The BVG (Federal Act on Occupational Old-Age, Survivors’, and Disability Pension Plans) governs the regulations governing pension funds and serves as the second pillar of the Swiss pension system. This is intended to ensure that you can maintain 60% of your standard of living even after retirement. The amount of the BVG contribution depends on your salary, your age, and your employer’s pension plan. The pension fund contribution ranges from 7% (for people between the ages of 25 and 34) to 18% (for people between the ages of 55 and 64 or 65). The employer and the employee each pay half of the contributions.
What is the BVG?
In Switzerland, retirement savings are funded through a three-pillar system. The BVG constitutes the second pillar of this system. The first pillar, the Old Age and Survivors’ Insurance (AHV), is designed to provide for your livelihood after you reach retirement age. The BVG is intended to ensure that at least 60% of your accustomed standard of living can be financed. The third pillar, private retirement savings, can then guarantee up to 100% of your standard of living.
Who is subject to the BVG, and who is not?
The following individuals are required to make contributions to the second pillar of the pension system. They are:
- Anyone who is already subject to AHV contributions,
- anyone who is at least 17 years old,
- Anyone with an annual salary of more than 22,680 francs (as of 2025).
The following are not subject to the BVG:
- Self-Employed Individuals
- Employees with short-term employment contracts (up to three months)
- Family members who work on their own farm
- Individuals who are at least 70% unable to work
However, these individuals may also choose to enroll in the BVG on a voluntary basis.
How much is the BVG deduction?
The amount of the BVG contribution is determined by the employee’s salary, age, and the employer’s pension plan. If your annual salary is between 22,680 and 90,720 Swiss francs (as of 2025), you are required to be insured under the BVG. Even if your annual salary exceeds 90,720 Swiss francs, your coverage under the second pillar is limited to this amount. Any amount above that falls under the third pillar, which is private insurance.
The deductions as a percentage are (example):
- Ages 25–34: 7%
- Ages 35–44: 10%
- Ages 45–54: 15%
- 55 – Reference age: 18%
The employer covers half of these contributions. The employer pays the pension fund twice the amount deducted from the employee’s paycheck. That is the legal minimum requirement. However, the employer is free to find a solution that goes beyond this minimum. This can, for example, make job postings more attractive.
Risk premiums and administrative costs are also split equally between the employee and the employer. These are not subject to a flat-rate arrangement but are determined on a case-by-case basis. For example, a risk premium may be set at a higher rate if the employee is required to travel extensively for work.
Threshold Amounts Under the BVG
For the 2nd pillar, the following limits will apply starting in 2025:
| Minimum Annual Wage (Entry Threshold) | 22,680 francs |
| Coordination Deduction | 26,460 francs |
| Minimum Insured Wage | 3,780 francs |
| Maximum Insured Wage | 64,260 francs |
| Upper BVG Threshold | 90,720 francs |
The Coordination Deduction
If benefits from the first and second pillars are coordinated, a coordination deduction is applied. Under the BVG, this deduction is set at 26,460 francs (87.5% of the maximum full AHV pension).
Insured Wages
For example, if someone earns a gross annual income of 76,460 francs, the coordination deduction of 26,460 francs is subtracted from that amount. In this example, the insured wage is 50,000 francs and serves as the basis for calculating contributions.
Minimum Insured Wage
For example, if the gross annual salary is 24,000 francs, then after the coordination deduction of 26,460 francs, the insured wage would be negative or zero.
In this case, the minimum insurable wage is 12.5% of the maximum annual full AHV pension, which amounts to 3,780 francs in 2025.
Maximum Insured Wage
This salary corresponds to the upper BVG limit, from which the coordination deduction has already been subtracted. The amount is currently 64,260 francs.
Upper BVG Contribution Limit
The reported annual salary for the second pillar is also capped. The limit corresponds to 300% of the maximum full AHV pension. Consequently, the upper limit for BVG contributions is an annual income of 90,720 Swiss francs. If the portion of the salary exceeds this amount, it may also be insured; however, this is not required by law.
How long do you have to be enrolled in the BVG?
In the event of a break in employment—such as maternity leave, a trip around the world, or unemployment—the accumulated funds are entrusted to an institution such as a bank, an asset management firm, or an insurance company. While this money is held in a low-risk account, it does not generate a return. When someone changes jobs, they typically transfer their BVG pension savings to their new pension fund.
Mandatory insurance under the second pillar of the system generally ends when you:
- have reached the statutory retirement age (currently 65 years old, with transitional rules for women born between 1961 and 1963)
- the employee earns less than 22,680 francs
- the employment relationship is terminated
When and how will the money be paid out?
About ten years before you might retire—usually starting at age 58—you can begin to consider whether you’d like to receive your accumulated savings as a lump sum, an annuity, or a combination of both.
Pension Benefits:
The advantage of receiving a pension is the certainty that you will receive it for the rest of your life. In the event of death, a lifetime widow’s or widower’s pension is paid out. The pension thus provides planning security, and the pension fund bears the longevity risk. The disadvantage is that the pension is taxed at a rate of 100%.
Capital withdrawal:
With this option, you receive the money you’ve saved as freely available assets and can invest it in something else. The payout of this amount is taxed only once, with the tax rate ranging from about 5% to 15%. The exact rate depends on the canton, municipality, and applicable tax rates. Generally, however, you can expect to pay about 10% tax on the amount paid out. With a lump-sum withdrawal, you bear the longevity risk yourself.
Hybrid:
More and more people are opting for a combination of a lump-sum payment and a pension. In this case, a decision must be made regarding what portion is needed to fund a lifetime pension and what portion can be paid out as a lump sum.
Early Retirement
Withdrawing your savings early is possible under certain conditions. There are the following six options:
- Purchase of a residence for permanent personal use
- Starting a self-employed business (forming a GmbH or AG does not constitute self-employment!)
- Emigration to a non-EU/EFTA country (if you emigrate to an EU/EFTA country, you will receive only the mandatory pension benefit)
- Early Retirement
- Payment of the Vested Benefits Due to a Break in Employment
- Cash Payment Due to Insignificant Amount