Gainfully employed persons in Switzerland who are insured under the state pension and earn between CHF 22,680 and a maximum of CHF 90,720 (2025) per year are by law subject to mandatory insurance under the second pillar. The minimum conversion rate for the mandatory BVG pension is 6.8 percent. Pension funds must guarantee this conversion rate with minimum benefits up to an income of CHF 90,720.

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Q: Sample calculation for the split conversion rate

A future pension recipient saved CHF 300,000 in pension fund assets. CHF 200,000 of that amount is the mandatory portion. CHF 100,000 of that amount is the extra-mandatory portion. Split conversion rate In the case of a split conversion rate, the pension is calculated using two different conversion rates: CHF 200,000 at 6.8 percent (mandatory under BVG)= an annual pension of CHF 13,600 CHF 100,000 at 5.2 percent (example rate set by the pension fund for the extra-mandatory portion)= an annual pension of CHF 5,200 Overall, this results in an annual pension of CHF 18,800.

Q: Sample calculation for the combined conversion rate

In this case, a combined conversion rate is used for the calculation. The final result may not be lower than the 6.8 percent for the mandatory portion, i.e. no lower than CHF 13,600 in this case. CHF 300,000 at 5.4 percent (The combined conversion rate usually hovers in this range.) = CHF 16,200 Overall, this results in an annual pension of CHF 16,200. This is higher than CHF 13,600, which means the combined conversion rate is in line with the BVG.

Q: Split conversion rate

In the case of a split conversion rate, the conversion rate of 6.8 percent as set by law applies to the mandatory portion, while a different conversion rate set by the pension fund applies to the salary components of the extra-mandatory portion. This option ensures greater transparency.

Q: Sample calculation for the split conversion rate

A future pension recipient has CHF 300,000 in pension fund assets. CHF 200,000 of that amount is the mandatory portion. CHF 100,000 is the extra-mandatory portion. Split conversion rate In the case of a split conversion rate, the pension is calculated using two different conversion rates: CHF 200,000 at 6.8 percent (mandatory under BVG) = an annual pension of CHF 13,600 CHF 100,000 at 5.2 percent (example rate set by the pension fund for the extra-mandatory portion) = an annual pension of CHF 5,200 Overall, this results in an annual pension of CHF 18,800.

Q: Combined conversion rate

By contrast, the combined conversion rate applies to the entire retirement assets. However, with this approach, the BVG stipulates that the retirement pension must not be below the statutory minimum benefits. This means that the amount paid out may not be lower than the 6.8 percent on the mandatory portion.

Pillar 2

The pension fund conversion rate explained

How much BVG pension can I expect? The conversion rate is used to calculate the annual BVG pension from the existing retirement capital. For a realistic assessment, you should know the most important facts.

by �۶��Ƶ Insights 26 Nov 2024 2 min read

Content:

The conversion rate determines the percentage at which the accrued retirement assets and interest are converted into an annual retirement pension.
The amount is set by law for the mandatory portion and is based on life expectancy and a target return.
Different conversion rates may apply to the mandatory and extra-mandatory portions under some circumstances.
To the conclusion

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At some point, every employee will ask themselves how much their own pension will be. Under the Swiss pension system, the pension comprises the state pension (first pillar), occupational pension provision (second pillar) and private pension provision (third pillar). Together, the three pillars should enable each person to enjoy a financially secure retirement.

In detail, the aim of the BVG, in combination with the state pension, is to achieve a pension income equivalent to approximately 60 percent of your final salary. The conversion rate is an important factor in the actual amount of the pension fund pension. That’s why it’s important you understand how it’s calculated and applied.

The conversion rate is a set percentage that defines the annual BVG pension from the retirement assets in the pension fund. There is a minimum conversion rate for the mandatory portion of the BVG. This conversion rate, set by the Federal Act on Occupational Retirement, Survivors’ and Disability Pension Plans (BVG), is currently 6.8 percent (as at 2025).

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The annual pension is calculated using a simple formula:

Retirement assets × conversion rate = annual pension

Example: if you have CHF 100,000 retirement capital, you will receive an annual pension of CHF 6,800 when you retire at the current conversion rate of 6.8%.

The conversion rate is set by law. Various parameters are used to calculate it. The most important are:

The duration of the pension payment, i.e. the calculated life expectancy of current and future retirees.
The promised interest rate on the existing actuarial reserves, known as the technical interest rate.

Life expectancy

Statistically speaking, nowadays a 65-year-old man who retires may receive a pension for almost 20 years, while a woman of the same age may live up to two and a half years longer.

