Everything you need to know about the Swiss AVS

The three-pillar system in Switzerland

First and foremost, it is important to note that the social security and pension system in Switzerland consists of three components, known as pillars. To recap, they are as follows:

• The first pillar is compulsory social insurance. It consists mainly of the Old Age and Survivors’ Insurance (AVS) and federal disability insurance (AVS/AI). There are also supplementary benefits (PC) for people with additional needs.
• The second pillar covers occupational pension provision and retirement insurance. It is governed by the Federal Act on Occupational Pension Provision, or LPP.
• The third pillar relates to private pension provision. It is optional and allows individuals to supplement their second pillar in order to build up retirement savings. The third pillar is divided into several types, A or B, based on either banking or insurance models.

In short, it’s quite simple: in Switzerland, once you retire, the first pillar covers basic living expenses, the second pillar helps maintain your usual standard of living, and the third pillar is an individual, personal supplement.

Is the AVS part of Switzerland’s first pillar?

A closer look at the AVS, which forms part of Switzerland’s first pillar.

What is the AVS?

What does AVS stand for? It is the acronym for Old Age and Survivors’ Insurance. Its purpose is to enable insured persons to retire from working life with greater peace of mind and financial security. It is a compulsory old-age pension for everyone. There is also a survivors’ pension for families, to protect them from financial hardship in the event of the death of a loved one.

How does the AVS work?

The AVS is a traditional pay-as-you-go pension scheme. How does it work? It is based on intergenerational solidarity, ensuring that all Swiss citizens and workers have a guaranteed income in retirement. 

Who funds the AVS? Pensions are made possible by contributions from the working population, who, in turn, will benefit from the contributions made by younger workers once they reach retirement age. Thus, employers and employees, as well as the self-employed, constitute the main sources of income for the AVS. The Swiss Confederation also contributes. A portion of value added tax (VAT) and casino tax (gambling establishments) is allocated to funding the AVS. When working in Switzerland, AVS contributions are deducted directly from your salary during your period of employment.

How much is the AVS?

How much is the AVS pension in Switzerland? The amount depends on the length of contribution and the worker’s income. Other factors may also be taken into account, such as contribution credits or gaps in contributions…

Maximum and minimum amounts

In 2023, the maximum AVS pension is CHF 2,450 per month for a single person and CHF 3,675 for a married couple. 

However, to receive the maximum pension, two conditions must be met:

• You must not have any gaps in your AHV contributions
• Have an average annual income of at least CHF 88,200

Finally, the minimum monthly AVS pension amounts to CHF 1,225 per person.

Methods of calculating the AVS in Switzerland

If you work in Switzerland, how much do you need to pay in contributions? It depends on your circumstances:

• If you are not currently in employment, are a student, are in early retirement, or are on disability benefit, you are required to pay a minimum annual contribution of CHF 514 to the AVS. If you are married and your spouse is able to pay double the minimum annual contribution (i.e. 514 x 2 = CHF 1,028), then you will not be required to pay any contributions.
• If you are an employee, you will need to pay 8.7% of your salary into the AVS. Your employer will deduct your contributions from your salary and pass them on to the compensation fund.
• If you are self-employed, you will need to pay your AHV contributions yourself. These amount to around 8% of your income.

How is the AVS pension calculated? Your local AVS compensation fund can calculate the amount of your pension for you. This service is free of charge for those aged 40 and over. The fund will check the various accounts held in your name with all cantonal funds and calculate the amount of your future pension based on your contribution periods.

Bonuses

Under the AVS scheme, there are various allowances that affect the amount of the pension and the contributions. The child-rearing allowance is available to parents with dependent children. The care allowance is intended for people with elderly or sick parents in their care.

Gaps

Gaps in contributions are another important factor to bear in mind. If contributions are not paid regularly to the AVS, this is referred to as a contribution gap. Each missing year of contributions (due to unemployment, a stay abroad, years spent studying, or an employer’s failure to pay, for example) results in a reduction in the pension.

Who is entitled to an AVS pension?

In Switzerland, all workers, whether Swiss nationals or not, are covered by the AVS.

Retirement in Switzerland: statutory retirement age

How many years do you need to contribute to qualify for a full AVS pension? Depending on the statutory retirement age in Switzerland, a woman must currently contribute to the AVS for 43 years and a man for 44 years. Please note that even people who are not in gainful employment must contribute for this period! 

In Switzerland, the AVS is therefore paid to all workers who reach the statutory retirement age: 64 for women and 65 for men. However, you must have at least one year of contributions to your name. 

And what about early retirement, before the standard retirement age? It is possible to claim your AVS pension early, for a maximum of two years. However, a reduction of 6.8% is applied to your old-age pension for each year you retire early.

The Swiss Old Age and Survivors’ Insurance (AVS): the case of cross-border workers

Are you one of the nearly 380,000 people who live in France but work in Switzerland? As cross-border workers employed in Switzerland, you are covered by the AVS and must also pay contributions. The amount of your pension will then be proportional to the number of years you have contributed in Switzerland. If you are approaching retirement age, you should be aware that you will be eligible for your Swiss AVS pension. Depending on your career history, there are several possible scenarios:

• If you are not a Swiss national but have spent your entire working life in Switzerland (even as a cross-border worker), you will only be entitled to an AVS pension during your retirement.
• If you have also worked in France (or any other European Union country), you will be entitled to a combination of a French pension (or a pension from another Member State) and the Swiss AVS, provided you meet the eligibility criteria in both countries. Each country in which you have worked will pay you your share of the pension.

How do you apply for a Swiss old-age pension? You must submit a written application to the AVS compensation fund to which you paid your most recent contributions. These cantonal bodies will be your main point of contact for all matters relating to the AVS.

If you live in France and have worked in Switzerland, you will likely need to use a euro-to-Swiss franc converter when you start receiving your Swiss pension. Would you like to repatriate the money from your various pension pillars from Switzerland? b-sharpe is here to help! What do we guarantee? A streamlined process and favourable exchange rates, thanks to our online currency converter.