State pensions, corporate pensions and private pensions are the three main pillars that form Liechtenstein's social insurance system. This network makes it possible for workers to cover risks such as illness, accidents, disability and unemployment and to prepare financially for retirement.
Workers in Liechtenstein's companies enjoy a social insurance system that both covers a range of risks and is in some cases also co-financed by their respective employers. Pillars one and two are mandatory, while pillar three is voluntary.
Pillar one of the social insurance system is mandatory state insurance designed to safeguard the livelihood of all people living or working in Liechtenstein. Those who work in both Liechtenstein and a neighbouring country must pay social insurance contributions on their entire income in the country they live in. Pillar one comprises:
Employers and employees pay a percentage of the salary into this insurance and pension fund, which is an independent public body monitored by the state. The employer is responsible for deducting contributions from the employee's pay and transferring this money to the correct department.
For the AHV, employees pay 3.95% and employers 4.15% of the salary. For the IV an additional 0.75% is deducted from the employee and 0.75% from the employer. FAK contributions total 1.9% and are paid by the employer. The employer also pays an administrative contribution of 0.2875%. The ALV accounts for 0.5% for both employers and employees. In total the worker pays 5.2% of his salary and the employer an additional 7.5875%. Self-employed persons pay contributions according to their income. Persons not in work pay an annual contribution which is calculated according to their assets, pension income and other factors. More information is available from the offices of the AHV/IV/FAK/ALV.
Pillar two also comprises mandatory insurances. For corporate pensions there is an upper and a lower threshold stipulated by law, with businesses free to set contributions anywhere between these thresholds. If employees were only covered by pillar one then they would face significant costs if they were forced to make a claim (insurance for old age, widowers, orphans, disabled persons). Pillar two is designed to ensure that citizens are able to continue to live lives to which they have become accustomed even if they are forced to make a claim. Corporate insurance includes pension funds (PK), health insurance (KV) and mandatory accident insurance (OUFL).
As with pillar one, it is the employer who is responsible for registering the employee with a pension fund and to transfer the contributions to the insurer. These contributions are generally split 50/50 between the employer and the employee, though there are sometimes different provisions. All workers earning more than 20,880 CHF subject to AHV must be insured. Contributions are paid from the age of 18 (disability, death). Pension contributions begin at the age of 24.
Health insurance guarantees that employees who are unable to work receive benefits equivalent to 80% of their income subject to AHV. While these contributions are divided 50/50 between employers and employees, it is the employer who is responsible for establishing the insurance and transferring the contributions to the insurer. Health insurance for inability to work is mandatory for all employees over 15 years of age who work for an employer with its headquarters or a branch office in Liechtenstein. However, all persons living or working in Liechtenstein (except cross-border commuters from non-EEA states, e.g. Switzerland) must have nursing insurance. The employer makes a fixed-sum contribution to this nursing insurance.
The third element of corporate insurance is the mandatory accident insurance. It is divided into insurance for accidents in the workplace and insurance for accidents outside the workplace. The former covers accidents in the workplace and illnesses resulting from work (e.g. doctors' fees, cost of medicines, etc.) and is paid entirely by the employer. The latter covers all accidents not related to work (leisure) and covers the same costs as insurance for accidents in the workplace. The employee pays the contributions for insurance for accidents outside the workplace. The employer deducts the employee's contribution directly from his pay and transfers this contribution to the insurer.
Pillar three is a voluntary, private insurance designed to supplement pillars one and two on an individual basis. This enables employees to fill any gaps left by pillars one and two. This often takes the form of private life insurance.Pillar three is financed 100% by the employee and involves neither the employer nor the state.