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State pensions and mandatory schemes

Contributions

Do employers and/or employees make pension contributions to the government in your jurisdiction? If so, briefly outline the existing state pension system.

Employers and employees make pension contributions.

According to Article 111 of the Federal Constitution, the social security system is organised in a three-pillar regime:

  • old-age and survivors insurance (first pillar);
  • the occupational pension system (second pillar); and
  • the individual pension system (third pillar).

In principle, old-age and survivors insurance mandatorily covers each person domiciled or working in Switzerland, including employees and independents.

Combined with this insurance, the occupational pension system should enable the insured to maintain his or her previous lifestyle (ie, his or her lifestyle before retirement) in an appropriate manner.

The objective of the individual pension system is to compensate for any lack of coverage resulting from the first and second pillars and to allow retirees to maintain their standard of living.

The individual pension system is optional. However, contributions to the third pillar are tax deductible up to an amount determined annually by the Federal Council.

Can employers deduct any state pension contributions from their taxable income?

Employer contributions to the first and second pillars are deductible from taxable income.

Are there any proposals to reform or amend the existing system?

On September 24 2017 a popular vote took place on a proposed reform of the social security system. This reform included, in particular, the following measures:

  • an increase in the retirement age for women from 64 to 65;
  • an increase in employer and employee combined saving contribution rates to occupational pension plans;
  • a reduction in the conversion rate (ie, the rate used to calculate the retirement pensions of occupational pension plans) from 6.8% to 6%;
  • an increase in the minimum age of early retirement from 58 to 62;
  • an increase in the flexibility of the retirement age from 62 to 70; and
  • a Sfr70 increase in the monthly state retirement pension.

This reform was refused by the Swiss population. However, it is expected that a new reform project will be prepared in the following years. This new reform project is likely to include most of the abovementioned measures.

Other mandatory schemes

Are employers required to arrange or contribute to supplementary pension schemes for employees? If so, briefly outline how the scheme is enforced and regulated.

In principle, employees subject to old-age and survivors insurance are mandatorily insured to a pension plan, provided that their annual income is at least SFr21,150 in 2017. Independents may be insured on a voluntary basis.

Statutory minimum plans cover the coordinated salary, which is the part of the salary between Sfr24,675 and Sfr84,600. Contributions must be paid by both employers and employees and are calculated as a percentage of the employee’s salary (7% for 25 to 34-year-olds and up to 18% for 55 to 65-year-olds). Employers must pay at least 50% of the contributions.

Supplementary plans can cover an additional part of the salary, beyond the coordinated salary. Different combined contribution rates may apply under supplementary plans.

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