Retirement Planning for Expats in Switzerland: AHV, Pension Fund, and Pillar 3a

Retirement and financial planning is a central topic for expats in Switzerland. In addition to questions about taxes and residence permits, social security in old age is also crucial. The Swiss pension system is based on three pillars: the state AHV, occupational pension (Pension Fund), and private savings (Pillar 3a and 3b).

Expats often ask: Which contributions must be paid? What happens to the pension funds when leaving Switzerland? And what tax benefits does private savings offer? This article provides a comprehensive overview.

Basics of the Swiss Pension System

The Three-Pillar Principle

The Swiss pension system is based on three pillars:

• First Pillar (AHV/IV/EO): State-run old-age, survivors’, and disability insurance, mandatory for all employed persons in Switzerland.
• Second Pillar (Pension Fund): Occupational pension, mandatory for employees with an annual salary over CHF 22,050 (as of 2025).
• Third Pillar (Pillar 3a and 3b): Private, voluntary pension with tax advantages (3a) or more flexible design (3b).

First Pillar: AHV for Expats

Contribution Requirement

All employed persons in Switzerland, including expats with L- or B-permits, pay AHV contributions. The current contribution rate is 8.7% of gross salary, split between employer and employee.

Pension Entitlement

To receive a full AHV pension, 44 contribution years (women: 43) are required. Expats working shorter periods in Switzerland receive a proportional pension.

Refund upon Leaving

• EU/EFTA countries: Contributions in Switzerland and the home country are combined, and the pension is paid proportionally later.
• Third countries: When leaving for a country without a social security agreement, expats may under certain conditions reclaim their contributions.

Second Pillar: Pension Fund

Mandatory Insurance

Employees with an annual income over CHF 22,050 must contribute to the occupational pension. The employer must cover at least half of the contributions.

Pension Fund Benefits

The pension fund covers:

• Retirement pension
• Disability pension
• Survivor’s pension for spouse and children

Payout Upon Leaving

• EU/EFTA countries: Mandatory savings remain blocked in Switzerland until a pension entitlement arises. The over-mandatory portion can be paid out.
• Third countries: Often, the full balance can be paid out.

Tax Treatment

Pension fund payouts upon leaving Switzerland or retirement are subject to a reduced withholding tax, which can in many cases be reclaimed through double taxation agreements.

Third Pillar: Private Savings (Pillar 3a and 3b)

Pillar 3a: Tied Pension

Pillar 3a is a tax-advantaged savings scheme. Contributions can be deducted from taxable income (as of 2025: CHF 7,056 per year for employees with a pension fund).

Benefits for Expats

• Tax deductions while living in Switzerland
• Flexible investment options (savings account, funds, life insurance)

Payout of Pillar 3a

• Paid out no later than five years after the official retirement age
• Early payout possible for: leaving Switzerland, purchasing residential property, or starting self-employment
• Taxed at a reduced rate

Pillar 3b: Flexible Savings

Pillar 3b includes all other savings and investment forms. It is not specifically tax-advantaged but offers more flexibility.

Special Considerations for Expats

International Social Security Agreements

Switzerland has agreements with many countries to avoid double payments and secure pension rights. Expats should check whether their home country has such an agreement.

Mobility and Pension Rights

Expats who have worked in multiple countries must carefully document their pension contributions to avoid losing entitlements in old age.

Tax Optimization

Pillar 3a is particularly attractive for expats, allowing tax savings during their stay in Switzerland. Upon leaving, the payout may also be tax-efficient.

Practical Examples

Example 1: EU Expat with Short Stay

A German expat works five years in Zurich. His AHV contributions are credited to the German pension. Pension fund assets remain blocked in Switzerland until pension payments begin.

Example 2: Expat from the USA

An American expat works three years in Basel and then moves back to the USA. She can withdraw her pension fund assets but must consider tax consequences in both countries.

Common Mistakes and Tips

Common Mistakes

• Not reviewing pension entitlements when working in multiple countries
• Ignoring the tax advantages of Pillar 3a
• Assuming all funds are automatically paid out upon leaving Switzerland

Tips for Expats

• Carefully document contribution years and pension assets
• Check early which benefits can be withdrawn when leaving Switzerland
• Use double taxation agreements to avoid unnecessary taxes
• Seek advice from a tax or pension consultant

Conclusion

Retirement planning in Switzerland is complex but essential for expats. The AHV provides basic state security, the pension fund offers a solid complement, and Pillar 3a allows tax-efficient savings.

Expats who know their entitlements, consider international agreements, and plan ahead can ensure their pension funds are optimally utilized – whether staying in Switzerland long-term or returning abroad.