Family: Protect yourself against risk with Pillar 3

Risk protection for every family model

Whatever its form: For most people, the family is one of the most important things in life. In order to continue to enjoy a good family life over the long term, it’s important to deal with issues that could tarnish the family’s happiness.

Whether it’s a separation, pension gaps, or strokes of fate such as accidents, illness, or death – no family is immune to this, but everyone can protect themselves against potential risks by planning ahead.

No two families are the same

Nowadays, family are made up in different ways. Married with children, unmarried parents, divorced and a single parent, same-sex parents with children or in blended families, the makeup of a family has changed dramatically with the social changes of recent decades. Even if most families are still structured in a traditional way – married parents and their biological children – every fifth Swiss child is now growing up in a family with unmarried parents or another non-traditional partnership. And looking to the future, alternative forms such as families with a single parent, blended and LGBTQ+ parented families will increase further.

Pension provision for your family situation

Even the traditional family has to take a lot of issues into account when planning its old age and risk protection. However, this structure is relatively well protected under the law because the partners are married, which makes it all the more urgent to address the question of how to comprehensively protect family members when the parents are not married against possible risks such as loss of earnings and the death of the principal earner.

The traditional family

In spite of social changes and the associated opportunities, the traditional family form is still a widespread way of life in Switzerland. This refers to a married couple with joint children. In this type of family, the father is the principal wage earner, while the mother is generally the unpaid carer of the child(ren) and the household without social insurance. In many regions, there is also a modernized version of the family structure in which the mother works part-time in addition to caring for the children.

The legal situation of the traditional family

Of the possible family structures, the married with child(ren) structure has the greatest protection under social insurance law n Switzerland. All personal and property relationships of the married partners are regulated by law. As an example, the parents are automatically granted shared custody from the birth of a child. They also provide for old age as a community and have a mutual obligation to provide assistance and a mutual inheritance entitlement and – in the event of an accident or illness – the right to medical information.

What risks do traditional families face?

In the traditional family model, risks often arise from an imbalance between the principal and supplementary earners.

Pension gaps: Many couples reduce their working hours as soon as a child is born. However, if only one parent earns most of the income or even both of them work less to provide childcare, gaps in retirement provision are inevitable – with every percentage of full-time equivalents, pension benefits in Pillars 1 and 2 decrease.
Inability to work or death: What happens if the family’s principal wage earner suddenly falls ill, has an accident or dies?
Divorce: In the event of a divorce, the pension assets accrued during the marriage are divided between the spouses. In order to calculate the retirement or disability pension of divorced persons, the incomes earned by the spouses during the years of marriage are divided and credited equally to both spouses.

Protecting the traditional family

Anyone seeking comprehensive protection for their family against risks is well-advised to take these precautionary measures.

Purchase of pension fund benefits:  To ensure that a family doesn’t have to accept financial bottlenecks in old age, any pension gap resulting from a reduction in working hours should always be closed as quickly as possible – for example by making a purchase of pension fund benefits.
Pensions with Pillar 3: Tax-privileged retirement savings with Pillar 3a can also protect your family against occupational disability and death.
Occupational disability insurance: In the event of an accident or if the principal wage earner becomes occupationally disabled, occupational disability insurance ensures that the family does not suffer a drop in their standard of living and that it does not face the threat of financial bottlenecks in old age.
Term life insurance: Term life insurance is recommended for families in which one parent earns the majority of the income. This insurance provides financial support by helping to cover the living costs of the survivors or by covering their education and training costs. If the family has a mortgage, insurance is basically a necessity. The family can then remain in the family home should a parent die.

Cohabitation with children

More and more couples are opting for cohabitation, which, although it outwardly appears similar to marriage, can be dissolved informally at any time. In addition to tax and cost advantages, most couples see the lack of legal obligations as the biggest advantage over marriage. This means greater freedom in everyday life, but also less security for the partners and their children in an emergency. Binding regulations are therefore advantageous at the latest if you want to start a family in an unmarried life partnership.

