF 100,000 | CHF 250,000 | CHF 500,000 | CHF 1,000,000 |
Single person | CHF 1,457.55 | CHF 4,620.85 | CHF 16,725.40 | CHF 39,272.85 | CHF 84,957.70 |
Married person | CHF 464.70 | CHF 3,126.60 | CHF 14,622.80 | CHF 35,746.50 | CHF 80,379.30 |
Tax on 2nd pillar withdrawals
canton of Vaud, municipality of Lausanne
Montant | CHF 50,000 | CHF 100,000 | CHF 250,000 | CHF 500,000 | CHF 1,000,000 |
Single person | CHF 1,690.60 | CHF 4,658.85 | CHF 17'552.35 | CHF 42,172.00 | CHF 90,781.30 |
Married person | CHF 1'345.55 | CHF 3,691.15 | CHF 15'236.15 | CHF 38,187.15 | CHF 87,097.50 |
Famille monoparentale | CHF 1,502.95 | CHF 4'098.50 | CHF 16,390.70 | CHF 40,469.65 | CHF 89,399.95 |
Tax on 2nd pillar withdrawals
canton du Valais, commune de Sion
Withdrawal amount | CHF 50,000 | CHF 100,000 | CHF 250,000 | CHF 500,000 | CHF 1,000,000 |
Single person | CHF 2,185.55 | CHF 4,760.45 | CHF 14,483.20 | CHF 38,041.30 | CHF 103,000 |
Married person | CHF 2,100.40 | CHF 4,498.60 | CHF 14,052.20 | CHF 37,171.15 | CHF 101,400 |
Tax on 2nd pillar withdrawals
canton de Fribourg, commune de Fribourg
Withdrawal amount | CHF 50,000 | CHF 100,000 | CHF 250,000 | CHF 500,000 | CHF 1,000,000 |
Single person | CHF 986 | CHF 3,260 | CHF 17,483 | CHF 46,583 | CHF 104,000 |
Married person | CHF 762 | CHF 2,723 | CHF 16,362 | CHF 45,362 | CHF 103,100 |
Conclusion
It is possible to pay less tax when you withdraw from your 2ndpillar. To do this, simply spread your withdrawals over several tax periods to break the progression of the rate.
Our experts are on hand to discuss your situation and advise you on your pension arrangements.
FAQ - 2nd pillar
If you earn an annual salary in excess of CHF22,050 in 2023, which is equivalent to around CHF1,837.50 per month, you start contributing to the second pillar from 1 January of the year following your 17th birthday, i.e. the year you turn 18 (only death and disability risks).
Then, from the 1st January following your 24th birthday, i.e. the year in which you turn 25, provided you still meet these income criteria, you start saving for your retirement under the second pillar.
Buying into the 2nd pillar allows employees to make up for years of no or low contributions to their pension fund.
Buying back increases your retirement pension, improves death and disability benefits, and offers a tax advantage since the amount of the buy-back can be deducted from taxable income for the year concerned.
In the event of divorce, second-pillar assets are generally divided between the spouses.
If only one spouse has contributed to the second pillar (for example, if the other has devoted himself or herself to bringing up the children), he or she will normally have to share these assets on divorce.
However, if a spouse waives partition, the final decision rests with the judge.
For advice tailored to your particular circumstances, it is advisable to consult a lawyer in connection with your divorce.
If you change jobs, you should transfer your 2nd pillar to your new employer's pension fund.
If you leave your job, you will need to open a vested benefits account with an insurance company or bank.
