Pensionskasse (2nd Pillar)

The Pensionskasse, or pension fund, is the second of the three pillars, governed by the occupational pensions act, the BVG. Your employer joins one for you, and part of your salary goes into savings in your name. Unlike the AHV, it's real saving: what you and your employer pay in, plus interest, is what you draw on when you retire. The fund also insures you against disability and death.

It's compulsory for employees who earn more than CHF 22,680 a year with one employer (2026). Cover for death and disability starts in the January after your 17th birthday, saving for retirement in the January after your 24th. The self-employed can join voluntarily. When you change jobs, your savings normally move to the new employer's fund. Between jobs, they go to a vested benefits account.

Not all of your salary is insured. Under the legal minimum, the fund insures the part between CHF 26,460 and CHF 90,720 a year, the insured or coordinated salary, and at least CHF 3,780. Each year it credits a share of that to your savings: 7% from age 25, 10% from 35, 15% from 45 and 18% from 55. Here's the legal minimum for a salary of CHF 80,000 at age 40:

CHF 80,000 minus the coordination deduction of CHF 26,460 leaves an insured salary of CHF 53,540. At 40 the savings credit is 10% of that, CHF 5,354 a year. Split evenly, you pay CHF 2,677 and your employer CHF 2,677. By law, an employer pays at least as much as all its employees together. On top usually come contributions for disability and death cover. How much is set in your fund's rules. The fund pays interest on the savings, in 2026 at least 1.25% on the mandatory part. Your own fund may insure more than this legal minimum: a larger part of your salary, or higher credits.

At retirement, the fund turns your savings into a yearly pension with its conversion rate. For the mandatory part of the savings, the law sets a minimum of 6.8% at age 65. Here's what CHF 500,000 of savings pays a year at two rates:

At 6.8%, CHF 500,000 pays CHF 34,000 a year, or CHF 2,833.33 a month, for life. At 5.0% it's CHF 25,000 a year, or CHF 2,083.33 a month. The 5.0% is only an example: a fund that insures more than the minimum may use a lower rate on the whole balance, as long as you still get at least the legal minimum benefits.

Instead of a pension you can take at least a quarter of your savings as a lump sum. Your fund's rules may allow more, and may set a deadline for asking. If you're married or in a registered partnership, a lump sum needs your spouse's or partner's written consent. A pension is paid for as long as you live; a lump sum is yours to invest and spend, and so is the risk of outliving it. At 6.8%, the pension pays out the CHF 500,000 in 14.71 years, before interest and tax. The two are taxed differently too: a lump sum once, separately from your other income and at a reduced rate, a pension every year as income.

If your savings are below what your fund's rules would give you, for example after years abroad, part-time work or a pay rise, you can pay in voluntarily, up to that gap. A buy-in comes off your taxable income. The catch: the benefits it buys can't be taken as a lump sum for three years.

If you move here from abroad and have never been in a Swiss pension fund, your buy-ins are capped at 20% of your insured salary a year for the first five years. And if you've withdrawn money for a home, you have to pay it back before you can buy in voluntarily.

Every fund is different. The coordination deduction, the savings credits and the 6.8% conversion rate on this page are the legal minimum, and the 6.8% applies only to the mandatory part of your savings. A fund can go beyond the minimum with its own rules, and may then use a lower conversion rate on everything you've saved, as long as you still get at least the legal minimum.

So don't plan with the legal figures. By law your fund has to tell you every year what you've saved and what it will pay, usually on a pension certificate, the Vorsorgeausweis. That's the document to check, and the one to read before deciding between a pension and a lump sum.