Umwandlungssatz (Conversion Rate)

The Umwandlungssatz (conversion rate) is the percentage used to convert accumulated Pillar 2 (BVG) pension capital into an annual lifetime pension payout at retirement. It's a critical factor determining how much retirement income you receive from your occupational pension savings. The mandatory minimum rate is set by law, though actual rates vary between pension funds.

For 2026, the statutory minimum conversion rate for the mandatory BVG portion is 6.8%. This means CHF 100,000 in pension capital converts to CHF 6,800 annual pension (CHF 567/month). However, many pension funds apply lower rates (5-6%) to extra-mandatory (überobligatorisch) portions due to increased life expectancy and lower investment returns. The conversion rate has been declining over decades—it was 7.2% in 2005—and faces ongoing political debate about further reductions.

Real-World Example If Thomas retires with CHF 500,000 in his Pillar 2 account (CHF 300,000 mandatory + CHF 200,000 extra-mandatory), the mandatory portion converts at 6.8% (CHF 20,400/year) while the extra portion converts at his fund's rate of 5.5% (CHF 11,000/year), totaling CHF 31,400 annual pension (CHF 2,617/month) for life.