Regulation of state and supplementary pension schemes in Switzerland: overview

A Q&A guide to pensions law in Switzerland.

The Q&A gives a high level overview of the key practical issues including: state pensions; supplementary pensions; funding and solvency requirements; tax on pensions; business transfers; participation in pension schemes; and employer insolvency and overall scheme solvency.

To compare answer across multiple jurisdictions, visit the Pensions: Country Q&A tool.

This Q&A is part of the global guide to pensions law. For a full list of jusisdictional Q&As visit

Ueli Huber and Peter Müller, Homburger


State pensions

1. Do employers and/or employees make pension contributions to the government in your jurisdiction?

Contributions paid to the government

Social security contributions including state pension contributions are payable to the state social security institution (called the "first-pillar scheme", which covers old age, disability and compensation for military duty and motherhood (AHV, IV and EO)) by all employees who are employed and working in Switzerland. No cap applies on contributions to the first-pillar scheme. Certain exceptions may apply under bilateral social security treaties with other states or with the EU/EFTA.

Taxation of contributions

Contributions to the state social security scheme are, as a rule, deductible from employment income by the employee and from taxable income by the employer.

Monthly amount of the government pension

The monthly amount of the state pension depends on the:

  • Civil status of the recipient of the state pension.

  • Total years during which the employee has contributed to the pension scheme.

  • Total amount of contributions made to the system.

In 2016, the monthly amount of AHV (old age) and IV (disability) pensions vary between CHF1,175 and CHF2,350 for a single person or a married person if only one of the partners has reached retirement age. The pension is 150% of the maximum monthly amount of a single person for a married couple if both partners have reached retirement age, that is, between CHF1,763 and CHF3,525.

Payments from other social security institutions depend on the individual case.

Supplementary pensions

2. Is it common (or compulsory) for employers to provide access, or contribute, to supplementary pension schemes for their employees? If they do, are they:
  • Occupational (that is, linked to an employment or professional relationship between the plan member and the entity that establishes the plan)?

  • Personal (that is, not linked to an employment relationship, established and administered directly by a pension fund or a financial institution acting as pension provider, where individuals independently purchase and select material aspects of the arrangements, though the employer may make contributions)?

Swiss law provides for the maintaining of occupational pension benefits schemes in excess of state pension benefits (second pillar scheme). It is mandatory for employers to maintain minimum pension benefits (mandatory benefits) in such schemes and it is possible to maintain additional, non-mandatory benefits up to a certain level (non-mandatory benefits, collectively second pillar benefits).

The maximum insured salary income is as follows, under:

  • A mandatory benefits scheme in 2016 is CHF84,600.

  • A non-mandatory benefits scheme in 2016 is CHF846,000.

These amounts are subject to review and will change regularly based on a decision of the Federal administration. Contributions to these schemes are deductible from employment income (and other income) by the employee and from taxable income by the employer.

The monthly amount of pensions from the second pillar scheme depends on the particular insurance scheme. In any event, the pension is at least 6.8% of the total capital accumulated during the contribution years (2016).

3. Where supplementary schemes are provided, do these schemes provide pensions, the value of which:
  • Is linked to the employee's salary (defined benefit)?

  • Is linked to employer and/or employee contributions and investment return on those contributions (defined contribution)?

The plan providing second pillar benefits must, as a matter of law, be maintained by a legal entity other than the employer. It is normally a foundation, either maintaining plans for a single employer (or a group of related companies) or maintaining separate plans for any number of independent employers. A foundation may provide mandatory benefits and non-mandatory benefits at the same time, that is, maintain separate plans.

Benefits consist of an old age pension and insurance in case of death or disability.

Employers must maintain a mandatory benefits scheme and any employee reaching a certain level of remuneration (2016: CHF21,150) will be automatically enrolled in that scheme. It is not compulsory to establish a non-mandatory benefits scheme, however once it is established any employee qualifying will be enrolled automatically.

Plans will be financed by contributions paid by the employer and contributions paid by the employees' remuneration. The total of employer contributions for all employees in a given plan must amount to at least 50% of all contributions required.

Linked to the employee's salary

Swiss law permits for the establishing of defined benefit plans. However, given the financial impact these plans normally have, they have become less and less common and today are a minority of all plans.

Linked to employer and/or employee contributions

The standard plan today will provide benefits the value of which is pre-determined by the contributions made by the employer and the employees (defined contribution plans). The contributions are levied as a percentage of the employee's insured salary. There are no minimum requirements and contributions will often be staggered depending on the age of the employee and slightly increasing over time.

4. For supplementary pensions:
  • Is there a minimum period of service before workers are entitled to receive vested rights?

  • Are there any legal requirements for schemes or providers to index pensions in payment and/or revalue pension rights in deferment?

