An efficient pension system should take the financial security of a family into consideration by compensating them if one or both of its providers pass away. If the system fails to provide the widow, widower or orphan with income the survivors could become a financial burden to the state.

The Swiss pension system does take this issue into consideration, but the terms of the pillar one benefits are extremely strict and sexist, as they have not been revised for many years.

In short, to be sure to financially protect those we love in the event of death, it is almost obligatory to subscribe to a pillar 3 life insurance contract.

Read on to understand why.

The pillar one widow or widower compensation scheme has not been revised for many years. It is based on three assumptions that quite simply do not work in our modern world:

• 1) women do not work
• 2) men do not stay at home and look after the kids
• 3) couples get married if they want to have children together

• Rule number one:
  Only the married benefit from pillar 1 life insurance compensation. This penalizes thousands of couples who have chosen to live together or to create a family without being married.
• Rule number two:
  The wife cannot be the only financial provider of a family, because if she passes away the widower will only receive the pillar 1 life insurance compensation if the couple have a child under 18, and once the child is 18 the benefit expires.
• Rule number three:
  The wife will receive a lifetime pillar 1 life insurance compensation (if and until she remarries) under one of the following conditions:
  a) the couple were raising a child together
  b) if the couple were not raising a child together, but the wife is over 45 years old and the couple were married for at least 5 years before the husband passed away.

The pillar 1 life insurance compensation is paid as an annuity. In 2020 the amount is capped at CHF 22’752.- per year or 1’896.- per month for a person who has contributed to their pillar 1 plan from age 21, with an average annual salary of at least CHF 85’320.-
This amount represents 80% of the maximum pillar 1 pension benefit.
To understand how the pillar 1 pension benefit is calculated consult the Pillar 1 page

An orphan benefit is also paid to the surviving children until their 18th birthday (or 25th if they continue their studies).
If the child loses one parent the annuity is capped at CHF 11’376 per year or 948.- per month in 2020 (40% of the maximum pillar 1 pension benefit).
If the child loses both of their parents the annuity is capped at CHF 17’064 per year or 1’422.- per month in 2020 (60% of the maximum pillar 1 pension benefit).

Strange as it might sound, the state approved the revision of the pillar two widow or widower compensation scheme to adapt it to the modern world. It’s rules and regulations are based on the following assumptions:

• 1) women work
• 2) men can stay at home and look after the kids
• 3) couples do not need to get married if they want to have children together

As each pillar 2 pension scheme is dependent upon the rules and regulations of its private governing body, the below rules can change from one pension fund to another. It is a fair assumption to say that in general the following rules apply to receive a pillar 2 life insurance benefit:

• Rule number one:
  Most pillar two pension funds allow married and unmarried couples to benefit from life insurance compensation.
• Rule number two:
  The widow and the widower receive the same pillar 2 life insurance benefits.
• Rule number three:
  The survivor will receive a lifetime pillar 2 life insurance compensation (if and until they remarry) under one of the following conditions:
  a) if the couple have a child UNDER 18 (or 25 if still studying) when one of the parents passes away
  b) if the survivor is over 45 years old and the couple were married for at least 5 years before the spouse passed away.

For those that comply to the above rules the pillar 2 life insurance compensation is paid as an annuity. The compensation represents 60% of the pillar 2 pension benefit if the spouse passes away after they are retired. If the spouse passes away before retirement the compensation represents 60% of the pillar 2 disability benefit.
For more on how the pillar 2 pension benefit is calculated consult the Pillar 2 page.

For those that do not comply to the above rules the pillar 2 life insurance compensation is paid as a capital, equal to three times the annual survivor’s benefit.

An orphan benefit is also paid to the surviving children until their 18th birthday (or 25th if they continue their studies).
The compensation represents 20% of the pillar 2 disability benefit if the parent passes away before the age of retirement. If the parent passes away after the age of retirement the compensation represents 20% of the pillar 2 pension benefit.

Once again, each pension fund has specific rules and regulations. We have outlined the minimal obligations. It is possible that certain pension funds offer higher life insurance compensation in the form of capital, which can be a multiple of the annual salary, rather than the annual survivor’s benefit. We therefore often analyze our clients’ pension certificates and regulations in order to advise them accordingly.