The legal situation for cohabitation with children

For unmarried couples living together, there are no binding rules. All obligations between the life partners have to be drawn up independently and written down in a cohabitation agreement. Hence, the father, for example, is not automatically related to the child from birth – the legal parent-child relationship initially only applies to the mother. In order for the father to be recognized as the biological father of the child, paternity must first be officially acknowledged or established by a decree if the father refuses to acknowledge the child.

What are the OASI risks for cohabiting couples with children? 

The freedom of living together without a marriage certificate often becomes a disadvantage in an emergency. Many couples live in a de facto marriage, but lack equal protection on separation or death. Inheritance and pension planning require particular attention.

Separation: Particularly if a life partner does not work or only works part-time and cares for children, there is a risk that he or she will be left empty-handed when the partnership ends. First, because only the employed partner pays OASI contributions, and, second, because the pension assets do not have to be divided as for married couples.
In the event of death: In the event of death, cohabiting partners are left empty-handed because an OASI pension is not provided. Only the children of unmarried parents receive an OASI orphan’s pension on the death of the mother or father.

Protecting cohabiting couples with children

Cohabitation agreement: The Cohabitation Agreement governs, among other things, the division of the cost of living, the relationship with the children and ownership of the assets brought in. Estate planning must be regulated separately in a will. It should be noted that the cohabiting partner is not a legal heir and is therefore subject to inheritance tax, depending on the canton. Retirement/financial planning is advisable for pension planning.
Child support agreement: It is advisable to set out the obligations and rights of parents by contract from birth and to conclude a child support agreement for the child or children and obtain approval from the child and adult protection authority (Kindes- und Erwachsenenschutzbehörde) or a judge. A valid child support contract is a prerequisite for debt collection assistance and for entitlement to an advance payment of alimony.
OASI education credits: If a cohabiting partner takes care of the child and is not engaged in paid work, this partner should also pay the minimum contribution for persons not gainfully employed or allow the OASI education credits to be taken into account.
Occupational disability insurance: In the event of an accident or if the principal wage earner becomes occupationally disabled, occupational disability insurance ensures that the family does not suffer a drop in their standard of living and does not face the threat of financial difficulties in old age.
Pension fund: Most pension funds grant survivors’ benefits in cohabitation under certain conditions. The relevant pension fund regulations apply. In addition, the order of beneficiaries must be filed in writing with the relevant foundation.
Pensions with Pillar 3: In the event of death, the life partner and biological children are entitled to the deceased’s savings capital. This requires the name of the benefiting life partner to be documented in writing at the bank or insurance company. It is also recommended that the beneficiary is documented in a will. Under Pillar 3b, cohabiting partners can also protect themselves in the event of death with life insurance. It is important that the insurer is informed in writing of the name of the beneficiary.
Will: If you want to involve your partner in your estate planning, it is advisable to draw up a will or have a notarial inheritance contract drawn up.

Single-parent family / single parents

A parent who is separated, divorced or widowed and has been alone with a biological/adopted/foster child or stepchild since birth: Single-parent families come about in various ways.  

The legal situation of single parents

If the second parent is not deceased and does not pose a risk to the child, the parents continue to share parental responsibility. In most cases, one of the parents – usually the mother - has sole custody of the child and assumes all the tasks associated with its upbringing: earning money, running the household, childcare.

What risks do single parents face?

Raising children alone is not easy. And it’s even harder to be well insured and save for old age – especially on the tight budget usually at the disposal of a single-parent family. Single parents are therefore often affected by pension gaps.

Pension gaps: Single parents can find it particularly difficult to reconcile gainful employment and family responsibilities. In many cases, they work less and suffer losses in income. They therefore pay less into OASI and they are often not insured in a pension fund for a longer period of time. In addition, they often do not have enough unallocated assets to pay additional savings contributions into Pillar 3.
Loss of earnings: How are living and/or education costs covered if the sole wage earner is unable to work?

