Pillars 1, 2 and 3: how do you make sense of it all?
The Swiss pension system is based on a simple yet robust structure: three complementary tiers that safeguard your future standard of living.
The concept: three floors for a single retreat
- The first pillar (AVS – Old Age and Survivors’ Insurance): This is the compulsory state-run scheme. Its aim is to cover basic living costs. It operates on a pay-as-you-go basis: current contributions fund today’s pensions.
- The 2nd pillar (LPP – Occupational Pension Scheme): Mandatory for employees, this pillar aims to maintain your previous standard of living (in addition to the AVS, the aim is to reach around 60% of your final salary).
Unlike the AVS, this is an individually funded scheme: you pay contributions for yourself. - The 3rd pillar (private pension provision): This is the optional tier.
It helps to fill gaps in your pension provision and offers attractive tax benefits, whether you are a resident or a cross-border worker.
Who pays contributions for what? (employees, self-employed, cross-border workers)
The situation varies depending on your employment status and where you live:
Employees (residents and cross-border workers)
- Contributions to the 1st pillar (AVS) and the 2nd pillar (LPP) are compulsory.
- They are deducted directly from gross pay and supplemented by an employer’s contribution.
Freelancers
- The AVS is compulsory.
- Membership of the 2nd pillar is optional.
- It is crucial to make provisions through a third pillar to compensate for the lack of a LPP.
The specific case of cross-border workers
- The AVS is compulsory under the bilateral agreement between Switzerland and the EU.
- The LPP is paid by the Swiss employer, as is the case for residents.
- When leaving Switzerland, cross-border workers can withdraw the non-mandatory portion of their 2nd pillar pension.
How much will you be paid?
The amount of your pension is not left to chance; it depends on how long you have paid contributions and on your income.
- For the first pillar (AVS): To qualify for a full pension, you must have made contributions for 44 years (the retirement age is now the same for both men and women at 65).
Any missing years will result in a reduction in the pension. - For the 2nd pillar (LPP): The amount depends on the capital accumulated in your pension account and the conversion rate applied at the time of retirement (currently 6.8% for the mandatory portion).
You will often have the choice between a monthly pension, a lump-sum payment, or a combination of the two.
💡 Our b-sharpe tip
- Start calculating your pension entitlements at least two to three years before you reach the statutory retirement age.
- If you are a cross-border worker, don’t forget to factor in the impact of the CHF/EUR exchange rate on your future pensions; this is where optimised currency management really comes into its own, helping you to maintain your purchasing power in the eurozone.
=> Exchange your CHF at the best rate here
The AVS: the pension you’ll receive no matter what happens
The Old Age and Survivors’ Insurance (1st pillar) forms the foundation of your retirement. Compulsory for everyone working in Switzerland, including cross-border workers, it is designed to cover your basic living expenses.
The amount of your future pension depends mainly on the number of years you have contributed and your average income, which is why it is essential to understand how the AVS works so that you can plan for your entitlements.
⚠️ Please note: even a single missing year can permanently reduce your pension, so please check your personal account regularly.
The LPP: what your employer sets aside for you
Occupational pension schemes supplement the state pension to help you maintain your usual standard of living.
It works like a personal savings account: your contributions and those made by your employer are paid into an account managed by a pension fund.
When you retire, you can choose between a monthly pension or a lump-sum payment – an option often favoured under the LPP by cross-border workers wishing to finance a property purchase.
It is a powerful pension tool that adapts to your career path.
The third pillar: savings you build up yourself
Unlike the first two pillars, the third pillar is a voluntary, private scheme.
It is the ideal way to bridge any gaps in your pension provision and build up additional savings, whilst benefiting from immediate tax deductions.
For cross-border workers or residents, this is often the most flexible option, but it requires careful consideration of whether to withdraw from or contribute to your third pillar pension scheme, depending on your cash flow requirements.
Whether you choose a banking solution or an insurance policy, it allows you to tailor your retirement plans to your personal ambitions.
The AVS 21 reform: what’s changing for your pension
The Swiss pension system has evolved to adapt to demographic realities.
