Early retirement? How to prepare

In Switzerland, the retirement system is based on two main pillars: the AVS (Assurance Vieillesse et Survivants) and the LPP (Loi sur la Prévoyance Professionnelle). Early retirement is an option available to Swiss citizens who wish to retire before the legal retirement age of 65. However, it can have consequences for pension benefits:

  1. AHV (1st pillar): The AVS is Switzerland's basic pension system, based on a pay-as-you-go principle. It provides a basic benefit to all Swiss residents and citizens once they reach legal retirement age, i.e. 65 for men, and 65 for women from 2024. If you choose to retire early, your AHV benefits will be permanently reduced.

    Since AHV retirement benefits are calculated on the basis of the contributions you have paid throughout your working life, in the event of early retirement your future contributions will be reduced, which will have an impact on the amount of benefits you receive. The reduction varies according to the length of your early retirement, and can be as much as -30% for retirement at the minimum age, i.e. at the earliest 2 years before the legal retirement age. 

  2. BVG (2nd pillar): The BVG is Switzerland's compulsory, funded occupational pension scheme. It is generally managed by employers and is designed to supplement AHV benefits. Employers and employees contribute to the pension fund, and these contributions are invested to generate returns and ensure appropriate retirement benefits.

    The BVG also allows early retirement, but the conditions and consequences vary according to the regulations of each pension fund. In general, early BVG retirement can lead to reductions similar to those under AHV. You do, however, have the option of accessing your accumulated BVG capital in the form of an annuity or a lump sum, but the final capital will still be influenced by your early retirement.

  3. General consequences: Taking early retirement can have significant financial consequences. You need to ensure that you have sufficient savings to cover your needs during the period of early retirement, taking into account any reductions in AHV and BVG benefits. In addition, early retirement may affect your entitlement to social benefits and healthcare.

We recommend that you consult an expert financial advisor to analyze your situation, assess your specific options and make an informed decision based on your financial situation, your retirement goals and the specific rules of your pension fund.

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