Protecting single parents

OASI education credits: OASI education credits help to close gaps in the retirement provision of single parents. Until the child is 16 years old, the credits are due to the parent with chief responsibility for the child.
Child support payments: The separated parent supports the single parent with Alimony: prorated child support and compensation for childcare costs. If the person liable for maintenance does not pay, pays irregularly or falls below the subsistence minimum as a result of the payments, it is advisable to call on the state alimony/social welfare office.
Occupational disability insurance: In the event of a loss of earnings of the sole wage earner, corresponding insurance ensures that the family does not face any financial difficulties and that the child or children’s education is secure.

The blended family

Blended families are often characterized by the complexity of their biological and personal relationships. Whether through separation, divorce or the death of a parent, at least one partner brings one or more children from a previous relationship into the new marriage or partnership. The birth of new, joint children can lead to the addition of further half-sibling relationships to this family structure.

The legal situation of blended families

As the name suggests: One blended family rarely resembles another. Each has its own history with, in most cases, a correspondingly complex legal situation. On the one hand, because children in a blended family usually have a mixture of biological and non-biological parents and siblings. But also because the parents may already have a family history involving such obligations. 

What risks do blended families face?

A stroke of fate can have serious consequences, especially if the life partners in a blended family are not married. Legal succession is based on the classic family with the result that non-biological children and life partners are left empty-handed following the death of a parent.

Sickness: If a parent in a blended family gets sick and can no longer work or look after their children, the blended family is threatened with a serious income gap.
Death: In the event of death, life partners and non-biological children in a blended family are left empty-handed because an OASI pension is not provided. Only the biological children receive an OASI orphan’s pension and are entitled to inherit if the mother or father dies.

Protecting the blended family

Adoption: Protection becomes easier if new partners marry and adopt children from previous partnerships, so that they have the same rights as biological children. However, as blended families are more frequently created following divorce or separation than from the death of a parent, adoption should only be considered in exceptional cases.
Wills: It is advisable to draw up a will in which not only the biological children but also the life partner and their children are taken into account. Nevertheless, only a small part of the assets can be freely bequeathed as the biological children always receive a fixed mandatory portion.
Occupational disability insurance: In the event of an accident or occupational disability of a life partner, insurance ensures the continuation of the same standard of living for the blended family.
Life insurance: In addition to the will, it is advisable to take out life insurance to protect the blended family. This allows you to determine who should benefit in the event of your death – and to what extent.

The LGBTQ+-parent family

A LGBTQ+-parent family is a family in which at least one parent identifies as lesbian, gay, bisexual, trans* or queer. Some intersex parents also belong to the LGBTQ+-parent families.

Children in these families come into their family in different ways: They may come from previous heterosexual relationships, be born into a same-sex partnership, be adopted or be fostered. Some families are founded abroad through surrogacy or egg donation. In the case of trans* parents, the coming-out may have taken place before or after starting a family.

The legal situation of LGBTQ+-parent families

In recent years, Switzerland has taken important steps to provide legal protection for LGBTQ+-parent families. In 2018, stepchild adoption became possible for same-sex couples, and since July 2022, marriage has been open to all couples. This means that same-sex couples now have full adoption rights and can adopt a child together – a step previously only possible through the stepchild adoption of the partner’s biological child. Lesbian couples now also have access to artificial insemination in Swiss sperm banks, which was previously only allowed for heterosexual couples.

These legislative changes strengthen the legal protection of LGBTQ+-parent families. Same-sex parents now have full parental rights and thus equal rights in areas such as inheritance and custody. In many cases, the stepchild adoption, which was often necessary in the past, is no longer necessary because both partners can be recognized as equal parents – regardless of whether they are married or living in a life partnership.

What risks do LGBTQ+-parent families face?

Inheritance law and social insurance are geared towards the traditional family. Only registered or married partners, biological children and adopted children are legally entitled to an inheritance and a survivor’s pension from OASI, mandatory accident insurance and the pension fund of the deceased.

Death: If the co-parent of a LGBTQ+-parent family dies, the child has no inheritance rights without adoption and no right to a child’s or orphan’s pension. 
Separation: If the partners separate, an unadopted child has no relationship to the co-parent and their family, no visiting rights, and no child support claims against the co-parent.

