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The LPP, or Federal Law on Old-Age, Survivors, and Disability Pension Plans, is a crucial pillar of the social security system in Switzerland. It complements the AVS (Old Age and Survivors Insurance) and constitutes the second pillar of the pension system. Its main goal is to ensure a sufficient income for insured individuals after retirement, in cases of disability or death.
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Why is LPP Important?
Financial Protection:
The LPP helps maintain the standard of living for insured individuals and their families in case of loss of income due to retirement, disability, or death.
Employer Obligation:
LPP is mandatory for employees whose annual income exceeds a certain threshold (in 2023, this threshold is 21,510 CHF).
Complementarity with AVS:
It complements AVS pensions, which often do not cover the cost of living adequately.
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FAQs
The LPP is a fundamental element of social security in Switzerland,
providing protection against risks related to old age, disability, and death.
Who is Covered by LPP?
- Employees: All employees under a work contract are generally covered by LPP, provided they meet the income threshold.
- Employers: Employers are required to offer LPP insurance to their employees and ensure its funding.
- Self-Employed: Self-employed individuals can also subscribe to LPP, although this is not mandatory.
Benefits of LPP
The LPP offers several types of benefits:
- Old-Age Pensions: Paid upon reaching retirement age, these pensions complement AVS pensions.
- Disability Pensions: In the event of disability, insured individuals can receive pensions based on their insured salaries.
- Survivor Pensions: In case of the insured's death, pensions may be paid to the spouse and dependent children.
Financing of LPP
The financing of LPP is ensured through contributions paid by both employers and employees. The distribution of contributions is generally split 50/50, but this can vary according to collective agreements or individual contracts.
Types of LPP Plans
- Basic Pension Plan: This is the minimum legal requirement that offers the essential benefits.
- Supplementary Pension Plan: This allows for increased benefits based on individual needs or employee expectations.
Advantages of the LPP
- Retirement Preparation: The LPP helps ensure a comfortable retirement.
- Protection in Case of Disability: It offers financial security in the event of an inability to work.
- Tax Benefits: Contributions to the LPP are tax-deductible up to a certain ceiling, which can reduce the tax burden on insured individuals.
Disadvantages of the LPP
- Cost: Contributions can represent a significant portion of the budget, especially for employers.
- Complexity: Managing the various LPP plans and understanding the benefits can be complex.
