Retirement provision for students: Save and protect against risks

The Swiss retirement provision system is based on three pillars:

• state retirement provision (1st pillar)
• occupational retirement provision (2nd pillar) 
• private retirement provision (3rd pillar)

The aim of the Swiss retirement provision system is to provide the country's population with a reliable income for all life situations. For example, after retirement, in the event of the death of a partner or in the event of permanent disability due to illness or accident. 

1st pillar – state retirement provision

The 1st pillar is about ensuring subsistence. This pension is intended to cover the minimum necessary living requirements. The 1st pillar consists of old-age and survivors' insurance (OASI), disability insurance (DI) and the income compensation scheme (EO).

2nd pillar – occupational retirement provision

The 2nd pillar ensures your accustomed standard of living. For occupational retirement provision, employees and employers pay at least the same amount into a pension fund. The employer can also volunteer to pay more.

3rd pillar – private retirement provision

The assets in the 3rd pillar serve to close any pension gaps from the 1st and 2nd pillars. It also allows you to retire earlier or fulfill dreams and wishes after retirement.

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The biggest differences between a pillar 3a solution from a bank or an insurance company relate to the risk protection for you and your family, your savings goal and the period of insurance.

Risk protection for families and savings goal
With an insurance company, you take out an insurance contract under pillar 3a. This includes insurance coverage in the event of disability and/or death. This means that if you become disabled, your insurance will pay the annual amount due into pillar 3a for you. You will therefore continue to save for retirement, even if you can no longer work. Depending on the retirement provision solution you choose, you will also be paid a disability pension until retirement. In any case, you will meet your defined savings target. In the event of death, a lump-sum death benefit will be paid to your surviving dependents. This means that your loved ones will at least be protected from the financial consequences of this misfortune. You pay for this insurance coverage with a portion of your premium.

When you open your pillar 3a with a bank, the main focus is on the savings process. You and/or your family will not be protected against the financial consequences of disability or death. If you can no longer pursue your work, you will no longer be permitted to pay into pillar 3a. In this case, you will not reach your defined savings goal. 

Period of insurance
Insurance contracts under pillar 3a always have a fixed period of insurance. This usually extends until the normal retirement age. You undertake to pay a certain amount into the pillar 3a policy on a regular basis. 

After the third insurance year, however, you have the option of pausing payments for up to three years. Insurance coverage does not expire in this case. This means that you will continue to be fully insured if, for example, you go on parental leave or spend time abroad. The only consequence is that your savings target will be reduced by the amount of the paused payments.

The time to start paying OASI contributions depends on whether or not you are gainfully employed.

• As a gainfully employed person: You start paying OASI contributions the year you turn 18.
• As a non-gainfully employed person: You start paying contributions no later than the year you turn 21. It does not matter whether you receive an income or not. 

Are you studying and not in paid employment? In that case, you should pay the minimum amount of CHF 514 to your OASI compensation office in 2023. Otherwise, you will be missing contribution years. This may result in your OASI pension being reduced upon retirement.

If you do not pay in the minimum contribution, your OASI pension will be smaller upon retirement. To avoid pension reductions, women need to demonstrate 43 years of contributions and men need 44. You have the option to make up for any missed contribution years within five years. After that, this option expires.

In Switzerland, anyone with earnings from gainful employment subject to OASI contributions can pay into pillar 3a. Therefore, this includes gainfully employed students and apprentices. The amount they can pay in depends on whether they are affiliated with a pension fund. If they are, they can pay in a maximum of CHF 7,258 in 2025. Gainfully employed students and apprentices who are not affiliated with a pension fund may pay in a maximum of 20% of their net earnings from gainful employment. They may deduct the amount paid from their taxable income when filing their tax return.

Students without earnings from gainful employment subject to OASI contributions cannot pay into pillar 3a.

Especially when you are young, securing your salary is important. After all, you haven't been working for very long. Imagine having to make do with 60 percent of your current salary for the rest of your life. Protect yourself with disability insurance.

Build up additional capital for the future with unit-linked life insurance. Since the investment horizon is very long, we recommend choosing an investment with a high equity ratio.

Only if you earn more than CHF 22,050 per year. This is the entry threshold to be included in the pension fund. Of course, pension funds can also offer more advantageous solutions to provide you with insurance at a lower income.

Yes, it does affect your occupational retirement provision (pension fund). However, in most cases, missing contributions can be minimized with higher wages. In addition, you can still make pension fund purchases at a later date.

If you are studying, paying the minimum OASI contribution each year is important. In 2023, this will be CHF 514. These minimum contributions will also be compensated for later on by the higher pay you can expect.

Even while studying abroad, you should pay the minimum OASI contributions and take out additional insurance against long-term disability. Preexisting disability insurance can also be continued when you're abroad.