How Does the First Pillar Work in Switzerland?

What is the first pillar, and why is it important?

The AHV/AVS is the foundation of Switzerland's three-pillar pension system. The logic of the three pillars:

The first pillar operates on a pay-as-you-go (Umlageverfahren) system: contributions paid today fund pensions paid today, not accumulated in individual accounts. This means your own future pension depends in part on the next generation's contributions.

The first pillar's purpose is to cover basic needs — it is not sufficient on its own to maintain the Swiss standard of living. According to data from the Federal Social Insurance Office (Bundesamt für Sozialversicherungen, BSV), the minimum old-age pension in 2025 is CHF 1,260 per month, with a maximum of CHF 2,520 per month (with full entitlement). The actual amount depends on the number of contribution years and average annual income.

From a Hungarian perspective, the first pillar is particularly important because Switzerland and Hungary have a social security agreement in place that determines how contribution years earned in both countries are credited — this is covered in detail in the "International Rules" section.

Who is covered by the first pillar?

Employees

Every person employed in Switzerland — regardless of citizenship — is mandatorily insured under the AHV/AVS system. Registration is typically handled by the employer: when an employee starts, they join the AHV compensation fund (Ausgleichskasse) selected by the employer.

Self-employed persons

Self-employed individuals (Selbstständigerwerbende) are also mandatory members, but they handle registration and contribution payments themselves at the competent regional Ausgleichskasse. The contribution rate differs from that of employees — this is detailed in the next section.

Non-workers (inactive persons)

Anyone living in Switzerland but not working — for example, a homemaker, student, unemployed person, or early retiree — is also mandatorily insured if they have a Swiss residence. In this case, contributions are calculated based on assets and substitute income. The minimum annual contribution in 2025 is CHF 514 (⚠️ see internal notes).

Who is exempt?

• Those whose employer is in another EU/EEA member state and who pay social insurance there (posted workers, based on A1 certificate).

• Those with diplomatic status.

• Certain short-term workers under special agreements.

Contributions and premiums: how much must be paid?

Employee contribution

The AHV/AVS contribution is calculated on gross salary 8.7% (2025 figures), shared equally between employer and employee:equal share:

Important: this rate combines AHV/AVS (old-age and survivors' insurance), IV/AI (disability insurance, Invalidenversicherung), and EO/APG (loss-of-earnings compensation, Erwerbsersatzordnung) into one. On the payslip, employees see these deducted together as a single "AHV/IV/EO" line.

The contribution has no upper income ceiling — meaning it is calculated on the entire gross salary, unlike the second pillar where a coordinated wage threshold applies.

Self-employed contributions

Self-employed individuals pay 8.1% (2025), though on a reduced scale for lower incomes. The self-employed person pays the full amount themselves — there is no employer portion to share the burden.

Non-active persons' contributions

Non-active persons' contributions are calculated based on assets and replacement income (e.g. pensions, maintenance payments). The annual minimum is CHF 514, and the maximum can be tens of thousands of CHF depending on financial circumstances.

How does it appear on the payslip?

The employee's share is automatically deducted from gross salary by the employer and remitted together with the employer's share to the Ausgleichskasse. The employee has nothing further to do — the system operates automatically.

Registration and administration: how do you enter the system?

As an employee

1. The employer registers the employee with the Ausgleichskasse at the start of employment.

2. The employee receives an AHV/AVS number (13 digits, in SVN format: 756.XXXX.XXXX.XX). This is a unique identifier valid for life.

3. The number appears on the insurance certificate (formerly called "AHV-Ausweis", now typically on the KVG card or sent by separate letter).

As a self-employed person

1. When starting the activity, you must register in person with the competent local Ausgleichskasse.

2. The Ausgleichskasse sets a provisional annual contribution based on estimated income.

3. After the annual tax return, a final settlement is made — if actual income differed from the estimate, you pay the difference or receive a refund.

As a non-active person

If someone moves to Switzerland and is not working, they must register with the Ausgleichskasse in their canton of residence. The local Gemeinde (municipal office) can also assist with registration.

The importance of the AHV/AVS number

The AHV/AVS number is the fundamental identifier in Switzerland's health and social system. If lost, a replacement can be requested from the Ausgleichskasse. From a Hungarian perspective: if someone previously worked in Switzerland, their old number remains valid — they do not receive a new one.

Pensions, disability, and death: what benefits are you entitled to?

Old-age pension (Altersrente)

The statutory retirement age in 2025:

• Women: 65 years (the 2024 AHV 21 reform gradually raised it from 64 to 65)

• Men: 65 years

A full pension requires 44 contribution years (for women it was previously 43; the AHV 21 reform standardized this). Each missing year results in a proportional reduction of the pension — 1/44th less per year.

