While the first pillar is a pension plan administered by the state, the second pillar is an occupational pension (LPP). It is an addition to the first pillar to ensure, when you retire, that you receive a pension corresponding to about 50-60% of your last salary.
The occupational pension (LPP), or to give its full name Federal Act on Occupational Old Age, Survivors’ and Invalidity Pension Provision, is based on individual savings. Half of it is financed by the employer and the other half is financed by the employee at variable rates depending on the employee’s age.
What about self-employed persons? Lonesome creators? Commercial adventurers?
In fact, we have all heard someone say something similar to “I really have to quit this job. I will withdraw my 2nd pillar and start a business!”. Or something like “in two years, I’m withdrawing all my second pillar and leaving Switzerland”.
Before answering this question, quick history moment. Indeed, to make the best use of your LPP, it is important to understand why it exists…
On the day the second pillar was introduced, the sun blazed all day long on the Federal Palace on this radiant day of 25 June. It was the year 1982 and the population was driven by an unprecedented exuberance at the idea that at its retirement age, it would be able to unwind more happily.
Ok, truth is, I am unsure whether it was actually sunny in Bern in that day. To tell you the truth, I’ve never seen Bern on a sunny day.
Thought the LPP was signed in June 1982, it was not until 1 January 1985 that it entered into force.
This second pillar of the Swiss retirement scheme explicitly aims to allow the elderly, but also surviving family members and incapacitated persons, in addition to the OASI, to maintain an appropriate standard of living when carrying out an old age,death or invalidity insurance case.
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