Retirement Age in Switzerland: Optimal Planning for Retirement

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Switzerland is a country known for its high quality of life. As a Swiss citizen, it is therefore a desirable goal to enjoy old age in Switzerland. In this context, when you plan your financial future, the specific retirement age should not be missing from your considerations. There are many factors that influence the date of retirement in addition to the official regulations.

What retirement age can I currently assume and will the retirement date possibly change? Are there ways to plan for retirement before the official retirement age in Switzerland, and what do I need to consider?

Only those who know the rules regarding retirement age in Switzerland can optimally prepare for a comfortable and secure future. You will find the essential information in this article.

The most important facts in brief

• The long period until retirement offers a wide range of pension options.
• Those who make optimal use of the long investment horizon until retirement age have an easier time of it.
• The retirement age is currently rising in all countries.
• Due to demographic developments and higher life expectancy, the financing of state pensions in Switzerland and internationally is reaching its limits.
• Private pension provision is becoming increasingly important and is the instrument to help determine the personal retirement age.

The retirement age in Switzerland: today and in the future

Currently, there is a women’s pension age and a men’s pension age in Switzerland. This means that the following ordinary retirement ages apply for drawing an AHV pension:

• for men 65 years
• for women 64 years

History of the AHV: Controversial discussions about retirement age in Switzerland

The introduction of the AHV is undoubtedly a milestone within Switzerland’s social policy. It was introduced in 1948. The retirement age for men was set at 65. A retirement age of 65 was also set for women at that time.

Since then, there have been the following major changes during the further development of the AHV:

• 1957: After the pension had been increased several times since the AHV was founded, the women’s pension age was lowered by two years to 63. This revision followed the conviction that physical strength would decline faster in women than in men.
• 1964: Another AHV revision lowered the regular retirement age for women – this time to 62. At the same time, supplementary pensions for wives and children’s pensions were introduced, financed by a contribution from the state.
• 1972: Another milestone in Switzerland’s old-age provision was the introduction of the 3-pillar principle in this year. According to the constitution, the AHV pension is to ensure subsistence and is supplemented by occupational and private pensions.
• 1985: According to the constitution, pensions from the pension fund should ensure the «accustomed standard of living».
• 1997: With the introduction of income splitting, education credits and care credits as well as the widow’s pension, the retirement age for women was simultaneously raised again to 64 in several partial steps.

In the years that followed (2004, 2010 and 2017), there were repeated reforms sought in Parliament to raise the ordinary women’s pension age to 65. However, all reforms were rejected by the time of the people’s decision at the latest.

AHV 21 reform: Uniform retirement age for men and women

The people and the cantons approved the AHV 21 reform on September 25, 2022. On December 9, 2022, the Federal Council set the effective date for this at January 1, 2024.

Key points are:

The retirement age for women and men will be standardized (65 years).
The continued financing of the AHV is secured until 2030.

The ordinary retirement age will in future be referred to as the reference age. This reflects the fact that flexible retirement between the ages of 63 and 70 is possible for both men and women.

Transitional arrangement

According to the reform, the reference age for women will be raised in several steps of three months per year, starting one year after the reform comes into force. If the reform comes into force in 2024, as currently planned, this means that women born in 1960 will not yet be affected by the new reference age. The 1961 cohort, for example, will then have a reference age of 64 years and three months. For the 1964 cohort, the reform will then be finally implemented in 2028 and the women of this cohort will have a reference age of 65.

Retirement age in Switzerland in international comparison

Demographic change and increased life expectancy are presenting many countries with enormous challenges. Even though trade unions and social welfare associations are campaigning for the lowest possible retirement ages, the question of financial viability is increasingly being raised. One consequence of this is often an increase in the statutory retirement age. With an age of 65, Switzerland is in the lower midfield in Europe.

For comparison, here are some countries with the respective statutory retirement age for drawing the full old-age pension:

• Slovakia: 64 years
• Austria: 65 years (currently transitional regulation, finally implemented for birth cohort 1968)
• Germany: 67 years (currently transitional regulation, finally implemented for birth cohort 1964)
• France: 67 years
• Italy: 67 years
• Denmark: 69 (currently transitional regulation, finally implemented for birth cohort 1967, thereafter increase according to the development of life expectancy).