The pension amount depends on average annual income (Durchschnittslohn) and the number of contribution years. In 2025:

• Minimum full pension: 1,260 CHF/month

• Maximum full pension: 2,520 CHF/month

• Combined maximum for married couples: 3,780 CHF/month (150% of the individual maximum)

The pension can be claimed as early as age 63 (early retirement, at a reduced amount), and can be deferred until age 70 (at an increased amount).

Disability benefit (IV-Rente)

The first pillar's disability branch (Invalidenversicherung, IV) comes into play when someone becomes permanently unable to work due to illness or accident. The degree of disability (25%, 50%, 75%, 100%) determines the benefit level. The IV works closely with SUVA (accident insurance) and employer insurance.

Survivor benefits (Hinterlassenenrente)

After a covered person's death:

• Widow/widower pension (Witwenrente / Witwerrente): payable to a widow/widower raising minor children or aged 45 or older.

• Orphan benefit (Waisenrente): payable until age 18 (or age 25 if in education).

International rules: situation of EU/EEA and third-country nationals

Situation of Hungarian nationals

Hungary is a member of the European Union, so Hungarian nationals are treated according to the rules applicable to EU/EEA nationals under the Agreement on the Free Movement of Persons between the EU and Switzerland (Freizügigkeitsabkommen, FZA, 1999). This is fundamentally a favorable situation.

Application of EU coordination rules

Between Switzerland and the EU, the Regulation 1408/71/EEC (or its successor, Regulation 883/2004/EC) coordinates social insurance. The key principles are:

• Only one country's legislation applies at a time. If someone works in Switzerland, they are insured under Swiss rules — even if they live in Hungary.

• Insurance periods can be added together (totalization): insurance years earned in Switzerland and Hungary are combined when determining eligibility.

• Proportional pension: each country pays a proportional pension for the period earned in its territory.

Switzerland–Hungary social insurance agreement

Between Switzerland and Hungary, a bilateral social insurance agreement is also in force, which can be applied in parallel with the FZA. This is particularly relevant for pension coordination: it regulates contact between the Hungarian ONYF (Országos Nyugdíjbiztosítási Főigazgatóság) and the Swiss Ausgleichskasse.

Practical consequence: someone who works in Switzerland and later returns to Hungary can receive a (proportional) pension from both countries — but due to the different calculation logic of the two systems, calculating the amount can be complex.

Third-country nationals

Anyone who is not an EU/EEA citizen (e.g., Ukrainian, Serbian, Turkish) is also mandatorily insured under AHV/AVS if they work or live in Switzerland. The difference lies in the exit rules: an EU/EEA citizen who permanently leaves Switzerland and returns to an EU/EEA country cannot withdraw in cash their AHV/AVS contributions (unlike the second pillar, where this is possible under certain conditions). Third-country nationals can in certain cases reclaim AHV/AVS contributions if there is no agreement with their home country — this requires individual examination.

Posting and A1 certificate

If a Hungarian employer sends an employee to Switzerland, the A1 certificate (issued in Hungary by NEAK) proves that the employee remains under Hungarian social insurance. In this case, AHV/AVS does not need to be paid in Switzerland. The posting period is generally limited to 24 months within the EU.

Common mistakes and questions: what you need to know in practice

Missing contribution years and how to make them up

If someone has not completed 44 years (e.g., arrived young or spent years elsewhere), their pension will be proportionally reduced. Through voluntary contributions (freiwillige Versicherung) missing years can be made up under certain conditions — this must be requested from the Ausgleichskasse, and it is not always possible.

What does "splitting" mean for married couples?

In case of marriage, the AHV/AVS income of both parties is added together and credited in equal proportions to both parties' accounts (Einkommensteilung / splitting). This protects the party who earned less or did not work. In case of divorce, splitting can be applied retroactively.

Child-rearing credits (Erziehungsgutschriften)

Parents raising minor children receive child-rearing credits for AHV/AVS calculation, even if they did not work in that year. The credit amount equals three times the minimum wage (approximately 43,020 CHF per year in 2025). This can significantly improve the pension prospects of low-earning or non-working parents.

When do you need to register on your own?

As an employee, the employer handles it — but if someone changes jobs, verify that the new employer has actually registered them. As a self-employed person or non-active person, registration is always your own responsibility.

How can you check your contribution history?

You can request an individual statement (Kontoauszug) from the Ausgleichskasse at any time regarding contribution years and annual earnings. This is particularly important if you have worked for multiple employers or taken longer breaks.

Sources

• Federal Office of Social Insurance (Bundesamt für Sozialversicherungen, BSV): https://www.bsv.admin.ch/

• AHV/IV official information page: https://www.ahv-iv.ch/

• Swiss Federal Information Portal: https://www.ch.ch/en/

• On EU–Switzerland social security coordination: Regulation 883/2004/EC (European Parliament and Council)

• AHV 21 reform details: BSV, 2022–2024 (effective: 1 January 2024)