The 2nd Pillar (BVG/LPP) at a Glance
- Mandatory from age 17 (risk coverage) and age 25 (retirement savings) for employees earning more than CHF 22,680/year
- Contributions shared between employer and employee: The employer pays at least 50%
- Conversion rate: 6.8% of accumulated retirement savings
- Withdrawal possible as an annuity, lump sum, or a combination: irrevocable decision
- Early withdrawal is permitted in 4 cases: early retirement, real estate purchase, independence, permanent departure from Switzerland
- Voluntary buybacks are possible and tax-deductible
What Is the 2nd Pillar?
The 2nd pillar, also known as occupational pension provision or LPP (Occupational Pension Act), is a mandatory insurance system in Switzerland for employees whose income exceeds a certain threshold, forming part of the three-pillar system.
It aims to supplement the benefits provided by AVS/OASI, to ensure adequate income at retirement, in the event of disability, or in the event of death. Jointly funded by employer and employee, it's based on the principle of individual capitalization: each insured person saves for their own retirement.
The Three-Pillar Concept of Swiss Retirement Provision
Swiss social security is based on a three-pillar system, designed to guarantee the financial security of residents and workers in Switzerland throughout their lives and in retirement:
- Pillar 1 (AVS / AI / APG) – State Pension System: Compulsory for all, it constitutes the basic foundation. Its objective is to cover the vital needs of a retiree or a disabled person.
- 2nd pillar (LPP) – Occupational pension scheme: Mandatory for most employees, it supplements the AVS. Its purpose is to maintain the standard of living enjoyed prior to retirement, with the goal of covering (together with the first pillar) approximately 60 % of the final salary.
- 3rd pillar (3a / 3b) – Individual provident scheme: Private and optional, it helps fill income gaps not covered by the first two pillars, while benefiting from attractive tax advantages.
Who Is Affected?
Not every employee in Switzerland automatically contributes to the 2nd pillar. Mandatory affiliation depends on several conditions:
- Being an employee and subject to OASI
- Having an annual income of more than CHF 22,680 (2026 threshold)
- Be at least 17 years old for death and disability insurance
- Starting at age 24, also start contributing to your pension (retirement bonuses)
LPP Thresholds (2026)
| LPP parameter | Amount |
|---|---|
| LPP entry threshold (minimum income) | CHF 22,680 |
| Coordination deduction | CHF 26,460 |
| Minimum insured coordinated salary | CHF 3,780 |
| Maximum insured coordinated salary | CHF 64,260 |
| Maximum determining AVS/OASI salary | CHF 90,720 |
Even if you don't meet the standard conditions, it's possible to be insured under the 2nd pillar on a voluntary basis. For example, an employer may choose to cover an employee whose income is below CHF 22,680. Similarly, the self-employed or people hired for a short period can choose to contribute, even though it isn't mandatory for them.
LPP Contributions and Retirement Credits
Contributions to the 2nd pillar (LPP) are calculated on the so-called coordinated annual salary (that is, after deducting a fixed amount known as the coordination deduction, CHF 26,460 in 2026). They're split between employer and employee, with the employer required to pay at least half (except for the self-employed, who must pay the full contribution themselves). Contributions include several components: retirement savings, risk coverage, and administrative costs.
1. Retirement Credits
Retirement credits represent the savings portion of occupational pension provision, and the rate increases with age to progressively build up your retirement savings. Here's an overview of the 2026 retirement credit rates by age, for the mandatory portion:
| Insured Person's Age | Percentage % |
|---|---|
| 25 to 34 years old | 7% |
| 35–44 years old | 10% |
| 45 to 54 years old | 15% |
| 55 to 65 years old | 18% |
2. Risk Premiums
Risk premiums finance coverage against risks d’disability and death. This means that if an insured person becomes disabled or dies before retirement age, the pension fund will pay a disability pension or a survivor's pension (spouse, registered partner, children). These premiums vary according to age and gender.
3. Contribution to the LPP Guarantee Fund
Every pension institution must pay a contribution to the LPP Guarantee Fund, which guarantees the legal minimum benefits in the event of a pension fund's insolvency. This mechanism protects insured individuals from losing their pension assets if their fund goes bankrupt. The Fund also steps in during restructurings or exceptional situations, such as fund mergers.
