Pillar 2 (BVG)

Pillar 2 (BVG/LPP), or occupational pension, is Switzerland's mandatory employer-sponsored pension scheme designed to maintain living standards in retirement. Together with Pillar 1 (AHV), it aims to provide approximately 60% of pre-retirement income. Contributions are automatically deducted from paychecks and matched by employers, with funds invested until retirement.

For 2026, BVG is mandatory for employees earning over CHF 22,680 annually. Contribution rates increase with age: 7% (ages 25-34), 10% (35-44), 15% (45-54), and 18% (55-65), split equally between employee and employer. Insured salary is calculated as gross income minus a coordination deduction (CHF 25,725 in 2026), capped at CHF 88,200. At retirement, accumulated capital converts to a pension using the Umwandlungssatz (conversion rate), currently 6.8% for mandatory portions. Early withdrawal allowed for home purchase, self-employment, or emigration.

Real-World Example If Julia (age 38) earns CHF 90,000, her BVG insured salary is CHF 62,475 (CHF 88,200 cap minus CHF 25,725 coordination deduction). At 10% contribution rate, she pays CHF 3,124 annually while her employer matches this. Over 27 years until retirement, her Pillar 2 capital grows to approximately CHF 400,000, converting to roughly CHF 27,200 annual pension (6.8% conversion).