Minimum period of service

There is no minimum period of service applicable. Employees who reach the minimum salary threshold of currently CHF21,150 (2016) must be enrolled. Insurance coverage (death and disability) begins at the age of 17 (as does coverage under the state social security scheme), whereas old age pension insurance begins at the age of 24.

Legal requirement to index

Pensions for dependants, or in the case of disability, that have run for three years must be adjusted to general price development based on instructions of the Federal administration. Other pensions for dependants, or in the case of disability, will be adjusted if the financial situation of the plan permits. The governing body will have to resolve on this annually. Old age pensions do not have to be adjusted.

Funding and solvency requirements

5. In relation to supplementary schemes, are these generally funded or unfunded? If funded, are there any solvency requirements on the sponsoring employer or provider?

Funded or unfunded?

Swiss pension plans are funded. The funding is provided by the contributions of employer and employees, by periodic income such as interest income on investments and by potential capital gains that may derive from investments, from persons leaving and not taking their full benefits with them, and so on.

Solvency requirements for funded schemes

Swiss pension plans must in principle be fully funded, which will be established by an annual actuarial calculation as part of annual reporting. Normally, no measures will have to be taken other than having a close eye on the situation as long as an underfunding does not exceed 5% to 10% of mathematical reserves. If restructuring is required, the plan has a number of options. The levying of additional contributions is a last resort. Such additional contributions must be borne equally by employer and employees mandatorily. While normally the plan cannot unilaterally increase contributions (that is, requires consent of the employer and the employees), this is not the case for restructuring contributions.

The question whether a plan is funded or not will be determined by Swiss GAAP FER 26. Compared to international accounting standards such as IFRS or US GAAP, there will normally be a gap, as international accounting standards apply different thresholds and parameters and therefore normally require higher mathematical reserves than Swiss GAAP FER 26. However, Swiss pension fund law will solely rely on the Swiss standard in making the determination and it also does not require a company to show an underfunding on its books (as there is no legal duty to provide additional funding other than to contribute to restructuring contributions as described above).

Swiss pension fund law has detailed restrictions as to the investing of funds, the major ones being:

  • Funds covering the mathematical reserves may not be invested with the employer (except if a guarantee of a Federal, cantonal or local administration or a bank or security on real estate that is not used for business purposes by the employer is made available); other funds may be invested with the employer up to a limit of 5% of those funds.

  • Investments consist of cash and cash equivalents, real estate, securities of listed companies and alternative investments.

  • Of the total assets, not more than 10% may be held against an individual debtor, but not more than 5% may be invested in the securities of an individual counterparty.

  • The value of an individual piece of real estate may not exceed 5% of the total assets.

6. In relation to access for members to the funds in their supplementary pension scheme:
  • To what extent can members transfer their funds to another pension scheme?

  • How do members normally take the benefit of their funds (for example, lump sums, income withdrawals (drawdown), life annuity arrangements?

  • What are the legal restrictions upon access to the funds (for example, age)?

  • What are the common arrangements for early retirement and ill-health retirement?

  • Are dependants of deceased members entitled to receive benefits payable on the member's death? What form do these commonly take?

Member's transfer of funds

During employment, the funds need to be deposited with the employer's pension fund. Members must transfer their funds when they change employers, as Swiss law does not permit legacy pensions from former employers. Funds will normally amount to vested benefits.

Taking pension benefits

Plans normally provide for life annuity arrangements, but often allow members the option of taking a lump sum payment when they retire.

Legal restrictions

Funds can only be taken out of a plan if a member retires, with the following exceptions:

  • If a member becomes self-employed or leaves Switzerland to a non EU-country. If a member leaves Switzerland to an EU-country, only the funds accrued under a non-mandatory benefits scheme may be taken out of the plan.

  • If a member uses the funds to purchase a private home, to repay a mortgage on a private home or to invest in the improvement of a private home. The member must use this home as his primary place of living; financing or improving a holiday home or similar is not permitted.

Early and ill-health retirement

Swiss law does not provide for explicit early and ill-health retirement. The former would normally be dealt with by a plan's regulations. The earliest age for early retirement that is permissible is 58. Plan benefits must be adjusted in order to reflect the longer coverage period. As a rule, the state pension presently does not provide for early retirement. Therefore a retiree will only receive benefits from the first pillar scheme when he reaches ordinary retirement age (if the employer is not willing to bridge the gap, which is sometimes seen if early retirement is the result of a restructuring). There is, however, a possibility to receive benefits from the first pillar scheme either one year or two years in advance of ordinary retirement (flexible retirement age). In this case the annual pension benefits will be reduced by 6.8% (for retirement one year in advance of ordinary retirement) and 13.6% (for two years in advance of ordinary retirement).

