Pillar 2 BVG: Switzerland's Occupational Pension Fully Explained

The BVG (Berufliche Vorsorge Gesetz) — or LPP in French — is the second pillar of the Swiss pension system. Unlike the pay-as-you-go AHV, your Pillar 2 is a real savings account in your name, accumulating throughout your career. Understanding it is crucial for anyone who wants to know their true financial protection — especially what happens on retirement, disability, or death.

How Pillar 2 Works

Your employer is legally required to enrol you in a pension fund (Pensionskasse) once your salary exceeds the entry threshold. From that point, both you and your employer make monthly contributions that are credited to your personal retirement savings account.

The mandatory entry threshold

The coordination deduction is the portion of your salary assumed to be covered by AHV. Your Pillar 2 contributions are calculated on the difference: your salary minus the coordination deduction. Employees earning below CHF 22,050/year are not mandatorily insured (though they can join voluntarily via the collective foundation).

Who contributes and how much?

Both you and your employer contribute, and the employer must pay at least as much as you. Contribution rates increase with age because older workers have fewer years to accumulate savings:

These are minimum rates set by law. Most pension funds offer substantially better terms — this is why reading your Vorsorgeausweis matters.

Reading Your Vorsorgeausweis (Pension Certificate)

Your employer must provide an annual pension certificate. This document is your single most important financial document. It tells you:

• Retirement savings capital: How much has accumulated in your account
• Projected retirement pension: What you will receive monthly from age 65
• Death benefits: The partner pension and orphan pension your family would receive if you died today
• Disability pension: What you would receive if you became unable to work
• Risk premium: What the fund charges for insurance coverage

BVG Survivor Benefits on Death

When an insured BVG member dies, the pension fund pays out to the surviving family. The benefits have a legal minimum under BVG but most funds pay more.

Partner pension (BVG Art. 19)

The surviving spouse or registered partner is entitled to a partner pension of at least 60% of the disability pension the deceased would have received. This is paid monthly for life. Many pension funds pay 66% or even 100% — check your Vorsorgeausweis.

The legal condition for entitlement:

• Married (or registered partner) for at least 5 years, or
• Has a child under 18 with the deceased
• Cohabiting partners may be entitled if registered — check your fund rules

Orphan pension (BVG Art. 20)

Each child of the deceased is entitled to an orphan pension of at least 20% of the disability pension, until age 18 (or 25 if in education). Again, most funds pay more than the BVG minimum.

Death capital (Todesfallkapital)

If no survivor pension is payable (e.g. the insured was single with no children), many pension funds pay out a death capital lump sum, typically equal to 3–5 years of the annual disability pension. The beneficiaries are defined by law in priority order: spouse/partner → children → parents → siblings.

The BVG and Voluntary Top-Up Purchases

One of the most powerful and underused features of Pillar 2 is the ability to make additional voluntary contributions (Einkauf) into your pension fund. These:

• Are fully deductible from your Swiss taxable income in the year of contribution
• Increase your retirement, disability, and death benefits
• Can fill gaps caused by career breaks, part-time work, or late entry into the Swiss system

The maximum amount you can buy in is shown on your Vorsorgeausweis as "möglicher Einkauf" (possible buy-in). For high earners, this is one of the most tax-efficient moves available in Switzerland.

What Happens to Your BVG When You Leave Switzerland?

Your BVG savings are yours — they follow you when you leave employment. If you leave Switzerland permanently:

• Citizens of EU/EFTA countries: Only the "over-mandatory" portion above the BVG minimum can be withdrawn as cash. The mandatory portion must remain in a vested benefits account until retirement age.
• Citizens of non-EU/non-treaty countries: Can generally withdraw the full amount, subject to withholding tax (usually 4–5% depending on canton)

The Over-Mandatory BVG: Why Your Fund Matters

The BVG law sets only the minimum benefits. Most employers offer plans that significantly exceed these minimums — higher insured salaries, better conversion rates, and more generous death and disability benefits. This is why two employees earning the same salary can have very different Pillar 2 protection depending on their employer.