BVG: the most important questions and answers

FAQs on the BVG/LPP

What does BVG/LPP mean in Switzerland?

In Switzerland, the BVG/LPP governs the system of occupational provisions, also known as pension funds, and forms the second pillar of the three-pillar system for Swiss retirement provisions. The full English title of the BVG/LPP is the “Federal Act on Occupational Old Age, Survivors' and Invalidity Pension Provision” and it defines the legal framework for occupational provisions.

What are occupational provisions for?

Occupational provisions provide protection in old age and in the event of disability or death for insured people and their relatives. Together with the first pillar, the second pillar is intended to enable people to adequately maintain their standard of living.

How much is the BVG/LPP offset?

The BVG/LPP contribution is the amount that you pay into your pension fund. The amount you pay in depends on your salary, age and your employer’s pension plan.

The employer pays at least half of the retirement credits; as a rule, the employee contribution is deducted directly from people’s salary on a monthly basis. Risk and cost contributions are generally charged in addition to these retirement credit contributions. For the most part, the employer finances more than half of these amounts.

When are occupational provisions mandatory?

Anyone who meets all of the following conditions is subject to mandatory insurance:

• You are subject to AHV/AVS contributions, i.e. you are already insured under the first pillar.
• You are at least 17 years old and have not yet reached statutory retirement age. You are insured against disability and death from 1 January following your 17th birthday. From 1 January following your 24th birthday, you are also insured for retirement benefits.
• Your annual salary exceeds CHF 22 050 (as at 2024).

Who is not insured for mandatory occupational benefits?

• Self-employed workers
• Employees with a fixed-term contract of employment (max. three months)
• Family members working at their own farm
•  People who are at least 70% disabled (as defined under disability insurance)
• People who have a secondary occupation and are already subject to mandatory insurance through their main occupation

Can I insure myself voluntarily through the second pillar?

Yes. If you work part-time and earn less than CHF 22 050 (as at 2024), you can take out voluntary insurance with the Foundation for the BVG/LPP Contingency Fund.

If you are self-employed, take out insurance with your professional association or with the employee benefits institution of your employees. In case of doubt you may always contact the Foundation for the BVG/LPP Contingency Fund.

BVG/LPP payout: when will my pension be paid out?

Insured people can withdraw their pension fund assets in various ways: as a lifelong pension, as a one-off lump-sum payment or as a combination of the two. This happens as soon as you have reached the statutory reference age of 65*. In any case, the current regulations of your pension fund apply. Is it better to receive a lifelong pension or a one-off lump-sum payment? Our guide “Pension or lump sum – eight tips for making the decision easier” will provide an answer.

*This excludes the transitional cohorts from 1961 to 1963 for women whose reference age is gradually increased to 65 due to the AHV/AVS reform.

Is it possible to make an early withdrawal of pension fund assets?

Yes, but only under certain conditions:

• You are buying an owner-occupied property.
• You enter self-employment as your main occupation.
• You emigrate to a non-EU/EFTA country. If you emigrate to an EU/EFTA member state, your options are limited and generally relate to supplementary savings.
• You opt for early retirement.

Are BVG/LPP and a pension fund the same thing?

In everyday parlance, the term BVG/LPP refers to occupational provisions organised by pension funds. Strictly speaking, however, the BVG/LPP and a pension fund are not the same thing.

The abbreviations BVG and LPP stand for “berufliche Vorsorge-Gesetz” and “Loi sur la prévoyance professionnelle”, respectively (“Occupational Pensions Act”) This act sets out the regulations governing occupational provisions and defines the framework conditions applicable to pension funds.

Can pension gaps arise in occupational provisions?

Yes, just as in the first pillar, pension gaps can arise in the second pillar. Reasons for this can include periods of part-time employment, a low salary or a longer career break.

You can calculate gaps in coverage by adding the projected annual pensions from the first and second pillars and comparing them with your estimated annual needs. Find out more about pension gaps here.

Our advice: gaps in your pension fund can be made up by making corresponding payments into it. Find out everything you need to know about making a pension fund purchase here.

Since when has the BVG/LPP been in existence?

The Federal Law on Occupational Retirement, Survivors' and Disability Pension Plans came into force on 1 January 1985.

The first pension funds were founded more than 100 years ago, initially in the machinery industry. Only those workers whose employer had a pension fund benefited from this coverage. Unlike today, joining these funds was voluntary. (Source: Federal Social Insurance Office).

What did the BVG/LPP reform concern (BVG/LPP 21)?

On 22 September 2024, the Swiss electorate rejected the BVG/LPP reform. It would have included the following changes:

• Minimum conversion rate lowered from 6.8% to 6.0%
• Entry threshold lowered from CHF 22 050 to CHF 19 845
• Coordination offset changed to 20% of AHV/AVS salary
• Retirement credit rates changed from four to two categories: 9% for people aged 25–44 and 14% for people aged 45–65
• Transitional benefits for those retiring during the first 15 years after entry into force

These changes will not enter into force now that the reform has been rejected.