Conversion rate

The amount of the pension fund pension depends on the conversion rate. This indicates what percentage of the retirement capital is paid out annually as a pension. A distinction must be made between the mandatory and non-mandatory portions:

• In the mandatory portion, salaries between the entry threshold (annual salary above CHF 22'680) and the upper limit (BVG maximum: CHF 90'720) are insured. Upon retirement, the minimum conversion rate determines how the retirement assets are converted into a pension at the time of normal retirement age. This rate is prescribed by the Pension Fund Act (BVG) and currently stands at 6.8 percent.
• For the non-mandatory portion of retirement assets, in particular from pension fund contributions on salary portions above CHF 90'720, pension funds can set a free, non-binding conversion rate. Whether the salary above the BVG mandatory portion is insured depends on the plan that the employer has taken out with their pension fund.

If salary amounts are insured in both the mandatory and non-mandatory pension plans, the pension fund can use either the split or the enveloping conversion rate when calculating pensions.

Depending on how the mandatory and non-mandatory retirement assets are divided, the result for pension recipients may vary. However, the latter is only permissible if the total pension is at least as high as the minimum pension calculated using a conversion rate of 6.8 percent.

An example to illustrate this:

A pensioner has saved pension fund assets of CHF 250'000, of which CHF 200'000 is attributable to the mandatory portion and CHF 50'000 to the non-mandatory portion.

• Minimum pension: CHF 200'000 × 6.8% = CHF 13'600
• Pension with a comprehensive conversion rate: CHF 250'000 × 5.5% = CHF 13'750
• Pension with a split conversion rate: CHF 200'000 × 6.8% + CHF 50'000 × 5% = CHF 16'100

Since the annual retirement pension with the guaranteed conversion rate in this example is higher than the minimum pension, the reduced conversion rate of 5.5 percent is justified.

With our interactive online calculator, you can compare whether a lump-sum withdrawal or a pension is more advantageous for you.