What kind of pension is available to self-employed workers in Switzerland?
Preparing for retirement when you're self-employed in Switzerland requires a thorough understanding of the pension system. Unlike salaried employees, who benefit from a structured framework provided by their employer, the self-employed must actively manage their own pension provision.
Enter compulsory contributions, From voluntary affiliation to tax optimization, the road to a comfortable retirement requires anticipation and strategy. This article guides you through the essential mechanisms for preparing your retirement as a Swiss self-employed worker.
The Swiss pension system for the self-employed
Switzerland's pension system is based on three pillars benefits. For the self-employed, the particularity lies in the fact that they are automatically covered only by the 1st pillar:, unlike employees, who also benefit from 2nd pillar mandatory.
1st pillar: the compulsory basis for your retirement
As soon as you start your self-employed activity, you must join the’AHV (Old-Age and Survivors' Insurance). This affiliation forms the basis of your social protection and will largely determine the amount of your retirement pension.
How do AHV contributions work for the self-employed?
As a freelancer, you take responsibility for’full payment of your contributions, without employer participation. The contribution rate is 10% of your annual net income, A sliding scale applies to incomes below this level. A sliding-scale system applies to incomes below CHF 58,800 per year by 2025, easing the burden on start-ups and low-income businesses.
These contributions are calculated on the basis of your determining income. It is crucial to declare your income correctly, as each year of contribution counts towards the final calculation of your pension. A missing or under-declared year can significantly reduce the amount of your future pension.
How much AHV pension can I expect?
By 2025, the AHV pension maximum is CHF 2,520 per month, while the minimum pension reaches CHF 1’260 per month. To qualify for the maximum pension, you must have made uninterrupted contributions throughout your working life. 44 years old, and an average annual income of CHF 90,720 (consult scale 44).
The exact amount of your pension depends on three main factorsThese include the length of time you have contributed, the amount of income on which you have paid contributions, and any bonuses for educational or care duties. Each missing year results in a reduction of approx. 2.3% of the full pension. So, if you have contributed for 30 years instead of 44, your pension will be proportionately reduced.
2nd pillar: a strategic option for the self-employed
L'voluntary membership to an occupational pension plan is with a collective foundation or the’BVG substitute institution if no other solution is available through your profession. This approach places you in a situation comparable to that of employees, but with one major difference: you alone bear the cost of all contributions, including both employer and employee portions.
In 2025, you can ensure maximum annual salary of CHF 64,260 under the mandatory BVG/LPP scheme. Contributions are based on your age, starting at 7% for the youngest and up to 18% of insured salary for older age groups.
Pension or lump sum: how do you recover your BVG/LPP credit?
When you retire, you can choose to receive your BVG/LPP credit balance in the form of life annuity or capital. The annuity offers maximum security with a guaranteed income until your death, generally calculated with a conversion rate of around 6% of your total assets. A lump-sum withdrawal, on the other hand, gives you access to your entire savings, subject to advantageous separate taxation, but requires you to manage these funds yourself to ensure your retirement.
This decision depends on many factors: your life expectancy, your ability to manage a large capital sum, your family situation, and your other sources of retirement income.
Pillar 3a: the freedom to build your retirement
In 2025, if you are not affiliated to the second pillar, you can contribute up to CHF 36,288 per year in your Pillar 3a, (20% of your net income).
This amount is fully deductible from your taxable income. If you are affiliated to a second pillar, the ceiling drops to CHF 7,258, in line with that for salaried employees.
Pillar 3a offers wide range of solutions investment solutions: bank accounts, insurance contracts, or index fund investment solutions. Unlike the second pillar, you retain total control over your investment choices, and can adjust your strategy according to market trends and your risk profile.
The capital accumulated in the pillar 3a can be removed in certain situations before retirement: purchase of your principal residence, start-up of a self-employed business, definitive departure from Switzerland, or purchase of years of BVG contributions. When you retire, you can withdraw five years before ordinary age of the AVS pension, with separate preferential taxation.
Pillar 3b: retirement without constraints
The pillar 3b, The "prévoyance libre", or free pension plan, completes the arsenal of solutions available, with no limit on payments and no restrictive legal framework. Although contributions are generally not subject to tax deduction (except in certain cantons), pillar 3b offers other advantages, notably the non-inheritance beneficiary clause and tax exemption on paid-in capital.
Optimization strategies for a comfortable retirement
The winning combination: 2nd and 3rd pillars
For the self-employed whose income allows it, the combination of second and third pillars offers the best of both worlds. The second pillar provides the security of a life annuity and high tax-deductible contributions, while Pillar 3a offers flexibility and higher potential returns thanks to active management of your savings.
This strategy maximizes tax deductions while diversifying your sources of retirement income. In this way, you build a solid foundation with LPP, supplemented by capital 3a.
Anticipate early to benefit from the compounding effect
Time is your best ally in building your retirement. The earlier you start contributing, the greater the effect of the interest capitalization works in your favor. A regular Pillar 3a payment from the outset of your self-employed activity can generate substantial capital over 30 or 40 years, even with modest amounts.
As far as the second pillar is concerned, early enrolment helps to avoid large gaps that would require costly buy-ins later in your career. Even if your income is modest at the outset, maintaining a minimum contribution creates beneficial continuity when calculating your entitlements.
Repatriate and invest your BVG assets
Don't forget to transfer your BVG assets to a vested benefits account. Otherwise, they will remain with the BVG Supplementary Foundation, where returns are very low. We also recommend that you research to the Centrale du 2ème pilier to locate any forgotten assets.
Adapt your strategy to changes in your revenues
A self-employed person's pension plan must evolve in line with the business growth. In the early years, concentrate on Pillar 3a with regular, even modest, payments. Once your activity has stabilized and your income is rising, consider joining the second pillar to benefit from higher tax deductions and secure a life annuity.
You can take advantage of years of high profitability to make BVG/LPP buy-backs or maximize your 3a payments, thus creating a tax and asset reserve for less favorable periods.
Invexa helps you plan your retirement
As a self-employed person in Switzerland, your retirement needs to be managed actively and in advance, but in return offers unrivalled flexibility to build a tailor-made protection package. Between the compulsory base of the first pillar, the strategic options of the second pillar, and the freedom of the third pillar, the self-employed have all the tools they need to build a comfortable retirement, provided they start early enough and maintain a regular savings discipline. At Invexa, we help you to building a retirement strategy tailor-made.
