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.
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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.
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 Old-Age and Survivors' Insurance (AHVG/LAVS) · Swiss Federal Social Insurance Office (FSIO/OFAS) · admin.ch