BVG/LPP pension certificate: how to protect your future in Switzerland

Occupational pension provision is one of the cornerstones of Swiss social security and is provided by the so-called second pillar, which offers risk and retirement benefits.

When did you last check the pensions paid in the event of illness, accident, death or retirement on your BVG/LPP pension certificate?

Many employees underestimate this document and find themselves unprepared when situations such as illness, accident or the death of a family member arise. In this guide we will look at how to read the certificate issued by the pension fund and why it is essential to know the risk and retirement benefits in detail.

Occupational pension provision (second pillar) and how it works

Occupational pension provision supplements the benefits of the first pillar (AHV/AVS and IV/AI) and is based on the principle of compulsory saving: contributions are paid by employees and employers, building up retirement capital over time.

Risk benefits (disability, death): in the event of disability (as a result of illness or accident) or death, occupational pension provision pays benefits in addition to those of the first pillar, ensuring continuity of income for the insured person or their survivors.
Retirement benefits: on reaching retirement age or in the event of early retirement, occupational pension provision pays a monthly pension or a lump sum, depending on the options provided for in the pension institution’s regulations.

Regularly checking your pension situation, comparing the first and second pillars and assessing any need for private pension provision (third pillar), is important in order to understand whether your cover is adequate from a financial and family perspective.

Incapacity for work and disability pensions due to illness

An important aspect concerns the benefits paid by the pension fund in the event of illness or accident, situations that lead to partial or total incapacity for work and potentially to an income gap, if the insurance cover does not sufficiently meet the household’s financial needs.

These benefits usually start after a waiting period of 12/24 months, so before considering the second pillar disability pension, it is important to find out how your salary is paid during the first two years of incapacity for work.

What happens in the first 24 months of illness

Salary cover in the event of illness: as a rule, the employer takes out an insurance policy to cover this risk; it insures employees in the event of illness, and the cover period can extend up to a maximum of 24 months.
No obligation for the employer: except in specific professions, the employer is not obliged to take out a policy providing daily allowances in the event of illness, and if it does so it can freely set the conditions,
Check the internal regulations: employees should check in the staff regulations or with the human resources department how their salary is insured and the exact cover period in the event of illness.

Incapacity to earn and the second pillar disability pension

If absence from work exceeds 12-24 months, the second pillar disability pension comes into play:

Start of the pension: once the waiting period (generally 12-24 months) has elapsed, the pension fund pays the disability pension.
Coordination with the IV/AI: the second pillar disability pension is paid in addition to the pension from the disability insurance (IV/AI) (first pillar), provided that the procedure for recognising the disability was started in good time.
Amount and duration: the occupational pension certificate states the amount and duration of the benefits, which are essential for understanding whether the income paid is sufficient to cover the family’s needs.

Accidents and the Federal Accident Insurance Act (UVG/LAA)

Accidents are treated differently from illness, as they are governed by the UVG/LAA:

UVG/LAA daily allowances: the employer is obliged to insure its employees. From the third day of incapacity for work, allowances equal to 80% of the insured salary are paid (up to a maximum of CHF 148’200).
Supplementary UVG/LAA cover: the employer can take out a supplementary policy to top up the basic 80%, giving employees greater protection.
Conditions and benefits: to find out the conditions and benefits in detail, you need to consult the internal regulations or ask your employer for details of the cover.

Survivors’ benefits in the event of death

Survivors’ pensions in the event of death are shown on the pension certificate and are as follows:

Pension for the surviving spouse or registered partner
This is provided for by law (BVG/LPP) and guarantees a replacement income for the surviving spouse or registered partner. The amount and specific conditions may vary according to the pension fund’s regulations, for example regarding any age limits or age differences between spouses/partners.
Cover for children
As a rule, children are entitled to a pension until they reach the age of 18 or, if in education or training, until the age of 25. The amount and duration of these benefits depend on the legal provisions and the pension institution’s regulations.
Extension to cohabiting or unmarried partners
This is not required by law, but some pension funds provide for it: in this case, unmarried (cohabiting) partners may receive a pension, provided certain requirements are met (for example a minimum period of cohabitation, financial support from the insured person or the existence of children in common).

