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The Second Pillar in Switzerland (2nd Pillar, BVG/LPP): How Occupational Pensions Work in 2026
The second pillar in Switzerland is the mandatory occupational pension scheme (BVG/LPP) that, together with the state pension (AHV/AVS), forms the backbone of retirement income. For Ukrainians and other foreign nationals working in Switzerland, the 2nd pillar is often the most significant component of future pension benefits, as this is where individual retirement capital is accumulated. This article explains who is subject to mandatory coverage, from what age contributions begin, what happens when changing jobs, and under which circumstances early withdrawals are permitted.
How the Second Pillar Fits into the Swiss Pension System
Switzerland’s pension system is built on three pillars:
- AHV/AVS (1st pillar) – the state old-age and survivors’ insurance providing basic coverage.
- BVG/LPP (2nd pillar) – occupational pension insurance through the employer.
- 3rd pillar – voluntary private savings.
While the first pillar ensures a basic minimum income, the second pillar is designed to maintain a standard of living after retirement. Unlike AHV, which operates on a pay-as-you-go basis, the second pillar is based on individual capital accumulation: each insured person builds up their own retirement savings during their working life.
Who Must Contribute to the 2nd Pillar
Mandatory occupational pension coverage applies to employees who are insured under AHV and earn above the legally defined entry threshold.
As of 1 January 2026, mandatory coverage applies to employees with an annual salary exceeding CHF 22,680. If earnings fall below this threshold, the employer may insure the employee voluntarily.
Age is a key factor, and it is important to distinguish between risk coverage and retirement savings:
- From 1 January following the 17th birthday, employees are insured against the risks of death and disability.
- From 1 January following the 24th birthday, retirement savings contributions begin.
Self-employed individuals are not required to join the second pillar but may opt in voluntarily.
How Contributions Are Financed
Contributions to the 2nd pillar are shared between employee and employer. By law, the employer must contribute at least the same amount as the employee. Many employers choose to contribute more.
Contributions are deducted directly from the salary. The amount depends on the employee’s age and the regulations of the specific pension fund. In most plans, savings contributions increase with age.
Each insured person receives an annual pension certificate (Vorsorgeausweis), which outlines:
- the accumulated retirement capital;
- projected retirement benefits;
- benefits payable in case of disability or death.
Changing Jobs and Vested Benefits (Freizügigkeit)
When leaving an employer, accumulated pension assets do not disappear. They are transferred as vested benefits (Freizügigkeitsleistung).
The capital must be transferred to:
- a vested benefits account with a bank, or
- a vested benefits policy with an insurance company.
If no instructions are given, the funds may be transferred to the national substitute occupational benefits institution (Stiftung Auffangeinrichtung BVG).
When starting a new job subject to mandatory coverage, the vested benefits must be transferred to the new employer’s pension fund.
Voluntary Buy-Ins (Einkauf)
If there are gaps in pension savings — for example due to career breaks or late arrival in Switzerland — insured persons may make voluntary buy-ins.
The maximum buy-in amount is determined individually by the pension fund. Such contributions are generally tax-deductible, provided legal conditions are met. However, restrictions may apply if capital is withdrawn shortly after a buy-in.
Planning of occupational pension and retirement savings within the 2nd pillar (BVG) system in Switzerland.
Shutterstock / Rawpixel.com
Early Withdrawal of Pension Assets
In principle, 2nd pillar assets are intended for retirement. However, the law provides specific exceptions.
Home Ownership
Funds may be used for purchasing owner-occupied residential property or amortising a mortgage. Applications may generally be submitted once every five years. Married persons or registered partners require written consent from their spouse or partner.
After age 50, statutory limits apply to the maximum withdrawal amount. If the property is sold, the withdrawn funds usually must be repaid into the pension system.
Becoming Self-Employed
Individuals starting self-employment may request payment of their accumulated pension capital. The request must typically be submitted within the first year of self-employment and supported by official documentation.
Permanent Departure from Switzerland
In case of permanent departure, early withdrawal may be possible. If the new country of residence is within the EU or EFTA and the individual becomes subject to mandatory social security there, the mandatory portion of the 2nd pillar must remain in Switzerland until retirement age. The non-mandatory portion may be paid out.
Retirement Age and Payment Options
Following the AHV 21 reform, a reference retirement age applies.
- For men: 65.
- For women: the retirement age is being gradually increased depending on year of birth.
Many pension funds allow early retirement from age 58, subject to their regulations. Postponement of retirement is also possible if employment continues.
Benefits may be paid as a lifelong annuity, a lump sum, or a combination of both, depending on pension fund rules.
Division Upon Divorce
In the event of divorce, the pension capital accumulated during the marriage is divided in accordance with a court decision and implemented through the pension institutions.
Benefits in Case of Death
A surviving spouse is entitled to a pension if they are at least 45 years old and the marriage lasted at least five years, or if they are responsible for dependent children.
Children receive an orphan’s pension until age 18, or up to age 25 if still in education. If the conditions for a surviving spouse’s pension are not met, a lump-sum payment is generally provided in accordance with statutory provisions.
What to Keep in Mind
The second pillar represents individually accumulated retirement capital. It is essential to review the annual pension certificate, ensure transfers are properly executed when changing jobs, and carefully assess the long-term consequences of early withdrawals.
Decisions regarding buy-ins, home ownership financing or emigration have lasting financial implications. The 2nd pillar should therefore be treated as a strategic element of personal financial planning rather than a purely administrative matter handled by the employer.
Sources
Federal Social Insurance Office (FSIO / BSV) — Occupational Benefits (2nd Pillar, BVG/LPP)
https://www.bsv.admin.ch/bsv/en/home/social-insurance/occupational-benefits.html
Federal Social Insurance Office (FSIO / BSV) — Benefits of Occupational Pensions (retirement, disability, survivors)
https://www.bsv.admin.ch/bsv/en/home/social-insurance/occupational-benefits/benefits.html
AHV/IV Information Centre — AHV 21 Reform (Reference Retirement Age)
https://www.ahv-iv.ch/en/Social-insurances/Old-age-and-survivors-insurance-AHV/AHV-21-Reform
AHV/IV Information Centre — Flexible Retirement (Information Sheet)
https://www.ahv-iv.ch/en/Leaflets-forms/Leaflets/Old-age-pensions
Federal Social Insurance Office (FSIO / BSV) — Vested Benefits (Freizügigkeitsleistung)
Federal Social Insurance Office (FSIO / BSV) — Home Ownership Promotion Using Pension Assets (WEF)
Federal Social Insurance Office (FSIO / BSV) — Voluntary Buy-ins into Occupational Pension Schemes
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