The BVG pension is paid out for life. This is why the total paid out in pension payments rises with the increase in life expectancy. A 65-year-old man who retired in 1985 received a BVG pension for five years less than the current generation of retirees.

To be able to pay out retirement pensions during this longer period, pension funds need to set aside sufficient capital for the future.

Technical interest rate

The conversion rate is also based on the return expectations for the pension fund capital invested in the capital markets. In effect, the pension funds promise to pay insured persons interest and they estimate how much interest they will be able to pay on the assets during the period when the pensions are paid out.

Based on current life expectancy, according to the Federal Social Insurance Office (FSIO), the current minimum conversion rate of 6.8 percent requires pension funds to generate a return of around 5 percent. Pension funds have on average been unable to generate returns of this magnitude for a long time now.

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Significantly fewer people than expected benefit from the current conversion rate of 6.8 percent. It only applies to the mandatory portion or Obligatorium. If the rate shown on your pension fund statement at the age of 65 is lower than this, you are covered by extra-mandatory insurance or Überobligatorium. However, check with your pension fund to ensure full clarity.

Mandatory portion

Extra-mandatory portion

Extra-mandatory assets are accrued when people pay contributions into the pension fund over and above the mandatory portion, for example by paying contributions on annual salaries above the CHF 90,720 limit or by making higher savings contributions. Each pension fund sets the rate governing the percentage at which these assets are converted into a pension. The percentage is often much lower than the 6.8 percent for the mandatory portion.

If salary components are insured in both mandatory and extra-mandatory pension provision, the pension fund can apply the split conversion rate or the combined conversion rate when calculating a pension.

Split conversion rate

Sample calculation for the split conversion rate

A future pension recipient has CHF 300,000 in pension fund assets.
CHF 200,000 of that amount is the mandatory portion.
CHF 100,000 is the extra-mandatory portion.

Split conversion rate
In the case of a split conversion rate, the pension is calculated using two different conversion rates:

CHF 200,000 at 6.8 percent (mandatory under BVG) = an annual pension of CHF 13,600
CHF 100,000 at 5.2 percent (example rate set by the pension fund for the extra-mandatory portion) = an annual pension of CHF 5,200

Overall, this results in an annual pension of CHF 18,800.

Combined conversion rate

Sample calculation for the combined conversion rate

The combined conversion rate is calculated as a percentage of the total balance. The final result may not be lower than the 6.8 percent on the mandatory portion, i.e. no lower than CHF 13,600 in this case.

CHF 300,000 at 5.4 percent (this is usually the order of magnitude of the combined conversion rate) = CHF 16,200

Overall, this results in an annual pension of CHF 16,200, which is more than CHF 13,600. This means the combined conversion rate is in order according to the BVG.

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The current, legally determined conversion rate for the BVG mandatory insurance has not changed for many years. Until 2005, it was 7.2 percent.

Parliament planned a reduction to 6.0 percent as part of a BVG reform – justified by the further increase in life expectancy and the lower interest rate – in 2023. The failure of this reform in the referendum in September 2024 means that the conversion rate is still 6.8 percent. Back in 2017, a further attempt to lower the conversion rate to 6.0 percent was also rejected at the ballot box.

However, this fixing of the conversion rate only applies to the mandatory portion. Since 2003, there has been one main trend in pension funds’ conversion rates for the extra-mandatory portion: downwards. A further decrease to 5.23 percent is expected by 2029.

The graph shows the development of the average mean value of combined conversion rates as a percentage, for 65-year-old men in this example.

An excessively high conversion rate has a negative impact on the pensions of future retirees – especially those of today’s younger generations.

The majority of pension funds are pushing for the minimum conversion rate to be lowered, as life expectancy is constantly rising and return prospects are insufficient for stable financing given the low interest rates.

If financing is not guaranteed, pension funds have to use funds to secure pensions that would otherwise benefit those currently in employment in the form of higher interest. This applies in particular to higher earners whose extra-mandatory assets generally significantly exceed the mandatory portion. The reform of occupational pension provision (BVG reform) was intended to counteract this.

To understand how much pension you will receive from the second pillar and why, you need to know the conversion rate. This is because your accrued assets will not simply be paid out to you in equal parts by the pension fund once you reach the reference age.

However, in the long term the current conversion rate is no longer sufficient to maintain the principle of solidarity and generational equity in occupational pension provision. It remains to be seen what changes will now be made to financing the second pillar following the failure of the BVG reform at the ballot box.

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