Rate in percent at which BVG retirement assets are converted into a lifelong annual pension. The conversion rate for women as well as for men is 6.8 percent (as of 2021). In the extra-mandatory portion (see "Extra-mandatory portion"), there is no conversion rate prescribed by law. If the same conversion rate is used for your entire retirement assets (mandatory and extra-mandatory portion), a “comprehensive conversion rate” is referred to.
It is deducted from your gross salary to determine your insured (coordinated) salary. Retirement credits (see "Retirement credits") are paid on your insured (coordinated) salary. The coordination amount is CHF 25,095 (as of 2021) and corresponds to 7/8 of the maximum ordinary AHV pension.
Encouragement of home ownership
Statutory option to make an advance withdrawal of or to pledge pension assets from your pension fund or restricted pension plan (pillar 3a) to finance owner-occupied residential property.
Income above CHF 86,040 per year (as of 2021) does not fall under the statutory provisions but can be insured anyway by many pension funds. The conversion rate for the extramandatory portion as well as the interest may be lower.
The funding ratio shows the relationship between the assets and the obligations of a pension fund. If the funding ratio is under 100 percent, then the pension fund does not have sufficient funds to cover current and future obligations with assets.
Pension funds must comply with statutory benefits for salaries up to CHF 86,040 per year (as of 2021). In addition, annual interest (see "Minimum interest rate") is credited on the mandatory pension fund assets.
Minimum interest rate
The minimum interest rate set by the Federal Council at which BVG retirement assets must earn interest. In 2021, the minimum interest rate is 1 percent.
Retirement assets are composed of individual retirement credits (employer and employee contributions), voluntary purchases of pension fund benefits and interest credits received.
Savings contributions that the insured person and the employer pay into the occupational retirement plan.
Capital that is due to you if you leave a pension fund and before an insured event occurs (such as retirement). If you change jobs, the entire vested benefits (mandatory and extra-mandatory portion) must normally be transferred to the new employer’s pension fund.
Retirement provision in Switzerland is based on three pillars:
- AHV and disability insurance form pillar 1, the state pension system. They are mandatory and secure your minimum living wage.
- Pillar 2 for occupational pensions is designed to maintain your standard of living. It is mandatory for employees.
- Pillar 3 for your private pension is designed to close the gap between income from pillars 1 and 2 and your required income as a retiree.
Employed workers must pay into AHV/IV/EO starting on January 1 after they turn 17, and non-employed persons must also pay in starting on January 1 after they turn 20.
In pillar 2, employees are insured against the risks of disability and death starting on January 1 after they turn 17, and they begin saving for retirement starting on January 1 after they turn 24.
Anyone who earns income liable to AHV contributions in Switzerland can pay into the tax-exempt pillar 3a. Pillar 3b relates to private savings without statutory conditions or tax benefits.