Why is it important to check the pension fund regulations?

Each pension fund has specific criteria regarding the definition of beneficiaries and the conditions for paying benefits. Depending on your family circumstances and personal situation, these clauses can be decisive in ensuring the financial stability of your survivors. It is therefore essential to consult the pension institution’s regulations, as the cover may go beyond what is required by the Federal Act on Occupational Retirement, Survivors’ and Disability Pension Plans (BVG/LPP) or, conversely, may be limited in some cases.

If the cover provided is not sufficient, supplementary solutions can be considered, such as private insurance or other forms of saving aimed at closing any financial gaps. This approach makes it possible to adapt protection to your own needs rather than to those of your survivors.

Retirement pensions at retirement

The main objective of the pension fund, an essential part of the second pillar, is to build up capital over the whole of your working life. At retirement, the main options for drawing the accumulated assets are:

Monthly pension: paid for life on the basis of the conversion rate, it is added to the first pillar (AHV/AVS) benefits.
Partial or full lump sum: the employee can choose to withdraw part or all of the accumulated capital. This option offers greater flexibility, but no longer guarantees a lifelong pension and requires you to manage the funds yourself.

The pension fund therefore plays a fundamental role in financial security after working life. During your career, it accumulates savings through contributions paid by both employee and employer. The assets grow over time through interest and, in some cases, through investment returns, which increase the retirement capital.

Buy-ins and tax optimisation

If there are contribution gaps (for example as a result of periods of study, stays abroad or career breaks) or if you wish to increase the amount of your future pension, you can make voluntary buy-ins into the second pillar. These additional contributions are, as a rule, tax-deductible, offering a twofold advantage: on the one hand you improve your retirement prospects, and on the other you obtain an immediate tax saving. However, before going ahead it is important to:

Check the buy-in limits set by the regulations.
Consider the restrictions on capital withdrawals (e.g. the obligation to wait three years after a buy-in before withdrawing capital).
Consult a financial or tax advisor to weigh up the costs and benefits.

The pension certificate: a key document to analyse regularly

The Swiss pension certificate, issued every year, provides a complete overview of the benefits to which you are entitled in the event of:

Disability (illness or accident)
Death (pensions for spouse, registered partner, children, cohabiting partner if applicable)
Retirement (retirement pension or lump sum)

In short, thanks to the BVG/LPP certificate, every employee should know:

How the first and second pillar social insurances are coordinated;
The amount of the benefits and their duration;
The income or capital gap that arises following the payment of allowances/pensions for illness or accident.
The specific conditions for accessing these social benefits, in particular the difference between illness and accident;
How incapacity for work (partial or total) is determined;
Recovery of health and the end of illness or accident benefits once the capacity to work has been regained.
In the event of death, the beneficiary of the survivors’ pensions (spouse/registered partner, children, cohabiting partner);
The amount of the benefits and the conditions for payment;
The financial needs borne by the family in the event of the death of the person earning the income from gainful employment

A comprehensive pension analysis

Knowing and understanding the benefits offered by your pension fund means not only taking note of the existing guarantees, but also assessing how they fit within the three pillars of the Swiss pension system and whether they are sufficient to meet your household’s income and capital needs.

Employee insurance is a fundamental component of a pension analysis. Employers often organise information sessions to help employees find their way through the various aspects of their cover. In this context, the role of the insurance and pension broker is decisive: thanks to their technical and specialist expertise, the broker can answer specific questions and help each individual correctly interpret the data in their pension certificate.

Being well informed is the first step towards making informed decisions and building a solid pension strategy that can ensure financial stability and security in the long term. The second step is to rely on a competent professional who can provide independent advice and personalised support, with positive and lasting effects on your pension planning.

Article written by:

Diana De Luca

Retirement Planning Specialist*AFA Insurance Intermediary*