This reform, which came into force on 1 January 2024, levels the playing field and offers greater flexibility in planning for the end of your career, whether you are a resident or a cross-border worker.
The reference age is being raised to 65 for women
This is the key change: the retirement age, now referred to as the ‘reference age’, has been set at 65 for both men and women.
- For women: The transition from 64 to 65 is being phased in gradually.
If you were born between 1961 and 1969, you are part of the ‘transitional generation’ and are eligible for compensatory measures (pension supplements or a smaller reduction in the event of early retirement). - The practical implications: This harmonisation simplifies the calculation of your AVS pension, but requires you to pay closer attention to your contribution years to avoid any gaps.
Early retirement or deferral: how it affects your pension
The reform offers a great deal of flexibility: you can now choose your retirement date “à la carte”, between the ages of 63 and 70.
- Planning ahead for retirement: You can start receiving your pension from the age of 63 (and even from the age of 62 for women in the transitional cohort).
- Deferring your pension: If you continue to work after the age of 65, you can defer the start of your pension payments for a period of between 1 and 5 years. Your pension will be increased by a deferral supplement. This is an excellent way to maximise your future income, particularly if you continue to make contributions via your 2nd pillar (LPP).
- Partial retirement: An interesting new development is that it is now possible to bring forward or defer only part of your pension (between 20% and 80%). This allows for a smooth transition into retirement without a sudden drop in your income.
💡 A quick reminder
- Whether you choose to take early retirement or defer it, please remember that your pension payments will be made in Swiss francs.
- As a cross-border worker, the flexibility offered by the reform is an opportunity, but the stability of your purchasing power within the eurozone will still depend on the quality of your currency exchange.
How to claim your Swiss pension: a step-by-step guide
The transition from working life to retirement does not happen automatically.
To avoid any gap in your income, you should apply to several different organisations in advance.
Apply for your AVS pension (6 months in advance, via the compensation fund)
The first-pillar pension is never paid automatically.
You must submit a formal application approximately six months before reaching the qualifying age (65).
This procedure must be carried out through the last social security fund to which you paid contributions. For cross-border workers with a mixed employment history, it is often necessary to coordinate this application with the pension authorities in your country of residence.
Planning ahead gives the pension fund plenty of time to check your contribution history and calculate your AVS pension accurately, without rushing.
Withdrawing your 2nd pillar savings: a pension, a lump sum, or both?
Withdrawing funds from your occupational pension scheme offers greater freedom, but requires careful strategic planning well before you retire.
- Options: Depending on your pension fund’s rules, you can choose between a lifetime monthly pension, a lump-sum withdrawal of your entire capital, or a combination of the two.
- The critical deadline: If you opt for a lump-sum withdrawal (either full or partial), most institutions require several months’ notice, or even a year in advance.
- Tax implications: A lump-sum withdrawal triggers immediate taxation. This is a key point to bear in mind when managing a LPP pension for cross-border workers, particularly as the payment of a large sum involves currency conversion, where every basis point counts.
Withdrawing funds from your 3rd pillar: permitted cases
The third pillar is a private pension scheme that normally matures when the holder reaches the statutory retirement age.
However, you can request the payment of your funds no earlier than five years before the reference age.
In addition to retirement, certain life events allow for early withdrawal:
- The purchase of a main residence.
- The transition to self-employment.
- Switzerland’s final departure.
- Disability or death.
The flexibility of withdrawals from or contributions to the third pillar makes it a highly popular pension scheme, but be sure to check the notice periods for cancelling your contract (with your bank or insurance company) so that you can access your funds when the time comes.
Cross-border workers or expats: pitfalls to avoid
Working across two countries comes with its own set of challenges.
To ensure a smooth transition into retirement, you need to consider not only the amount of your pensions, but also how they are coordinated and transferred.
You have paid contributions in France AND Switzerland: what happens next?
There is no single Franco-Swiss pension scheme.
If you have worked in both countries during your career, you will receive two separate pensions, each calculated in accordance with the relevant national rules.
Switzerland will pay you your AHV pension in proportion to the number of years you have contributed in Switzerland, whilst France (CNAV) will do the same for your periods of contribution in France.
