When is the pension better than taking the lump sum?

The higher the conversion rate and the longer you live, the better the pension. At 5.4% and CHF 400,000, breakeven is roughly 17–18 years. Retire at 65, live to 85+ = pension usually wins.

What is the conversion rate and how does it affect my pension?

The conversion rate determines annual pension per CHF 100,000 balance. BVG minimum: 6.8%. Many funds: 5.0–5.8%. Lower rate makes lump sum more attractive.

How much is the lump sum withdrawal tax in Switzerland?

Varies by canton: Zug ~4%, Basel-Stadt ~9%. On CHF 400,000: between CHF 16,000 and CHF 36,000. Taxed separately at reduced rate.

Can I combine pension and lump sum?

Yes, many funds allow mixed withdrawal (e.g. 50/50). Combines guaranteed income with flexibility and inheritability.

Pension vs Lump Sum: The Breakeven Calculator for Your Retirement

Thierry

February 26, 2026 3 min read

arvy Pension Calculator

Pension vs Lump Sum: The Breakeven Calculator for Your Retirement

How many years until the pension pays out more than the lump sum? Calculate the breakeven for your situation.

Pension fund balance

Your total pension fund balance (mandatory + supra-mandatory). Found on your pension certificate. The higher the balance, the more important this decision becomes. → Glossary: Pension Fund

CHF 100,000CHF 1,200,000

Conversion rate

The conversion rate determines your annual pension: balance × rate = pension. The BVG minimum (6.8%) applies only to the mandatory portion. Many funds apply 5.0-5.8% to the total balance. A lower rate makes the lump sum more attractive. Check your pension certificate. → Glossary: Conversion Rate

4%6.8%

BVG minimum: 6.8%. Many funds: 5.0–5.8%

Investment return (lump sum)

The expected return if you invest the capital yourself. Conservative (bonds): 2-3%. Mixed: 3-5%. Equity-oriented: 5-7%. Higher returns make the lump sum more attractive — but also riskier. → Compound Interest Calculator

1%8%

Annual withdrawal rate

How much you withdraw annually (as % of starting capital). The 4% rule (Trinity Study) is considered sustainable over 30 years. At 3% you are safer, at 5% you need higher returns. → FIRE Calculator

2%6%

Canton (lump sum withdrawal tax)

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⚠ Simplified estimate. Not financial, tax, or pension advice. Values vary by pension fund regulations, canton, and personal situation. Survivor's pension (60%) and mixed withdrawal not modelled. arvy is a FINMA-regulated asset manager.

Pension or lump sum — the most important retirement decision

At retirement, you face an irreversible decision: take your pension fund balance as a monthly pension or withdraw it as a lump sum? Both options have clear advantages and disadvantages, and the right choice depends on your personal situation.

The pension offers security: a guaranteed monthly payment for life. The downside: it's not inheritable (exception: survivor's pension, typically 60%), not flexible, and the amount depends on the conversion rate, which is declining at many pension funds.

The lump sum offers flexibility: you control the withdrawals, you can invest and grow the capital, and any remaining balance can be passed on to heirs. The downside: you bear the investment risk and longevity risk — what happens if you reach 95 and the capital is depleted?

What the conversion rate means for you

The conversion rate is the percentage used to convert your pension fund balance into an annual pension. The BVG minimum is 6.8% — but that only applies to the mandatory portion. Many pension funds apply a lower rate of 5.0–5.8% to the total balance (including the supra-mandatory portion). A lower conversion rate means less pension per franc of balance — and shifts the breakeven in favour of the lump sum. Check your pension fund statement: your applicable conversion rate is listed there.

→ Pension vs Lump Sum: The Complete Guide
→ Pension Gap Calculator
→ 3a Tax Savings Calculator
→ Investing After 50: The Guide
→ Budget Calculator: How much can you invest?