Individual and family Foresight
Foresight in Switzerland is based on three pillars: public Foresight, occupational Foresight and individual Foresight. The lesser known is the third pillar, which has a considerable number of advantages.
1.The first pillar (AVS and AI)
What is the 1st pillar (AVS) and its benefits?
The main pillar of Swiss social security is old age and survivors insurance, or more commonly known as AVS. The latter is compulsory and has the function of covering the vital needs of an insured person in the event of retirement or death.
The old age pension is intended to compensate, at least partially, for the loss of income from work when the person retires; therefore it allows material security during retirement. Insured people are entitled to an old age pension when they reach retirement age, namely 64 for women and 65 for men.
The main reason of a survivor’s pension is to prevent undue financial hardship following the death of a parent or spouse. It consists of three types of annuities: widow’s annuities, widower’s annuities and orphan’s annuities.
The AHV is supplemented by disability insurance (DI) and supplementary benefits (IS). The CEW is paid to insured persons when they need regular and substantial assistance from others to perform the ordinary acts of life.
Where the AHV pension is not sufficient to cover the vital needs of an insured person, he may be entitled to supplementary advantages.
Being a general and compulsory popular insurance, the AVS is for all people who live or work in Switzerland. The AVS must be insured with:
· People engaged in gainful employment in Switzerland (including frontier workers and foreign workers)
· Other people domiciled in Switzerland, namely children and persons without gainful activity.
Who funds the AVS and how?
The main source of funding is the insured person and employers. A small percentage is also levied on value added tax (VAT) and the tax on playhouses to provide the AVS.
All AHV insured people are required to pay contributions. As stated before, AVS is mandatory for all people working and/or residing in Switzerland. As a result, all of these people contribute, with the exception of children who are insured and are entitled to benefits without having to contribute.
However, the start of the contribution varies according to the occupational situation of the insured person. If the latter pursues a gainful activity, it is required to pay its contributions from 1 January following the year of its 17th birthday until the end of the gainful activity.
If the insured person is not in gainful employment, he is required to pay contributions only from 1 January following the year of his 20th birthday until the ordinary retirement age.
2. The second pillar (LPP)
Occupational pension is compulsory for all employees from a fixed minimum wage. It is funded by employers and employees and aims to achieve, with the resources from the first pillar, the standard of living of the insured before retirement.
In addition to the first pillar, which is often insufficient, comes the second pillar: occupational pension (LPP). By accumulating the first two pillars, insured people should be able to maintain their previous standard of living, the objective being to reach about 60% of the last wage.
What is the 2nd pillar (LPP) and its benefits?
Occupational pension is based on individual savings; it is therefore a savings process on an individual account throughout the insurance years. The accumulated old age pension is used to finance the old age pension.
There are two options for the insured upon retirement:
1. The accumulated capital is converted into a monthly old age pension. This pension will be paid until the death of the insured person in a guaranteed manner.
2. The capital constituted may be paid in the form of capital.
Who contributes to the LPP and how?
The LPP is mandatory for employees already subject to the AVS and who receive an annual income of at least CHF 21’330-. Contributions are shared between the employer and the employee, with the employer being required to pay at least 50% of the contributions.
The insured person under 25 years of age contributes only to cover the risks of death and disability. Old-age pension contributions do not start until the 25th year. Savings cease once retirement age is reached.
Some people are not required to insure. These include self-employed people and who, for the purposes of Disability Insurance, have an incapacity to earn at least 70%. However, these people may take out a minimum insurance policy on an optional basis.
The third pillar is used to supplement the income of the first and second pillars, which make it possible to reach only 60% of the last income of the insured.
There are two kinds of 3rd pillar: the 3rd bound pillar and the 3rd free pillar.
3. The third pillar
Individual pension provision is the third pillar. It complements the benefits from the first two pillars, which are often insufficient to guarantee a good retirement.
So, in addition to improving your retirement, you protect your family with a safe and guaranteed contract. By adapting the 3rd pillar according to your needs, your loved ones will be protected in case of disability or death, whether at the financial level, but also real estate.
The third pillar linked
Anyone working in Switzerland, including cross-border workers, can subscribe to a linked third pillar.
The duration of the third pillar contract is linked to retirement age: 64 for women and 65 for men.
However, it is possible to withdraw the funds of the 3rd pillar linked after a minimum contract year (if the premiums of the contract are paid) and if you meet one of the following conditions:
– You are definitely leaving Switzerland
– You become independent
– You are purchasing your principal residence
– 5 years before retirement age
Make sure there is a cash surrender value when you want to take the funds out. Some companies propose a cash surrender value in the first year of insurance, others later.
The policyholder, the insured person and the fee payer are the same person.
The beneficiaries of the contract are designated by a legal clause according to a specific order:
1. Spouse (married or cohabiting for more than 5 years)
2. The children
3. The parents
4. Brothers and Sisters
5. the other heirs.
The maximum possible payment on a 3rd pillar is CHF 6’826. – per calendar year for an employee, and 20% of net operating income for an independent, with a maximum amount of CHF 34,128. – by calendar year.
At the end of the contract, a tax of 5% to 7% will be collected on capital and interest.
The 3rd free pillar
The 3rd free pillar is open to all residents in Switzerland, whether they work in Switzerland or abroad. If you live in Switzerland, you benefit from advantageous tax deductions.
The duration of the contract is free and fixed by the insured. It is also possible to withdraw funds within a minimum of three years of contract. No specific reason is required to justify the release of the police.
The policyholder, the insured person and the fee payer may be different people. This makes it possible to combine the role of each to obtain a contract à la carte and adapted to your needs.
You can insure several people with a single 3rd pillar contract. In addition, the beneficiary clause remains completely free: you mention the beneficiary(s) you want, allowing you to privilege certain heirs in the context of an estate, for example.
There is no payment limit on this type of contract, so you have the free choice of the amount you want to deposit. According to the cantons, a tax deduction is allowed for contributions.
No taxation is applied at the end of the contract.
LIFE INSURANCE PURE RISK OF DEATH, WHAT IS IT?
The good financial balance of a household is often based on income from gainful activity. The purpose of life insurance pure risk of death is to secure one’s family or loved one against the financial consequences following the disappearance of the person who provided the support. By purchasing life insurance pure risk of death, the insured person will not leave in need his relatives in case of disappearance.
The amounts insured are variable according to the needs of each, most of the life insurance products pure risk death offer different capital choices, ranging from CHF 10,000 to several million.
More and more households are becoming homeowners and generally take out a mortgage for the purchase. In order to avoid unpleasant surprises in the event of death, it is advisable to take out life insurance pure risk death to cover the amount of the debt.
Do you have questions on the subject of foresight? We put our specialized know-how at your disposal and offer you complete advice.