LPP Restructuring and the Minimum Interest Rate
The retirement savings you have accumulated in your 2nd pillar do not sit idle: they are invested by your pension fund and generate an annual return in the form of interest.
- Statutory minimum interest rate: For the mandatory portion of the LPP, the Federal Council sets a minimum interest rate that each pension fund is legally required to pay to its insured members. It currently stands at 6.8% (2026).
- Mandatory vs. extra-mandatory portion: This minimum rate applies strictly to the mandatory portion. For the extra-mandatory portion (insured salary above CHF 90,720), the pension fund is free to set its own interest rate, based on its financial health and funding ratio.
Benefits: Old Age, Disability, Death
The 2nd pillar also protects insured individuals and their families against the risks of disability or death, as well as against the inevitable risk of old age. Benefits are therefore paid out based on different life events, in the form of pensions. Here's a summary overview of the main benefits provided under the LPP:
| Type of Pension | Details |
|---|---|
| Retirement | |
| Old-Age Pension | Paid starting at the legal retirement age. Calculated based on accumulated retirement savings, at a conversion rate of 6.8%. |
| Retirement Savings | You may withdraw one-quarter of your mandatory LPP balance as a lump sum. Some pension funds allow you to withdraw the entire balance. |
| Retiree's Child Pension | 20% of the old-age pension paid per child, until the child turns 18 or 25 if the child is in school. |
| Disability before retirement | |
| Disability pension | If the insured person becomes disabled (as defined by the AI), he or she receives a pension calculated based on the accumulated balance plus future age-related adjustments, without interest. |
| Disability Pension for Children | 20% of the disability pension paid per child, until the child turns 18 or 25 if the child is in school. |
| Death before retirement | |
| Spousal pension | The surviving spouse receives 60% of the pension if the marriage lasted at least 5 years and the spouse is at least 45 years old, or if there are dependent children. Otherwise, a lump-sum payment equivalent to 3 annual pensions may be paid. |
| Orphan's pension | 20% of the pension paid to each child until age 18, or age 25 if the child is in school. |
Annuity or Lump Sum: What Should You Choose at Retirement?
Upon retirement, you can receive your LPP/BVG vested benefits in the form of a life annuity, a lump-sum capital, or a combination of both. This choice is irrevocable and must be communicated to your pension fund at least one year in advance.
The annuity guarantees a fixed monthly income for life, regardless of your lifespan or market conditions. With the statutory conversion rate of 6.8 % on the mandatory portion, it offers a guaranteed return that is difficult to match with safe investments. On the other hand, any remaining capital is not passed on to heirs, and the annuity is taxed at 100 % as income.
The lump sum offers complete flexibility — paying down a mortgage, investing, planning your estate — and is taxed only once, at a reduced rate, upon withdrawal. But you alone are responsible for managing that capital over 20 to 30 years, with no safety net if the funds run out.
The combination of both is often the most balanced solution: part in an annuity to secure a basic income, and part in capital for projects and inheritance.
For a quantitative analysis, see our LPP pension or lump-sum guide.
How to withdraw your 2nd pillar?
The capital of your 2nd pillar can be withdrawn under certain conditions:
1. Retirement
You can request that all or part of your retirement savings be paid out as a lump sum, in accordance with your pension fund’s rules. A formal request must be submitted several months in advance.
2. Permanently Leaving Switzerland
If you leave Switzerland for a country outside the EU/EFTA, you can withdraw your entire 2nd pillar balance. If you move to an EU/EFTA country, only the portion above the mandatory minimum is withdrawable, with some exceptions.
If you've already withdrawn your 2nd pillar when moving abroad and are now considering returning to Switzerland, the consequences for your pension coverage are significant.
3. Homeownership
You can use your assets to finance the purchase of your primary residence, either through an early withdrawal or as collateral (EPL – home ownership promotion).
4. Starting Self-Employed Activity
5. Small Balance
If your vested benefits are less than one year's contributions, you can request withdrawal.
- Taxation of withdrawals: Each withdrawal is subject tocapital gains tax, a tax on reduced rate, distinct from ordinary income, to 1/5 of the tax rate. It is therefore advisable to plan this operation carefully.
Taxation of the Withdrawal
In Switzerland, withdrawals of LPP capital are subject to a tax on lump-sum payments; this is a separate tax from ordinary income tax, applied at a reduced rate corresponding to approximately one-fifth of the standard rate, depending on the canton.
