Summary

Switzerland operates a comprehensive social security system which provides a range of old age, invalidity, sickness, unemployment and other social benefits, including family allowances and income guarantees. Entitlement to benefits generally derives from and individual’s contribution history, although some benefits arise due to residence in Switzerland.

Swiss retirement provisions are provided under a three pillar system – a state run scheme, a mandatory private occupational scheme, and a voluntary scheme.

Details

Contributions

The contribution regime is complex because of the split between different elements of the mandatory social schemes and mandatory private pension contributions

Employers and employees each contribute 5.3% of earnings, with no cap, to the First pillar retirement fund.

In addition, each pays 1.1% on earnings up to CHF 148,200 to the Unemployment Insurance fund. Employers have to pay between 1 and 3% (uncapped) of earnings into the Family Compensation fund and a similar amount into the occupational accident insurance fund, and employees have to pay between 1 and 4% (capped) into the non-occupational accident insurance scheme. Contributions the second pillar mandatory private occupational schemes vary according to the chosen scheme, but the employer must pay at least half of these contributions.

Treaties

Switzerland participates in the multilateral social security agreement with all European Economic Area countries and has bilateral agreements with more than 20 non EEA countries, including the US, UK, Canada, Australia, India and Japan. These agreements determine which country has the right the levy social security contributions, has the obligation to provide benefits, and prevent social security being levied twice on the same income. Most inbounds expatriates to Switzerland therefore continue to pay home country social security rather than Swiss contributions. The bilateral agreement with the UK limits home country coverage to two years rather than the usual five, and unusually for a bilateral treaty, has provisions for those who regularly work across borders. Special rules also apply to individuals working in Switzerland and other EEA countries on a regular basis.

The Swiss authorities usually take a positive view of applications to extend periods of overseas social security coverage under the bilateral agreements.

Exemptions

 Switzerland has a broad range of deductions which can positively impact the social security base of those elements of social security which are not capped. These can vary according to the Canton in which the individual is based. 

Administration

 Administration of social security in Switzerland is split between the federal government and the cantons. There are more than 100 bodies involved with social security and many of these require different data sets relating to social security contributions.  

Benefits

 Swiss social security benefits are generous from a non-Swiss perspective, but bearing in mind the Swiss cost of living they should be regarded as a safety net for those working in Switzerland. 

Other

 Employee social security contributions are tax deductible in Switzerland, as are some contributions to third pillar private pensions. 

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