Pension system

Switzerland has at its disposal an effective and solid safety net of social security which is based on the principle of the so-called three pillars.

First pillar
The first pillar consists of the old-age and survivors’ insurance (OASI, or AHV in German) and invalidity insurance (IV). The remit of the AHV/IV is to secure a person’s basic subsistence needs in old age, in the event of invalidity and, for survivors, in the event of death. The AHV and IV are obligatory for all persons living or working in Switzerland; the contributions are deducted directly from your salary.

Second pillar
The second pillar of the pension system is the occupational pension (BV). This has a supplementing effect with regard to the AHV/IV and is meant to guarantee a pension income corresponding to at least 60 per cent of the person’s final salary. In the event of death, benefits are paid for children who are minors and pensions are paid to the widow or widower. In the event of invalidity, the BV gives financial support. All employees who are insured with the AHV and who obtain a legally established minimum income are obliged to pay contributions. When you are appointed at the University of St.Gallen, we automatically register you with the St.Gallen Pension Fund, which is responsible for us.

Third pillar 3a and 3b
The third component of the Swiss pension system is the private pension. With the private old-age pension, a distinction is made between Pillars 3a and 3b. A maximum annual amount can be paid into Pillar 3a which can then be applied as a deduction in your tax calculation. With this in mind you can open a 3a pension account with a bank or insurance company of your choice. No wealth taxes have to be applied to your pension capital in such an account, and the resulting interest and capital gains from it are free from income tax and from withholding tax. The capital in your 3a pension account may, under certain conditions, be withdrawn before you reach pensionable age. The early withdrawal of capital is only possible in the case of acquiring or constructing residential property in which you then live yourself, in the case of leaving Switzerland definitively, in the case of taking up a self-employed professional activity, or in the case of changing from one self-employed activity to another. Such a withdrawal is also possible if a total invalidity occurs. No particular rules apply to Pillar 3b. Savings assets and life insurances belong to Pillar 3b.