Old-age provision in occupational benefits plans
Occupational pension funds, also called the 2nd pillar, complete the basic 1st pillar AVS/AI/APG system (old age, disability, loss of income). Together, these two insurance systems should ensure that retired people to a large extent maintain their former standard of living
Who is insured?
The LPP/BVG is mandatory for salaried persons already subject to the AVS, with an annual income of at least CHF 22'680 from 2025. This is the threshold of the compulsory occupational benefits scheme and corresponds to 3/4 of the maximum AVS/AHV retirement pension (2025: CHF 2,520 x 12 = CHF 30,240; 3/4 of this = CHF 22,680).
The obligation to take out insurance sets in with gainful employment, after reaching 17 at the earliest. Until the employee reaches the age of 24, the contributions only cover the risks of death and disability. From 1 January after the employee reaches the age of 24, additional savings are made for the retirement pension.
Certain groups of people are not subject to the mandatory scheme: the self-employed, salaried persons with a job contract that does not exceed three months, family members of a person operating an agricultural establishment in which they are employed, persons who are disabled to at least 70 % according to the provisions of the AI. If they want to, such persons may take out minimal insurance on an optional basis.
Old age assets
Capital constituted in order to finance old age benefits is called old age assets. These assets are made up of annual old age bonuses on which an interest rate of at least 1.25 % from 2024 is paid (2017-2023: 1 %; 2016: 1.25%; 2015: 1.75 %). These old age bonuses are calculated as a percentage of the coordinated salary according to the age and sex of the insured person.
The following rates apply :
Each pension fund is free to choose its means of financing the annual old age bonuses, with the LPP/BVG providing but a few general indications. The LPP/BVG is based on the principle of collective financing: the contribution of the employer must be at least equal to the sum of contributions paid by all the employees. Similarly as for the AVS, all payments are made by employers (their own part, and the employee's part, which is deducted directly from the salary).
Old age insurance
Old age insurance under the 2nd pillar is based on individual savings. The savings process sets in when the insured person reaches the age of 25 and presupposes an annual income over the established threshold of CHF 21'510 until 2022, CHF 22'050 until 2024 and CHF 22'680 from 2025. The savings process comes to an end when the insured person reaches retirement age. The savings assets accumulated by the insured person on his individual savings account over the years serve to finance the old age pension. The constituted capital is converted to an annual old age pension on the basis of a conversion factor of 6,80% for men and women.
Overview of occupational benefits retirement pension
Old age pension
To receive a retirement pension, you must have reached the reference age. Since the introduction of the AVS/AHV 21 reform (January 1, 2024), a flexible pension system has been in place in the 1st and 2nd pillars.
The reform replaces the current different ordinary retirement ages for men (65) and women (64) with an identical reference age of 65 for all insured persons.
The reference age for women will be gradually increased as follows:
- women born in 1961: 64 years and 3 months;
- women born in 1962: 64 years and 6 months;
- women born in 1963: 64 years and 9 months;
- women born in 1964 or later: 65 years.
The Old age pension corresponding to 6,80% of the assets accumulated by the insured person.
Flexible retirement: early retirement/ deferred retirement/ partial retirement
Since the introduction of the AVS/AHV 21 reform (January 1, 2024), members have been entitled to early, deferred or partial retirement.
Early retirement: Early retirement is possible from the age of 63. Occupational benefits institutions may stipulate a lower age at which benefits can be received (but no earlier than 58).
Occupational benefits institutions may stipulate a lower age at which benefits can be received (but no earlier than 58).
Deferred retirement: If members continue to work after the age of 65, they have the option of deferring their retirement benefits until the end of their working life, but no later than the age of 70.
Partial retirement: allows insured persons to receive their retirement benefits in the form of a pension in up to three stages. The pension fund may authorise more than three stages. If the retirement benefit is in the form of a lump-sum payment, it may be withdrawn in no more than three stages.
Pensions are reduced in the event of early retirement: since in theory the old age assets have not been constituted entirely, a lower conversion rate is used to calculate the old age pension. In the event of deferred retirement, pensions will be increased.
Capital benefits and / or pension
The insured may also request that a quarter of their assets be paid out as capital. The pension fund may also rule that all old age, survivors' or disability benefits may, upon request, be paid as capital, even if the sum is more than one fourth of the assets. Insured parties must keep the deadline set by the pension fund to request a cash payment.
Child's pensions
In the event of the death of the old age pension recipient, the child or children qualify for an orphan's pension
The pension is paid until age 18 or 25 at the latest if studies or apprenticeship
The child's pension is equivalent to 20% of the retirement pension for each child per year.