Dependants' benefits

Dependants will be entitled to a widow's|widower's pension (which will also be paid, if so provided by the regulations, to non-married and same sex dependants). In addition, children who were supported by the deceased will be entitled to a childrens' pension. This is normally up to the age of 18 or, if the child is still in education, to the age of 25. Details will be as per the plan's regulations.

7. Is there a regulatory body that oversees the operation of supplementary pension schemes? Do any other governance regimes apply to supplementary pension schemes?

Regulatory body

Any institution active in pensions is subject to supervision as a matter of law. It is irrelevant whether a pension institution provides for mandatory benefits schemes, non-mandatory benefits schemes or other pension services (such as financing services like pooling assets for various pension funds).

The supervisory agency is in principle a cantonal authority, which supervises pension institutions domiciled in that canton. But the law permits cantons to join and to delegate supervision to a regional authority supervising pension institutions of several cantons. Various cantons have made use of this possibility.

Regulatory framework

Swiss pension fund law is basically governed by the Swiss Federal Act on Occupational Retirement, Survivors' and Disability Pension Plans (Bundesgesetz über die berufliche Alters-, Hinterlassenen- und Invalidenvorsorge of 25 June 1982, as amended). Its fourth title deals with supervision.

The main tasks of the supervisory agency are to:

  • Verify that the provisions of a pension fund's articles of incorporation and regulations are in line with the legal provisions.

  • Review the pension funds' annual reporting, including the report of the auditors and the actuarial expert.

  • Take measures to remedy deficiencies.

  • Serve as a deciding authority in disputes where provided for by law.

The supervisory agency may, among other things:

  • Request to be provided information and to request the production of documents from the governing body of the pension fund, the auditors and the actuarial expert.

  • Give instructions to these bodies.

  • Instruct expert opinions to be taken.

  • Take matters in its own hands if these bodies do not co-operate.

  • Annul decisions of the supreme governing body of a pension fund.

  • Reprimand or remove members of that body.

  • Order the pension fund to be administered by the cantonal administration or another body suitable to do so.

  • Appoint or remove the auditor or the actuarial expert of a pension fund.

  • In limited cases, issue fines.

Other key governance requirements

The supreme governing body of a pension fund in the form of a foundation is its board of trustees. The board of trustees is composed of an equal number of employer and employee representatives. For foundations administering pension plans for a number of independent employers, each plan will have to have a pensions committee governing the pension plan. The committee must be composed of an equal number of employer and employee representatives. Employee representatives are elected by a ballot.

Penalties for non-compliance

Swiss pension law has several provisions containing criminal sanctions. Depending on the severity of the violation, the penalty is a fine of up to CHF30,000 or imprisonment. The provisions are however very rarely invoked. There is one published Federal Supreme Court case in the last 20 years, dealing with an employer who did not transfer the contributions to the pension fund.


Tax on pensions

8. Are any tax reliefs available on contributions to supplementary pension schemes (by the employer and employees)?

Tax relief on employer contributions

The employer's contributions are part of allowable social labour costs and therefore are tax deductible.

Tax relief on employee contributions

Contributions to the mandatory part of occupational retirement schemes (second pillar) and the non-mandatory part are deductible from an employee's income. In addition, a buy-in by the employee in the pension scheme to cover pension shortages is tax deductible.

9. Are there any approval or registration requirements with the local tax authority where a supplementary scheme is established?

Approval requirements

Exemption of the supplementary scheme from Swiss income tax and capital tax must be applied for and approved by the competent Swiss tax administration.

Registration requirements

Following approval of tax exemption, the supplementary schemes are registered in the register of tax exempt schemes.

10. What is the tax treatment of investments made by the scheme?

As a rule, supplementary pension schemes are tax exempt by law (see Question 9). Investment income and capital gains realised by supplementary pension schemes are exempt from income tax. An exception applies as regards taxation of gains realised on the sale of real property.

11. What is the tax treatment of pension and lump sum payments made to members?

Pension payments

Pension payments are subject to federal, cantonal and communal income tax. Pension payments are aggregated with other income earned during the tax year such as interest income, dividend income, income from the state pension plan and so on. They are also subject to income tax at prevailing federal, cantonal and communal income tax rates (progressive rate).

Lumps sum payments

Lump sum payments are subject to federal, cantonal and communal income tax, whereby such payments are taxed separate from other income. Direct federal tax is imposed at a reduced income tax rate of only 20% of the prevailing income tax rate with a cap at 2.3%. As regards cantonal and communal income tax, the Swiss cantons apply different taxation concepts for taxation of lump sum payments. Similar to the direct federal tax, some cantons apply a reduced income tax rate (for example, Canton of Grison) while other cantons reduce the tax base (for example, Canton of Zurich). For lump sum payments of a substantial amount, from a tax point of view it is usually more attractive if the tax rate rather than the tax base is reduced.