Thanks to bilateral agreements, the years you have worked in Switzerland are taken into account by the French authorities when determining your “full rate” (length of insurance), thereby preventing any reduction in your French pension.
You’re leaving Switzerland: what happens to your three pillars?
If you leave Switzerland permanently (to move to France or elsewhere), what happens to your assets depends on the relevant pillar:
- Pillar 1: You cannot withdraw the capital. You will receive a pension when you reach the statutory retirement age.
- 2nd pillar: If you move to an EU/EFTA country (such as France), you can only withdraw the “mandatory portion” of your LPP for cross-border workers as a lump sum if you are no longer subject to compulsory social insurance in your new country. Otherwise, this portion remains frozen in a vested benefits account until you reach retirement age.
- Pillar 3: This is the simplest option. Leaving Switzerland permanently is grounds for a full early withdrawal.
This is often the ideal time to review the withdrawal of your 3rd pillar savings so that you can reinvest those funds in your new country of residence.
Transferring your pension savings to France without losing out on the exchange rate
Once your rights have been activated, the question of the transfer arises.
Receiving money in CHF into a EUR account can be expensive if you let your bank handle the transaction by default.
Monthly income or lump sum: two different investment strategies
- Monthly income: This exposes your daily budget to exchange rate fluctuations every month. To stabilise your income, it is essential to automate your transfers at a competitive rate.
- Lump-sum withdrawal: Receiving a large sum (from the 2nd or 3rd pillar) is a critical decision.
A difference of just 1% in the exchange rate can result in a loss of several thousand euros on a pension fund.
It is essential to compare the rates before confirming the transfer.
How b-sharpe actually affects your payments
At b-sharpe, we understand that every euro counts when you stop working.
Unlike traditional banks, which often charge opaque and high currency exchange fees (between 2% and 3%), we offer transparent rates that are close to the interbank market rate.
By using our solution to transfer your Swiss pension, you maximise the amount actually credited to your French account.
It’s a simple, secure process and, above all, one that’s tailored to the lifestyle of cross-border workers who want to make the most of their years of contributions without being fleeced by bank charges.
Key takeaways:
Your retirement savings in Switzerland are the result of years of hard work: don’t let bank charges and a lack of preparation squander this capital.
Planning ahead is still your best ally. Check your AHV contribution years today and contact your pension funds to calculate your estimated pension payments. Once your entitlements have been confirmed, choose a competitive exchange rate to repatriate your funds.
Ready to secure your future? Optimise your pension transfer now with b-sharpe and protect your purchasing power within the eurozone.
Frequently asked questions about Swiss pensions
Since the AVS 21 reform, the reference age is 65 for everyone (men and women). For women, the transition from 64 to 65 is being phased in gradually since 2024. It is possible to take early retirement from age 63 (62 for the transitional generation) or to defer it until age 70 to increase the amount of your pension.
For a full AVS pension (without contribution gaps), the minimum amount is CHF 1,225 and the maximum is CHF 2,450 per month (2024–2025 figures). To this are added the benefits from your 2nd pillar, which together aim to cover around 60% of your last gross salary.
Yes. As soon as you work and contribute in Switzerland, you build up rights to a Swiss pension, regardless of where you live. At the legal age, Switzerland will pay you a pension prorated to the number of years worked on its territory. These years also count toward the calculation of your insurance period in France to obtain the “full rate”.
If you leave Switzerland permanently for France, you can withdraw the over-mandatory portion of your LPP as a lump sum. The mandatory portion, however, must generally remain in a vested benefits account in Switzerland until retirement age, unless you are no longer subject to mandatory social security in your new country. Remember to plan your cross-border LPP claim at least 6 to 12 months before your departure.
Yes. If you are a French tax resident, you must declare all of your worldwide income, including your Swiss pensions. Under the France-Switzerland tax treaty, these pensions are generally taxable in France, but particularities exist depending on the pillar and your former status (public/private). It is advisable to consult the guidance notes from the Haute-Savoie or your local tax office so that nothing is overlooked.