The rate varies significantly depending on the canton of residence at the time of withdrawal. For a withdrawal of CHF 200,000, the differences are significant:
| Canton | Estimated rate | Estimated tax |
|---|---|---|
| Zug | ~4,2% | ~CHF 8,400 |
| Valais | ~5,5% | ~CHF 11,000 |
| Zurich | ~5,6% | ~CHF 11,200 |
| Geneva | ~5,7% | ~CHF 11,400 |
| Fribourg | ~5,8% | ~CHF 11,600 |
| Vaud | ~6,4% | ~CHF 12,800 |
The tax is progressive: The higher the amount withdrawn in a single transaction, the higher the effective tax rate. Spreading withdrawals over several tax years can result in significant savings. For example, in Geneva, two withdrawals of CHF 250,000 one year apart cost about CHF 10,500 less than a single withdrawal of CHF 500,000.
Three essential rules to remember:
- Never withdraw capital within 3 years of an LPP buy-in, or you risk a retroactive tax reassessment
- Avoid combining the pension fund (LPP) withdrawal and the 3rd pillar withdrawal in the same tax year
- For couples, coordinate withdrawals across two separate years
LPP Buybacks: Optimizing Your Retirement
Making buy-ins into your pension fund is the most effective way to improve your 2nd pillar benefits. These voluntary payments let you fill any contribution gaps, for example after a job change, unpaid leave, or reduced working hours.
The amount bought in directly increases your retirement savings, resulting in a higher pension at retirement. On top of that, buy-ins are tax-deductible, reducing your taxable income. That said, certain conditions apply — notably a three-year waiting period before a lump-sum withdrawal if you've made a buy-in.
To optimize your retirement provision further, the 3rd pillar offers a tailored solution that complements your pension fund. Pillar 3a, as well as Pillar 3b in certain cantons, offer recognized tax advantages.
Dividing the 2nd Pillar in the Event of Divorce
In the event of divorce in Switzerland, 2nd pillar assets accumulated during the marriage are, in principle, divided equitably between the spouses, regardless of the property or matrimonial regime. This division applies only to the vested benefits (exit benefits) built up during the marriage.
The amount is calculated as of the date the divorce proceedings begin. Each spouse is entitled to half of the pension assets the other saved during the marriage. If one spouse contributed little or nothing (for example, due to a career break to raise children), they can recover part of the other's assets as a compensatory benefit.
The transferred amount is paid either into the recipient's pension fund, or into a vested benefits account, if they're not immediately affiliated with a fund. Exceptions exist (for example, a different agreement approved by the court, or a pension already being paid), but the principle of equal division remains the rule under Swiss law.
Vested Benefits and Changing Jobs
A vested benefits account or policy is used to hold your 2nd pillar assets when you leave a pension fund without immediately joining another one. It's a mandatory transitional solution to avoid losing your occupational pension rights.
This situation typically arises if you:
- Leave your job without immediately starting a new one,
- Become self-employed,
- Reduce your working hours below the LPP threshold,
- Are going through a period of unemployment,
- Move abroad.
Your accumulated assets remain locked and protected, continue to earn interest, and are exempt from wealth tax. You can transfer them either to a bank account or deposit for vested benefits, or to a vested benefits insurance policy. This keeps you connected to the pension system while you wait for a new affiliation or another qualifying event (retirement, buy-in, or an early withdrawal under certain conditions). Either way, comparing vested benefits solutions is essential before making a decision.
Frequently Asked Questions
How does the second pillar work?
Since when has the 2nd pillar existed?
The 2nd pillar was introduced in Switzerland in 1985, with the entry into force of the LPP.
What is the average amount of the 2nd pillar in Switzerland?
When can you withdraw your second pillar?
At retirement, or earlier in certain cases: permanently leaving Switzerland, buying a home, starting self-employed activity, or if the balance is too small.
How do I know how much I have in my 2nd pillar?
Each year, your pension fund sends you a pension certificate showing your accumulated assets and your current and projected benefits.
Who contributes to the second pillar?
Every employee aged 17 or older whose annual income exceeds CHF 22,680 (in 2026). The self-employed can join voluntarily.
How to withdraw your 2nd pillar in Switzerland?
You can unlock your 2nd pillar in Switzerland at retirement, or earlier to buy a home, become self-employed, or permanently leave the country.