Understanding the Second Pillar: Occupational Pensions
June 16, 2023
4 min read
arvy's Teaser: Your pension fund is probably your largest asset — CHF 200,000, CHF 300,000, sometimes over CHF 500,000. And yet most people have never properly read their pension statement. That's like owning a property and never reading the contract. Here's everything you need to know about the 2nd pillar — and the 4 levers worth tens of thousands of francs.
CHF 300k–500k
Typical pension fund balance: CHF 100k salary / 35 years
6.8%
BVG minimum conversion rate (mandatory)
CHF 7,000
Tax saving: CHF 20k buy-in at 35% marginal rate
What the 2nd pillar is — and why it matters more than you think
The occupational pension (BVG / Pensionskasse) is typically the largest asset most Swiss residents own — often CHF 200,000–500,000+. And most people have never properly read their pension statement.
Unlike the AHV (pay-as-you-go), the pension fund operates on a funded basis: you accumulate your own balance. Your employer contributes at least half. The money is invested and grows over the years.
Key terms — simply explained
Coordination deduction — and why it's a problem for part-time workers
Not your entire salary is insured — only the portion above the coordination deduction of CHF 25,725. On a salary of CHF 88,200, only CHF 62,475 is insured (the "coordinated salary").
Part-time warning: Many pension funds don't adjust the coordination deduction for part-time work. Someone working 60% and earning CHF 54,000 has an insured salary of only CHF 28,275 — a massive gap.
Conversion rate — how much pension you get per CHF 100,000
| Conversion rate | Annual pension per CHF 100,000 | Monthly per CHF 100,000 |
|---|---|---|
| 6.8% (mandatory minimum) | CHF 6,800 | CHF 567 |
| 5.4% (typical supra-mandatory) | CHF 5,400 | CHF 450 |
| 4.8% (low supra-mandatory) | CHF 4,800 | CHF 400 |
At CHF 400,000 and a 5.4% conversion rate: CHF 1,800/month in pension fund income. Plus maximum AHV: CHF 4,320/month total. Manageable — but tight in Switzerland.
Retirement savings contributions — how your balance grows
| Age | BVG minimum contributions (% of coordinated salary) |
|---|---|
| 25–34 | 7% |
| 35–44 | 10% |
| 45–54 | 15% |
| 55–65 | 18% |
The 4 big levers worth tens of thousands
Lever 1: Voluntary pension fund buy-ins
Buy-in potential on your pension statement? Every franc voluntarily contributed is fully deductible from taxable income.
Example: CHF 20,000 buy-in at 35% marginal rate = CHF 7,000 in immediate tax savings.
Important: No buy-in within 3 years of a planned capital withdrawal — otherwise the tax advantage is reversed.
Lever 2: Annuity vs. lump sum
At retirement you choose: annuity (monthly, for life) or lump sum (one-off, flexible, but you bear the investment risk). This decision is irreversible and worth CHF 100,000+. (→ Annuity or Lump Sum? The Definitive Comparison)
Lever 3: Compare employers' pension funds
Pension funds vary massively: supra-mandatory contributions, interest rate, conversion rate, death and disability benefits. When changing jobs: don't just compare salary — compare the pension fund. A generous PF can mean CHF 50,000–100,000 difference over a career.
Lever 4: Check the coordination deduction (especially for part-timers)
Progressive employers adjust the deduction proportionally — ask about the PF regulations. Part-time workers can often significantly improve their insured income by choosing the right employer.
What happens when you change jobs? Understanding vested benefits
When you change jobs, your pension fund balance — the vested benefit — transfers to the new employer's pension fund. Without a new job: open a vested benefits account. Many people forget this money or leave it in uninteresting accounts.
"Your pension fund is your largest asset — and simultaneously the asset you know least about. Change that."
Your next steps
✅ Request and read your pension statement — check buy-in potential (→ Understanding Your Pension Statement)
✅ Check your buy-in potential — often the biggest tax lever of your life
✅ Max out your 3a — the perfect complement (→ 3a Comparison 2026)
✅ Calculate your pension gap (→ Pension Gap Calculator)
✅ Plan your withdrawal strategy (→ Annuity or Lump Sum?)
Frequently asked questions about the Swiss pension fund
How much pension fund balance do I have?
Check your pension statement (sent annually or accessible via your pension fund's online portal). On an income of CHF 100,000 over 35 years, a balance of CHF 300,000–500,000 is typical.
What is the conversion rate in the Swiss pension fund?
The conversion rate determines how much annual pension you receive per CHF 100,000 of balance. Mandatory minimum: 6.8% (CHF 6,800/year). Supra-mandatory: often only 4.8–5.4%. At CHF 400,000 balance and 5.4%: CHF 1,800/month in pension income.
Is a voluntary pension fund buy-in worthwhile?
In most cases yes — especially with higher income. Every franc contributed is fully tax-deductible. At CHF 20,000 and 35% marginal rate: CHF 7,000 in immediate tax savings. Don't do a buy-in within 3 years of a planned capital withdrawal.
What is the coordination deduction in the Swiss pension fund?
Only income above CHF 25,725 (2026) is insured in the pension fund. On a salary of CHF 88,200, only CHF 62,475 is insured. For part-time workers this can be disproportionately large — progressive employers adjust it proportionally.
Know your largest asset.
Understand your pension fund, invest your 3a, close the pension gap. arvy helps you make the decisions worth hundreds of thousands.
Open Pillar 3a | Start savings plan
Disclaimer: General information only. Figures based on 2026 legal provisions. Pension fund benefits vary by employer. arvy is an asset manager supervised by FINMA.