Protecting the LGBTQ+-parent family

Registration of partnership/marriage: Since July 1, 2022, it is no longer possible to register a new partnership. Existing partners can retain their marital status or convert it into a marriage. Marriage at the civil registry office means that the partners are mutually obligated to support each other, have pension entitlements and are entitled to an inheritance and a compulsory share.
Stepchild adoption: If the second biological parent is unknown, deceased or agrees to the transfer of their rights and obligations, a partner can adopt the partner’s child.
Pension fund: With a pension fund, it is important to clarify the respective conditions and for each partner to name the other as beneficiary. The individual benefits in the event of death are determined in accordance with the regulatory provisions.
Pillar: In the event of death, the spouses, registered partners and biological children are entitled to the deceased’s savings capital. This requires the name of the life partner named as beneficiary to be documented in writing at the bank or insurance company. It is also recommended that the beneficiary is documented in a will. Under Pillar 3b, the registered life partner can also be protected in the event of death: with life insurance. It is important that the insurer is informed in writing of the name of the beneficiary.
Will: If you want to include the children of your spouse or registered partner in your estate planning, it is advisable to draw up a will or have a notarial inheritance contract drawn up.
Occupational disability insurance: In the event of an accident or occupational disability of a life partner, insurance ensures that the LGBTQ+-parent family continues to receive the same standard of living. 
Life insurance: To protect the LGBTQ+-parent family financially, it makes sense to take out life insurance as a supplement to a will. This allows you to determine who should be the beneficiary in the event of your death – and to what extent.

Frequently asked questions

If you die, your spouse receives benefits from Pillars 1 and 2. However, this is often less than the actual income requirement – especially if you have joint financial obligations. You can fill this pension gap using preventive measures such as taking out life insurance or whole life insurance.

Unmarried couples have no mutual legal inheritance entitlement if a partner dies. Individual pension solutions such as a cohabitation agreement or a will ensure that the life partner can inherit. In addition, it is advisable that the life partner informs their own pension fund and benefits their partner with their retirement savings under Pillars 3a and 3b.

If the children are still minors or still in education, the OASI pays an orphan’s pension if you die. In addition, in a legally valid will, you can distribute your estate and stipulate the guardianship rules in line with your wishes. A rule on how the inherited assets are to be managed should also be included in a will.

That depends on your marital status. If you are married or living in a registered partnership, the savings are distributed to your children and spouse according to the legal line of succession or the marriage contract. If you are unmarried, any biological or adopted children receive the lion’s share – the next heirs in accordance with the legal line of succession are your parents, your siblings and their children. An unmarried life partner must be explicitly acknowledged through an individual pension plan, otherwise they will end up empty-handed. If you leave a will, the people listed therein are taken into account.

The following general rule applies: All precautionary measures must be taken individually while you are both still alive and be specified in writing - i.e. in a cohabitation agreement - since no entitlements exist in law. It doesn't matter how long you have lived together. 

With occupational disability and/or term life insurance. The former is a sensible investment at the latest when you acquire your own property. It adds to the mandatory benefits paid by social insurance in the case of occupational disability for health reasons or disability, allowing you to continue to receive your usual income. Term life insurance is also suitable for financing residential property and mortgages in the event of occupational disability.

The Swiss 3 Pillar system

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Pillar 1: AHV (OASI) /IV (InvIA) / EO (LEC)

The purpose of Pillar 1 is to secure livelihoods after retirement, in the event of disability and incapacity to work, or after a death.

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Pillar 2 – occupational pensions

Pillar 2 includes occupational pensions, occupational accident insurance, daily sickness benefits insurance and the vested benefits institutions. It’s intended to enable people to maintain the standard of living they’re accustomed to after retirement.

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Pillar 3 – personal pension provision solutions

By making voluntary payments into pension provision with withdrawal and contribution restrictions (Pillar 3a) or flexible pension provision (Pillar 3b), you can close income gaps from Pillar 1 and 2 of the Swiss social system to the fullest extent possible.

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