At the most basic level, know what your paycheck covers. Swiss companies and their employees both pay into:
- disability insurance (AI)
- AVS which is the first pillar of the pension system (comparable to social security for Americans or the old age pension in Britain)
- and an obligatory pension fund, LPP, which is the second pillar.
These are all federal obligations although the funds are managed by the cantons. If you work in Geneva but live in Vaud, Geneva’s system is the one that affects you. If you live in Geneva and work for a company that pays you out of Lausanne, Vaud’s system kicks in. AI has been in the news for the past three to four years because of a growing deficit, but the Swiss Federal Council, or Cabinet, decided in October 2007 to fund it separately from the AVS, which should improve the finances of both.
Social security in France is much higher than in Switzerland, but includes coverage under the national health system. When calculating taxes, remember that French taxes are higher but when Swiss health insurance premiums are factored in, Switzerland is nearly as expensive.
Nevertheless, in terms of overall taxes, Switzerland remains one of the least burdensome countries in Europe, according to the Paris-based OECD (Organisation for Economic Co-operation and Development), largely because its sales tax (TVA), at 7.6%, is far lower than in other European countries. If you’re a big consumer, this can make a substantial difference at the end of the year.
All Swiss residents must have basic health and accident insurance, a situation very different from that in, for example, the United States. Insurance is private rather than state-run, unlike in Britain, Canada and some other Anglo-Saxon countries.
Swiss employers must pay accident insurance and minimal health insurance for employees who earn above a set amount, although it is a fairly standard employee benefit to offer more. Many employers offer a group health plan and match employees’ contributions.
In families where husband and wife work fulltime either of the employers’ health plans can be selected. The norm is for the employer of the partner with the higher salary to cover the family’s insurance. The employer of the partner who earns less will need to see proof (from the other employer) that the family is in fact covered for health care.
France has a national health insurance system, funded by Urssaf payments made through employers.
Setting something aside for retirement
Switzerland has three layers, or piliers (literally pillars) to its retirement system. AVS is the federal retirement and disability plan to which all employers must contribute. Note: if you have household help, such as a regular babysitter or cleaning person, you must pay the AVS for them, through your commune.
The second pillar (LPP) is your company’s obligatory retirement plan which it must offer to anyone over age 17 who earns more than CHF19,890. The company doesn’t have to cover more than a salary of CHF79,560, but most companies, especially those with a collective contract, offer more. The third pillar is your personal, optional, additional retirement fund which you can create with a bank or an insurance company. Note that the separation of banking and insurance industries in Switzerland is not as great as in many countries and each can offer many services also offered by the other. The money you place in your third pillar is tax-free until you use it, at which point it is treated as income. Part Three of this guide will take a close look at how you can best use these options.