As a freelancer in Switzerland, you're not required to join the LPP (occupational pension plan). But should you? This decision could save you 30% or more in taxes while building retirement security and disability coverage.
Unlike employees earning over CHF 22,680 annually, self-employed individuals can choose whether to participate in the second pillar. Understanding your options is crucial for long-term financial security.
No, LPP (also called BVG) is voluntary for self-employed individuals.
Only your AHV/AVS (first pillar) contributions are mandatory. These vary between 5.196% and 9.650% of your income, including disability insurance (IV) and loss of earnings (EO).
However, choosing not to join LPP means you'll rely solely on the first pillar for retirement, disability, and survivor benefits—which may not be sufficient.
Switzerland's pension system combines three pillars to ensure retirement security. Here's how they work for freelancers.
Mandatory for all. Contribution: 5.196% to 9.650% of income. Covers basic retirement, disability, and loss of earnings. Maximum pension: ~CHF 2,450/month.
Required for employees earning CHF 22,680+. Optional for self-employed. Covers occupational pension, disability benefits, and survivor benefits.
Optional. Pillar 3a offers tax-privileged savings with contribution limits. Best for long-term retirement planning with tax deductions.
Four compelling reasons to join the second pillar as a self-employed professional.
All LPP contributions are fully tax-deductible. With Swiss tax rates reaching 30% or higher, every franc you contribute saves you 30 cents in taxes.
This is where LPP provides the most value for freelancers. If you become unable to work, LPP provides crucial income security.
LPP provides comprehensive protection for your loved ones in case of death.
Unlike the first pillar (where contributions fund current retirees), your LPP capital belongs to you.
When you join LPP voluntarily, you have flexibility:
Maximum insured salary: CHF 90,720 (2025 and 2026)
Maximum contribution rate: 25% of your income
Maximum annual contribution: CHF 22,680 (25% of CHF 90,720)
You can adjust your insured salary and contribution percentage within these limits, allowing you to optimize for tax savings, risk coverage, or retirement savings based on your needs.
Many freelancers wonder whether voluntary LPP or Pillar 3a makes more sense. Here's how they compare for self-employed professionals.
| Feature | Voluntary LPP (Pillar 2) | Pillar 3a |
|---|---|---|
| Max Contribution | CHF 22,680/year (25% of CHF 90,720) | CHF 36,288/year (without LPP) or CHF 7,258/year (with LPP) |
| Tax Deductible | ✓ Yes, 100% | ✓ Yes, 100% |
| Disability Coverage | ✓ Yes, customizable | ✗ No (separate insurance needed) |
| Survivor Benefits | ✓ Yes, included | ✗ No (separate insurance needed) |
| Flexibility | Less flexible, annual commitments | More flexible, voluntary contributions |
| Withdrawal | At retirement or specific conditions | At retirement, home purchase, or emigration |
| Best For | High earners, risk coverage needs | Flexibility, investment control |
Pillar 3a works best for freelancers in specific situations.
In your first few years of self-employment, Pillar 3a offers flexibility. Choose a bank account (not insurance) so you can:
Pillar 3a provides sufficient tax optimization without the complexity of LPP administration.
Many Pillar 3a providers offer investment accounts with stock market exposure, potentially higher returns than LPP's 1.25% minimum interest.
Voluntary LPP makes sense for established freelancers with specific needs.
Only LPP allows you to contribute up to CHF 22,680 annually—far exceeding Pillar 3a's limits.
LPP provides significantly better disability coverage than relying on first pillar IV alone.
If you have dependents, LPP's widow/widower pensions and death benefits provide crucial financial security.
If you lack better investment vehicles, LPP's guaranteed minimum interest and tax deductions make it a strong option.
You have three main options:
Many industries have specialized pension funds for doctors, lawyers, architects, artists, and other regulated professions.
Advantages: Industry-specific understanding, potentially better terms for your profession
If you employ others, you can join a collective foundation together with your employees. Many insurance companies (AXA, Swiss Life, Generali) offer collective foundation solutions.
Advantages: Simplified administration, competitive rates, comprehensive services
The government's backup option for those who can't join elsewhere.
Website: aeis.ch
Caution: Generally considered expensive for the services provided. Most freelancers find better value with professional associations or collective foundations. Best used as a last resort if other options aren't available.
If you're transitioning from employment to freelancing, you can withdraw your LPP capital under specific conditions. This creates important strategic opportunities for new freelancers.
LPP withdrawals are taxed separately from ordinary income at approximately one-fifth (1/5) your normal tax rate—a significant tax advantage.
Example: If your normal tax rate is 30%, your LPP withdrawal might be taxed at just 6%.
Before withdrawing, consider:
Many new freelancers withdraw their LPP to fund business development. Others prefer joining voluntary LPP to maintain coverage and tax benefits.
Important changes coming to Switzerland's pension system that affect freelancers.
Starting in 2026, pensioners will receive a 13th AHV payment annually, paid together with the December pension. This doesn't affect freelancers' contribution requirements but increases retirement income.
Beginning in 2026, you can make retroactive Pillar 3a contributions for up to ten years back. However, this only applies to contribution years from 2025 onward. Creates planning opportunities for freelancers with variable income.
Yes, but your Pillar 3a contribution limit drops to CHF 7,258 annually (from CHF 36,288 without LPP). This combination works best for high earners seeking maximum tax deductions and comprehensive risk coverage.
Pillar 3a offers more flexibility since contributions are optional annually. With LPP, you commit to contribution levels, though you can adjust them. Many freelancers start with Pillar 3a and add voluntary LPP once income stabilizes.
Yes. Self-employed individuals cannot contribute to unemployment insurance and won't receive unemployment benefits if business income stops. This makes disability coverage through LPP even more important—it's one risk you can insure.
Every franc contributed to LPP reduces your taxable income. With Swiss tax rates ranging from 20% to 40% depending on location and income, the savings are substantial. Always deduct LPP contributions when filing your tax return.
Yes, you can withdraw LPP capital for home purchase in Switzerland, just like employees. This applies to down payment for primary residence, repayment of mortgage debt, or purchase of property ownership shares. Restrictions apply, and you must repay before retirement or when selling the property.
If you leave Switzerland permanently and move outside the EU/EFTA, you can withdraw your entire LPP capital. If moving within the EU/EFTA, you can withdraw the portion above mandatory minimum benefits. Tax implications vary by destination country.
Use these guidelines to determine the best pension strategy for your situation.
You're in your first 1-3 years of self-employment • Your annual income is below CHF 100,000 • You want maximum flexibility • You're comfortable managing disability risk separately • You prefer investment control
You earn over CHF 150,000 annually • Disability coverage is a priority • You have dependents needing survivor benefits • You want maximum tax deductions (beyond Pillar 3a limits) • You prefer structured retirement savings
You earn significantly over CHF 150,000 • You want maximum tax optimization • You need comprehensive risk coverage • You can afford both contributions comfortably
Navigating Swiss pension regulations as a freelancer can be complex. Magic Heidi simplifies administrative tasks for independent professionals, helping you focus on your business while staying compliant.
Whether you're deciding between pension options, managing registrations, or handling ongoing administrative requirements, Magic Heidi provides the tools and guidance to make informed decisions about your financial future.
The deadline to join voluntary LPP or make Pillar 3a contributions is December 31st each year. Don't miss out on this year's tax deductions—the decision you make today shapes your financial security tomorrow.
Remember: The best pension strategy is the one you'll actually implement. Starting with Pillar 3a and adding voluntary LPP later is perfectly valid. What matters most is that you're building retirement security beyond the first pillar's basic coverage.