A look beyond Switzerland quickly shows that an increase in the retirement age seems unavoidable. In Denmark, the retirement age has even been linked to the development of life expectancy. Experts therefore assume that it will already be at least 70 years in the next few years.

A reference age of 65 in Switzerland can therefore currently be seen as an expression of economic stability. However, Switzerland will not be able to ignore developments in the long term in order to continue financing the AHV system. This once again highlights the growing importance of occupational and private pension provision.

Early retirement: the options for early retirement

The AHV pension can be drawn one or two years earlier. For each year by which the pension is drawn early, you must accept a reduction of 6.8 percent. Important: The reduction is permanent. It therefore applies to the entire pension period. No children’s pensions are paid during the period of the early withdrawal.

An application must be submitted for the early withdrawal. The deadline for this is the end of the month in which the insured reaches the age of majority.

Usually no early withdrawal from the second pillar

Normally, the BVG pension, i.e. the pension from the second pillar, cannot be withdrawn early. However, some pension schemes allow early retirement from the age of 58. If you are interested, it is best to contact your pension fund at least one year in advance. Pillar 2b capital can, however, be withdrawn at any time.

Early withdrawal from the third pillar

You can withdraw capital from the third pillar at the earliest five years before the AHV retirement age. Please note that only one payment is possible – i.e. one full payment per pension account.

Pension deferral: When retirement is not yet an incentive

Early retirement is not attractive for everyone. So if you would like to continue working, you can postpone payment of your AHV pension for a maximum of five years. Working alongside the AHV pension is also possible.

If you postpone your AHV pension, you will receive a pension supplement later. This is graded according to the duration of the deferral and amounts to between 5.2 and 31.5 percent.

Usually no deferral of the pension from the second pillar

The pension from the occupational pension plan is normally paid from the normal retirement age. However, individual pension plans provide for deferral until the age of 70 in their regulations.

Deferral of benefits from the third pillar

If you can prove that you are working despite reaching the statutory retirement age, you can also postpone drawing from the third pillar for up to five years after the statutory retirement age. It should also be noted here that only one payment, i.e. the full capital, is possible.

Early retirement and pension deferral from 1.1.2024 (AHV 21 reform)

The standardization of the retirement age (in future «reference age») for men and women to 65 years will result in flexible retirement between 63 and 70 years. Women in the transitional years can already choose to retire at age 62.

At the same time, partial retirement and partial pension deferral will be introduced.

Instead of fixed reductions for early withdrawal and supplements for deferral, these will in future be based on average life expectancy. There will also be lower reductions for lower annual incomes (below CHF 57,360). The changes to the reductions and surcharges are planned for 2027 at the earliest. The rates should be set by the Federal Council shortly before they are introduced.

The Swiss pension scheme: Secure your financial future with the 3-pillar principle

The developments of the retirement age and the respective backgrounds clearly show that there will continue to be a shift within the three pillars of retirement provision in Switzerland. For future financial planning, it is therefore important to know and take advantage of the options within the 3-pillar principle.

First pillar: State pension plan

This consists primarily of old-age insurance and survivors’ insurance, known as AHV for short. In addition, there is disability insurance, unemployment insurance, maternity insurance and compensation for loss of income during military service. The first pillar represents a state-organized means of subsistence – but nothing more. Depending on the number of years of contributions as well as the contributions paid in, the maximum pension (as of 2023) is 2,450 francs per month for one person. For married couples, it is currently 3,675 francs.

The insurance covers all people who live or work in Switzerland, with or without gainful employment. Contributions are paid by employed persons and the amount depends on income.

Second pillar: occupational pension plan

The occupational pension plan is funded. It is divided into a

• mandatory (2a) and
• non-compulsory (2b) part

The compulsory part is the old-age provision (BVG pension). This part also includes daily sickness benefits insurance and accident insurance. It also includes vested benefits institutions to take over entitlements if the benefit provider changes.

