Pension Fund (BVG/Pensionskasse) in Switzerland
The occupational pension (BVG, Bundesgesetz über die berufliche Vorsorge) is the second pillar of the Swiss three-pillar system. It is mandatory for employed workers above an income threshold and accumulates capital throughout your career. Upon retirement, you choose a pension or a lump sum, one of the most consequential financial decisions Swiss workers make.
- Mandatory for employees earning at least CHF 22,680/year from one employer.
- Employer and employee each contribute age-dependent rates: 7% (25-34), 10% (35-44), 15% (45-54), 18% (55-65).
- Minimum BVG conversion rate is 6.8% (2026); the choice between pension and lump sum is irrevocable.
Who Is Covered and What Is Insured
BVG is mandatory for employees earning at least CHF 22,680/year from one employer (2026 entry threshold). The coordinated salary (versicherter Lohn) = AHV salary minus the coordination deduction (CHF 25,725/year). This is the base for contributions. Employer and employee each contribute age-dependent rates: 7% (age 25–34), 10% (35–44), 15% (45–54), 18% (55–65). The capital accumulates in your pension fund account, generating a minimum guaranteed return (BVG minimum rate, currently 1.5% p.a.).
Capital vs Pension at Retirement
At retirement (age 65), you choose between: pension (calculated by applying the conversion rate to accumulated capital, e.g. 5.5% rate on CHF 500,000 = CHF 27,500/year), or lump-sum withdrawal (capital paid out, taxed at preferential rate). Many pension funds offer a hybrid. The minimum BVG conversion rate (mandatory part) is 6.8% (2026). Funds typically apply lower rates (5.0–5.8%) to the over-mandatory portion. The choice is irrevocable, once you elect a pension, you cannot switch to capital.
Decide based on your life expectancy and risk tolerance, not the headline number. A lump sum looks larger on paper, but a pension keeps paying for as long as you live; with a lump sum, you carry the risk of outliving your own savings.
Portability, Vesting Account and 3rd Pillar
When leaving an employer, your BVG capital transfers to your new pension fund or to a vesting account (Freizügigkeitskonto). Failure to transfer results in it landing at the BVG catch-all fund (Auffangeinrichtung), still accessible but earning lower returns. Early withdrawal is only permitted for: home purchase, emigration from Switzerland, or starting self-employment. The 3rd pillar (voluntary): Pillar 3a (tied pension savings, max CHF 7,258/year for employees in 2026, tax-deductible) and Pillar 3b (free savings, less tax advantage).
Frequently Asked Questions
Can I take my BVG capital as a lump sum when I retire?
Yes, if you notify your pension fund before the deadline (usually 3 years before retirement). The capital is taxed at a preferential rate (separate from income). Many people take a partial lump sum to combine cash flexibility with pension security.
What happens to my pension fund if I leave Switzerland?
EU/EFTA citizens can only withdraw the over-mandatory portion; the mandatory portion stays until retirement or goes to a Swiss vesting institution. Non-EU/EFTA citizens may withdraw the full amount upon permanent departure from Switzerland.
What is the difference between the mandatory and over-mandatory BVG?
Mandatory BVG covers the insured salary up to CHF 88,200/year with a guaranteed minimum conversion rate and guaranteed minimum return. Over-mandatory (for salaries above CHF 88,200) has more flexibility, pension funds can set lower conversion rates and different contribution structures.
Federal Law on Occupational Retirement (BVG/LPP) · Swiss Federal Social Insurance Office (FSIO/OFAS) · BVG 2026 entry thresholds · admin.ch