A reality far more common than we think
We prefer not to think about it, but loss of earning capacity is a real risk for anyone who is employed in Switzerland. In 2024, federal disability insurance (AI) paid benefits to around 461,000 people, with total expenditures reaching CHF 10.46 billion.
Among them, 254,000 received a disability pension, of whom 227,300 were living in Switzerland.
In other words: 6 out of every 100 insured persons living in Switzerland received at least one AI benefit during the year. This figure may seem abstract, but when applied to your close circle (family, colleagues, friends), it takes on a very different meaning.
And the trend is rising. The number of new disability pensions has increased across all age groups, with particularly sharp growth among 18–24-year-olds and 60–64-year-olds. However, policyholders aged 55 to 63/64 remain the most affected group.
Illness is the leading cause and is often underestimated
When loss of earning capacity is mentioned, people often think of a serious accident. Yet this is a common misconception: 9 out of 10 cases are caused by illness, not by an accident. This figure is crucial, as the protections provided by the Swiss system are not the same depending on the cause.
In the event of an accident, compulsory social insurance covers up to 90 % of your previous income, which represents relatively solid protection.
In the event of illness, on the other hand, the combination of 1st pillar (AHV/IV) and 2nd pillar (BVG) now covers only about 60% of your income. A substantial shortfall that can quickly become a problem, especially if you have high fixed expenses: rent or mortgage, leasing, health insurance premiums, or childcare costs.
And that's not all: earning disability doesn't just mean loss of income. It can also generate new costsThese include adapted transport, home help and childcare, all of which exacerbate an already fragile situation.
Mental health, a risk too often ignored
One of the most striking developments in recent years concerns the origin of disability. In 2024, 1 in 2 disability pensioners was suffering from a mental illness. Depression, anxiety disorders and burnouts are now among the leading causes of disability in Switzerland.
The figures from the Swiss Federal Statistical Office speak for themselves: 9 % of Swiss population is currently suffering from depression, and 17 % will experience a depressive disorder at least once in their lives. Depression or any other medically-recognized mental illness is indeed considered to be a "mental illness". earning incapacity, which entitles you to the same benefits as a physical pathology.
It would therefore be dangerous to consider earning incapacity as a purely «physical» risk. The psychological risk is real, documented and in increase.
What the Swiss system actually pays
The Swiss system is based on three pillars. However, in the event of incapacity for work due to illness, the first two pillars have important limitations that you need to be aware of.
- 1st pillar (AVS/AI) pays an annuity, the amount of which depends on your previous income and years of contributions. It is capped and rarely sufficient, on its own, to maintain a decent standard of living.
- 2nd pillar (BVG) supplements this pension via your pension fund. But here's the reality: benefits in the event of illness are often lower than in the event of accident. Above all, the 2nd pillar system doesn't apply to everyone.
The independent, They are not affiliated to a pension fund, except on a voluntary basis, and have no 2nd pillar coverage in the event of disability. The 1st pillar invalidity pension alone is clearly insufficient to cover their professional and personal expenses.
People to low income are also in a vulnerable situation. Below the BVG/LPP entry threshold, their disability benefits are low and will only include IV.
To sum up: the more you rely on the first two pillars alone, the greater your pension gaps are likely to be.
The 3rd pillar: your personalized safety net
Faced with these shortcomings, the private pension provision (3rd pillar), is the most appropriate response. There are two types, both of which are compatible with disability insurance:
The pillar 3a (restricted pension plan) is tax-advantageous: premiums paid are tax-deductible each year, so you can reduce your tax burden while protecting yourself. There is an annual contribution ceiling.
The pillar 3b (unrestricted pension plans) offers greater flexibility, with neither a contribution ceiling nor the same strict withdrawal constraints. It is particularly suited to situations where needs exceed 3a limits.
In both cases, the available disability insurance solutions can effectively cover the gaps left by the 1st and 2nd pillars.
How does disability insurance work in practice?
3rd pillar disability insurance pays a regular pension when you are no longer able to work due to illness or accident. The system operates according to a scale of incapacity:
- Under 25 % of disability : no benefits are paid.
- Between 25 and 69 % : a partial benefit is paid, proportional to the degree of disability.
- From 70 % : you receive 100 % of contractual benefits.
- Waiting period : the annuity only starts to run after a period defined at the time of purchase. The longer the period, the lower the premium - which means you can adjust the cost according to your situation (for example, if your employer maintains your salary for several months in the event of sick leave).
- Release from payment of premiums : in the event of recognized disability, the insurer takes over payment of your premiums until the end of the contract. In this way, you continue to be protected without any additional financial effort on your part.
In addition to the annuity, it is also possible to receive benefits in the form of a lump sum, particularly in the event of permanent disability. This option is particularly interesting for owners wishing to amortize a mortgage debt.
An often underestimated risk: the inability to save
One often overlooked aspect deserves to be highlighted. Loss of earning capacity does not only affect your current income: it also jeopardizes your ability to save for the future.
With only 60 % of your usual income, If you are unable to work, financing your long-term projects (retirement, children's education, property purchase) becomes extremely difficult, if not impossible. Without private insurance, a prolonged period of incapacity can wipe out years of savings efforts, with consequences that extend far beyond the work stoppage itself.
Who is most concerned?
The independent are unquestionably the most exposed. Without a compulsory 2nd pillar, an illness or accident can be financially devastating. Private disability insurance is not a luxury for them: it's a necessity.
Low-income employees often underestimate their coverage gaps. Since 2nd pillar benefits are calculated based on salary, they are proportionally insufficient to cover everyday needs, even when combined with AI pensions.
High incomes are confronted with a structural problem that is often overlooked: compulsory social insurances cap insured earnings at two levels. Under the LAA (accident insurance), insured earnings are limited to CHF 148,200 per year. Under the BVG (2nd pillar), the maximum coordinated salary is CHF 68,260 per year. Above these thresholds, the excess income is simply not covered by the compulsory system. In practical terms, an executive or self-employed worker whose income exceeds these ceilings will, in the event of incapacity, receive benefits calculated on a much lower basis than his or her actual salary, creating a gap that is all the greater the higher his or her standard of living.
Finally, people with high family or mortgage obligations: a reduction to 60% of income can threaten the financial balance of an entire household. Mortgage payments, rent, family expenses… these costs do not automatically adjust to a lower income.
How do you assess your needs?
Every situation is unique. A personalized retirement and insurance analysis is an essential starting point to identify your actual coverage gaps. It allows you to see exactly what you would receive from the 1st and 2nd pillars in case of disability and to determine the amount you need to insure through the 3rd pillar.
This analysis takes into account your professional situation (employed or self-employed), your current income, your fixed expenses, any family commitments, and the terms and conditions of your pension fund if you are covered by one.
Too many people, including employees who are well covered on paper, discover during this analysis that significant gaps exist, particularly in the case of sickness. It's better to know this before the risk becomes a reality.
Optimize your pension with Invexa
In a nutshell
Incapacity for work is a very real risk, statistically frequent and financially fraught with consequences. The Swiss social security system provides an appreciable safety net, but in many situations it is insufficient.
Private pension provision under the 3rd pillar, whether in the form of an annuity, a lump-sum payment in the event of disability, or a premium waiver, allows you to fill these gaps in a targeted, tax-efficient way that's tailored to your personal situation.
The first step? Take stock of your actual situation with a retirement and insurance expert. Only by clearly understanding your coverage gaps can you take effective action to fill them.
