For half a century the 3-pillar concept has been enshrined in the Swiss Federal Constitution as the best of all worlds. Even though this satellite has long shown dangerous cracks and reforms are overdue, the official doctrine on the Swiss pension system continues to pay homage to it, Angela Agostini writes in an essay for finews.first.


This article is published on finews.first, a forum for authors specialized in economic and financial topics.


With the 1st pillar, one can declare oneself in agreement. For over 70 years, the AHV (in English: old-age and survivor's insurance, OASI) has ensured fair redistribution from rich to poor. Whether someone earns millions or is a wage earner in one of the lowest income brackets: the rate and pension are the same for everyone. From a salary of around 85,000 Swiss francs, the AHV becomes – roughly calculated – a second income tax, as the AHV deduction is made on the entire salary. This benefits the majority of the population.

The second pillar, on the other hand, which has been based on compulsory saving for a good 30 years and now has a capital stock of an estimated one trillion Swiss francs, did not provide for anything of the kind. Solidarity was to play solely within the pension funds and investment foundations, which administer the funds and payout old-age pensions in accordance with their investment performance – individually graduated according to the amount of an insured person's accumulated old-age savings.

«The preservation of vested rights guarantees pensioners a lifelong pension»

But we did not count on the policy that has long since given way to another dimension of state-imposed solidarity: redistribution from young to old. Because the returns once thought of have long since ceased to be achievable, the active generation is being growled up into renouncing a steadily growing portion of their retirement capital in favor of the generation of pensioners. This amount has now already reached 7.2 billion Swiss francs per year. The preservation of vested rights guarantees pensioners a lifelong pension, which in most cases was calculated at a conversion rate of 7.2 percent and is co-financed by the active generation.

Compared with the AHV payments of 45 billion last year, pensioners will soon be «appropriating» one fifth. Statutory investment regulations and the capital market are reducing the urgently needed income of pension funds to meet their obligations.

«A change of job therefore always offers the opportunity to check one's own pension provision»

The higher earners of the younger generation, in particular, are slowly feeling cheated and have to accept that the conversion rate for their future pension will be steadily reduced. They are looking for ways out that will allow them to be compensated to some extent.

Vested benefit solutions are available under the 2nd pillar. When changing jobs, which is becoming increasingly common in the modern working world, as well as when changing from dependent to self-employed and vice versa, it is important to choose a suitable vested benefit to account with care, which firstly allows a high proportion of shares and secondly is cost-effective. Digital products are particularly attractive for this purpose. A change of job therefore always offers the opportunity to check one's own pension provision and to take advantage of opportunities.

«Thanks to digital solutions, this approach is now even more cost-effective»

The Fintechs have a clear lead in this respect. Thanks to them, the individualization of occupational pension provision is gaining ground. The digital solution providers help customers to build up their own «pension fund».

With the same approach, high earners should just as consistently use the tax-privileged pillar 3a with the support of the Fintechs: bet on shares to participate in the performance of the economy. What has proven to be the right strategy over the past 100 years and more will hardly ever be wrong in the future. Thanks to digital solutions, this approach is now even more cost-effective.

In addition, the payment methods are likely to be liberalized soon. In any case, there is an impetus in the political process. Among other things, it is planned to make it possible to make back payments for 3a solutions within a period of 5 years.

The supposed best of all worlds is – at least for the time being – moving a little in the right direction. That is hopeful.


Angela Agostini is the head of Descartes Vorsorge's pension division. She has over 30 years of experience in the insurance industry, where she has held various technical as well as management responsibilities. As a lecturer for pension plans, she trained customer advisors in the areas of corporate and private customers at Zurich Insurance and for the Berufsbildungsverband der Versicherungswirtschaft (VBV). She is also an examination expert for insurance intermediaries at VBV.


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