You have heard of the abbreviation BVG many times. But what does BVG mean exactly? And what does the pension fund and occupational provisions have to do with it? Swiss Life answers the most important questions about the second pillar of Swiss retirement provisions.
What does BVG mean in Switzerland?
The term BVG is commonly used for occupational provisions, i.e. the pension fund, or the second pillar of the Swiss social security system. The abbreviation BVG stands for "Federal Law on Occupational Retirement, Survivors' and Disability Pension Plans". The law defines the minimum legal requirements for occupational provisions.
Since when has the BVG been in existence?
The Federal Law on Occupational Retirement, Survivors' and Disability Pension Plans came into force on 1 January 1985.
Previously there were pension funds, in 1925 there were 262 000 members of 1200 pension funds. However, in the ensuing decades these members were part of a privileged group, including civil servants, SBB employees or employees of banks and insurance companies. The pension fund was seen as an important tool in retaining employees.
What are occupational provisions for?
Occupational provisions provide cover for both insured persons and their dependants and help them lead a self-determined life. In the event of old age, disability or death, the second pillar is to enable maintenance of the accustomed standard of living in an appropriate manner. The goal is for the first and second pillars to cover pension income of around 60 percent of the last salary.
When are occupational provisions mandatory?
Anyone who meets the following conditions is subject to mandatory insurance:
- You are subject to AHV contributions, i.e. you are already insured under the 1st pillar.
- You are at least 17 years of age and are not yet at the statutory retirement age (insurance for disability and death is valid from 1 January following your 17th birthday. From 1 January following your 24th birthday you are also insured for retirement benefits.)
- Your annual salary is over CHF 21 510 (as at 2022).
Who is not insured for mandatory occupational benefits?
- Self-employed persons
- Employees with a fixed-term employment contract (maximum three months)
- Family members working at their own farm
- Persons who are at least 70% disabled (as defined by the IV)
Can I insure myself voluntarily through the second pillar?
Yes. If you work part-time and earn less than CHF 21 510 (as at 2022), you can take out voluntary insurance with the Foundation for the BVG Contingency Fund.
If you are self-employed, take out insurance with your professional association or with the employee benefits institution of your employees. However, in case of doubt you may always contact the Foundation for the BVG Contingency Fund.
BVG payout: when will my pension be paid out?
Insured persons can withdraw their pension fund assets in various ways: as a monthly pension, as a one-off lump-sum payment or as a combination of the two. This will happen as soon as you reach the statutory retirement age. In any case, the current regulations of your pension fund apply.
Do you prefer a monthly pension or a one-off lump-sum payment? Our guide provides an answer: “Pension or lump sum” (Pension or lump sum - eight tips to make the decision easier).
How much is the BVG offset?
The amount of your BVG contribution depends on your salary, age and employer’s pension plan.
If you are between 25 and 34 years of age, the pension fund contribution amounts to a mere 7 percent of your insured BVG salary. If you are between 55 and 64 years of age, 18% is due. Your employer pays at least half of this amount.
Is it possible to make an early withdrawal of pension fund assets?
Yes, but only under certain conditions:
- You purchase owner-occupied property
- You take up self-employment
- You emigrate to a non-EU/EFTA state (if you emigrate to an EU/EFTA state, you will only receive supplementary pension fund benefits)
- You opt for early retirement
Do you have any other questions about future provisions?
Make an appointment – our experts will be happy to provide you with personal advice with no obligation involved.