12. Are there any other applicable tax charges on schemes?

As a rule, supplementary pension schemes are tax exempt by law (see Question 9).

Business transfers

13. Is there any legal protection of employees' pension rights on a business transfer?

Transfer of accrued pension rights

As a matter of mandatory law, transferring employees normally take their vested benefits with them and bring them into the pension fund of their new employer. Equally, the previous pension fund is under a legal duty to transfer assets covering the vested benefits to the new pension fund. Depending on the size of the business transfer (especially the number of employees leaving and the amount of mathematical reserves that is affected by such leave), the previous pension fund may have to undergo a partial liquidation. Details must be defined in any pension fund's rules and regulations. The difference to a normal transfer is that in case of a partial liquidation employees will be entitled to receive a proportionate share in the previous pension fund's free reserves and certain other reserves on top of their vested benefits. It also means that if the pension fund is underfunded, leaving employees may have to share in that to a certain extent, thereby receiving less than their vested benefits.

Other protection for pension rights

There are no other protective provisions applicable.

Participation in pension schemes

14. Can the following participate in a pension scheme established by a parent company in your jurisdiction:
  • Employees who are working abroad?

  • Employees of a foreign subsidiary company?

Employees working abroad

If employees of a Swiss firm are transferred to a foreign subsidiary, the employee can stay with the Swiss mandatory pension scheme for a limited time, depending on the country and whether Switzerland and the recipient country have agreed to a treaty (for example, the agreement on the free movement of persons between the EU and Switzerland or a treaty containing similar provisions). For EU/EFTA countries the assignment period is two years. If there is no treaty, the employee can elect to stay in the Swiss scheme, provided the employer agrees. However, in these cases double insurance as well as double charging of contributions may occur.

If an employee works abroad temporarily he can continue in the Swiss employer's pension scheme.

Employees of a foreign subsidiary company

Based on treaties between Switzerland and EU/EFTA countries, foreign nationals posted to a Swiss parent or other Swiss group company remain insured with the pre-existing pension scheme in their home country for a period of two years. Extension of the two-year period may be applied in advance of the end of this period.

If the transferred employee is from a country with which Switzerland has no treaty, the employee transfers to the pension scheme of the Swiss parent or group company, unless he can show that a pension scheme offering sufficient insurance coverage exists in their home country. In this situation, the employee must file a release request with the competent Swiss labour authority.

Employer insolvency and overall scheme solvency

15. Is there any protection provided for pension scheme benefits where the sponsoring employer becomes insolvent? If so, who provides the protection, and how does this operate? If the scheme itself is underfunded, are there any funding obligations on connected or associated legal entities?

As the pension scheme must be maintained by a legal entity separate from the employer and employees have pension rights against that institution, the employer's insolvency will not normally affect the employees beyond contributions that may not yet have been transferred to the pension fund. The pension fund will have a privileged claim in the employers' insolvency for this. Further, a pension fund will be exposed to the employer's insolvency if it has invested in the employer. This is the main reason why investments in the employer are permissible within a narrow limit only. Additionally, the employees' entitlements regarding mandatory benefits schemes are guaranteed by the state-run substitute institution (Auffangseinrichtung).


Online resources

Swiss Confederation – Collection of statutes


Description. Official website of the Swiss Confederation providing for all up-to-date statutes of Swiss law in German, French and Italian. A selection of statutes (including the Swiss Code of Obligations, but not including pension fund law) is also provided in English (please click the "English" tab on the upper right hand corner).

Federal Tax Authority


Description. Official website of the Swiss Federal Tax Authority providing information on federal taxes in German, French and Italian.

Contributor profiles

Ueli Huber


T +41 43 222 10 00
F +41 43 222 15 00

Professional qualifications. Switzerland, 1984

Areas of practice. Employment law including: pensions; corporate M&A; restructuring and insolvency.

Recent transactions

  • Advising in major transactions on pension fund issues, including: migration of employees to new plans; carve out of employees from existing plans; transfer of assets and benefits; pension issues related to business transfers; liquidation and partial liquidation of pension plans; set up of new plans; regulatory aspects.
  • Advising the new CEO of a Swiss investment company on a complex employment agreement.
  • Advising on termination issues, mainly concerning upper level management.
  • Advising on the employment and pension aspects of a major transaction concerning the carve out of a business.

Peter Müller


T +41 43 222 10 00
F +41 43 222 15 00

Professional qualifications. Switzerland, 1999

Areas of practice. National and international tax law; social security law.

Recent transactions. Advising in major transactions on state pension issues including: international posting of employees from abroad to Switzerland and from Switzerland to abroad; setting up of Swiss group companies of international groups; employee incentive plans; negotiating of rulings with Swiss security authorities; regulatory aspects.

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