The Swiss Pillar 2 is your compulsory occupational (or workplace) pension plan intended to maintain your standard of living in retirement.
Unlike the Pillar 1, which is managed by the government, Pillar 2 is managed by private pension funds, usually set up by employers or, optionally, by self-employed individuals.
Every employed person in Switzerland who earns above a certain threshold is required to contribute to a Pillar 2 pension plan.
Importantly, if you are under 25, your Pillar 2 contributions are only paying towards the insurance element of the Pillar 2 for the risks of death and disability, rather than towards your future retirement savings.
Once you are aged 25, your Pillar 2 contributions are then typically split between the employer and the employee.
They are also paid towards both the risks of death and disability and towards your future retirement savings.
This means that you receive not just your own contribution, but your employer’s contribution into your Pillar 2, too.
The funds accumulated in your Pillar 2 account are invested, and the returns help increase the pension pot to which you will have access upon retirement.
However, in most cases these investments are not optimised for the individual and can provide sub-optimal returns.
The primary goal of Pillar 2 is to ensure that when you retire, your income — when combined with Pillar 1 — will be around 60-70% of your pre-retirement salary.
This allows retirees to maintain a similar standard of living as they had during their working years.
When taking your Pillar 2, you can opt for either:
In the unfortunate event of disability or death, Pillar 2 funds provide financial support to the insured person or their surviving family members, which is another great benefit.