Benefit providers of the second pillar are public as well as private pension funds. From a minimum annual BVG salary, employees are required to pay insurance and must pay contributions, half of which are paid by the employer. Self-employed persons can pay in voluntarily.

The insurance obligation only applies to a limited part of the income. The part above this is the extra-mandatory part. Voluntary provision can be made for this so-called precaution 2b. Tax advantages can be generated here, since both contributions and saved pension capital are tax-free.

The occupational pension plan can cover about 20 percent of the pension requirements. With the benefits from the first and second pillars, around 60 to 70 percent of the earned income can thus be covered, provided that the extra-mandatory insurances are also used.

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Third pillar: Private pension provision

As fewer and fewer working people will have to pay for more and more pensioners in the future, private pension provision will become increasingly important. Therefore, part of planning a financially carefree life in old age is the use of the third pillar.

The third pillar is divided into two areas:

• Pillar 3a (tied pension provision, exempt from tax within certain limits, in exceptional cases, such as the purchase of a home, an advance withdrawal is possible)
• Pillar 3b (free pension provision, no immediate tax advantages, fewer restrictions, flexible and needs-based coverage, flexible structuring of payouts)

Thanks to a wide range of financial products, the third pillar allows pension provision to be optimally adapted to individual needs. The identifiable gaps in coverage that are not covered by the first and second pillars of pension provision can be optimally closed with the third pillar. This is particularly relevant against the backdrop of the changing retirement age.

Thinking about tomorrow today: The advantages of early financial provisioning.

The earlier you start making financial provisions, the easier and more profitable it will be to achieve your goals.

There are several reasons for this:

• If you start making financial provision in good time, you can determine your retirement in a more self-determined manner. This gives you more freedom and scope for development.
• Early financial provision can offset the effects of lower pension and social security benefits.
• Investing and saving early creates more wealth over time, and the compound interest effect is particularly powerful.
• A solid long-term financial retirement plan helps realize financial goals and aspirations, such as buying a home or traveling the world.
• Early financial provision creates the financial means to cope with unexpected expenses and emergencies, such as job loss, major repairs or illness.
• Timely wealth accumulation allows for broad diversification and reduces investment risk.
• A long investment horizon provides access to investment opportunities that may not be available at a later date.

Frequently asked questions (FAQ)

What needs to be arranged for retirement and when?

In order to receive an AHV pension, you must inform the compensation office in writing of your entitlement. The compensation office where you have paid AHV contributions in previous years is responsible for processing your claim. If you are unsure, your employer will inform you about the compensation office.

It is important that you submit your application no later than three months before you reach the statutory retirement age. This will enable the compensation office to obtain all the necessary information to calculate your pension.

To receive a BVG pension from the second pillar, you should contact your pension fund a few months before the regular retirement age. They will provide you with information on the exact amount of the pension and guide you through the necessary steps to receive it.

For benefits from the third pillar, you should also contact your private pension fund a few months in advance to find out about the modalities and the amount of your saved capital.

How is the amount of the pension calculated?

The AHV pension is determined by the years of contributions as well as the relevant average income. Additional education credits are granted for children and care credits are available for caring for relatives in need of care. Pensions are limited in terms of maximum pensions and minimum pensions. Insured persons can obtain an estimate of their OASI pension.

The BVG pension from the second pillar is calculated on the basis of the contributions paid in and the pension fund regulations. Normally, a one-time payment of a quarter of the capital is also possible upon retirement. The annuitization of the capital is based on a conversion rate, the minimum level of which is currently set by law at 6.8 percent. For a capital of 250,000 francs, for example, this means a pension of 17,000 francs a year, or around 1,416 francs a month, at a conversion rate of 6.8 percent.

The retirement assets from the third pillar are generally drawn as a one-time lump-sum payment.

Why is there old-age poverty in a wealthy country like Switzerland?

While the standard of living in Switzerland remains very high, the poverty rate in old age is increasing at a striking rate. This can be explained primarily by the fact that Swiss people are more dependent on assets in old age. This highlights the importance of using private pension options. According to statistics from the SFSO, the poverty rate for retirees who draw their main income from the first pillar is over 20 percent. However, if the main income comes from the second pillar, the rate already drops by more than half.