Three-Pillar System (Drei-Säulen-Konzept)
The three-pillar system is the constitutionally enshrined basic structure of Swiss old-age, survivors', and disability provision, consisting of state, occupational, and private pension provision.
Concept
The three-pillar system forms the basic structure of Swiss old-age, survivors’, and disability provision, enshrined in the Federal Constitution. It is divided into state provision (first pillar: AHV/IV/EL), occupational provision (second pillar: BVG), and private provision (third pillar: pillars 3a and 3b), which together are intended to provide adequate coverage for financial needs in old age, upon disability, and in the event of death.
Function of the Individual Pillars
The first pillar aims to secure basic subsistence on a solidarity basis (pay-as-you-go financing) for the entire population. The second pillar, together with the first, is intended to enable the continuation of an accustomed standard of living and is financed on a funded basis. The third pillar serves individual supplementation according to personal needs and financial means, with pillar 3a being tax-privileged and tied, while pillar 3b remains freely available.
Relevance for Advisory Practice
The three-pillar system forms the systematic starting point for any holistic pension and risk analysis: only by comparing the expected benefits from all three pillars against individual protection needs can coverage gaps in the event of disability, death, and old age be systematically identified and closed with suitable private insurance solutions.