Swiss occupational pension (BVG/LPP): an employer's guide

Swiss retirement provision rests on three pillars. The first, AHV/AVS, is the state old-age and survivors' insurance that covers basic living needs. The second is the occupational pension, known by its German and French abbreviations BVG and LPP, which is funded by employer and employee contributions and is designed to let people keep their accustomed standard of living in retirement. The third pillar is voluntary private saving. For a foreign company hiring in Switzerland, the second pillar is the one that creates a concrete administrative obligation from the first qualifying employee onward.

Unlike the pay-as-you-go first pillar, the BVG is a funded, capital-based system: each insured person builds up an individual retirement account inside a pension fund (Pensionskasse). The employer chooses and joins a fund, deducts the employee's share from each salary, adds its own at least equal share, and remits the total. This guide explains who must be insured, how the insured salary is calculated, the age-based credit rates, the contribution split, how to choose a fund, and what happens when an employee changes job or leaves the country. Key figures are stated as of 2026.

The BVG (Berufliche Vorsorge) or LPP (Prévoyance Professionnelle) is the Swiss occupational pension, the second of the country's three retirement pillars. It is a funded scheme: contributions paid in by employer and employee are saved in an individual account, earn interest, and are paid out at retirement as a pension or a lump sum. A pension fund is also called a Pensionskasse or caisse de pension, so those terms describe the same thing.

Yes, it is mandatory. Above an annual entry threshold, an employer must affiliate to a registered pension fund and insure every qualifying employee. This is not a benefit the company can choose to skip: the duty falls on the employer to set the scheme up, enrol staff, deduct the employee share, add its own share and remit the total to the fund. The rest of this guide sets out who must be insured, what it costs, and how a new Swiss company affiliates to a fund.

BVG affiliation is mandatory for employees who are already subject to AHV and who earn more than the annual entry threshold (Eintrittsschwelle) with a single employer. As of 2026 that threshold is CHF 22,680, equal to three quarters of the maximum annual AHV pension. An employee earning at or below it is not covered by the mandatory scheme, although some funds offer voluntary insurance below the line.

Cover begins at different ages for its two components. From age 17 the employee is insured for the risks of death and disability only; from the start of the year in which they turn 25 the retirement savings (old-age credit) component is added. Insurance runs to the statutory reference age of 65. Some categories sit outside the mandatory scheme, for example employees on a fixed contract of three months or less, and self-employed people, who may insure themselves voluntarily instead. Part-time staff are covered on the same threshold test, which is why several funds reduce the coordination deduction pro rata to avoid under-insuring them.

Take an employee earning CHF 80,000 a year as of 2026. Subtract the coordination deduction of CHF 26,460 and the insured (coordinated) salary is CHF 53,540. The retirement credit and the risk premiums are charged on that CHF 53,540, not on the full CHF 80,000. If the employee is in the 35 to 44 age band, the mandatory retirement credit is 10 percent of CHF 53,540, or CHF 5,354 a year, before risk and administrative premiums.

That total is then split: the employer must fund at least half, so on this example the employee share deducted through payroll is no more than CHF 2,677 a year and the employer pays at least as much again on top. The deduction bites harder on lower salaries, because a fixed CHF 26,460 is removed regardless of hours. An employee earning CHF 30,000 has an insured salary of only CHF 3,540, just above the minimum. These mechanics feed straight into payroll, which our payroll services team runs for foreign employers, with the remittance and reconciliation handled through our accounting service.

The single most important rule for budgeting is that the employer must pay at least 50 percent of the total BVG contributions. The employee's share is deducted from gross salary each month; the employer adds its own share, which must be equal to or greater than the sum of all employees' shares, and remits the combined amount to the fund. Many employers choose to pay more than half as a recruitment incentive.

The total contribution covers three elements: the retirement credit (the savings component), risk premiums for death and disability, and an administrative and guarantee-fund charge. Only the employee's gross-salary deduction reaches the payslip; the employer share is a separate cost on top of wages, which is why the true cost of a Swiss hire runs well above the headline salary. Our payroll taxes guide shows how the BVG line sits with AHV, unemployment insurance and accident cover.

Accumulated mandatory retirement assets must earn at least a minimum interest rate (BVG-Mindestzins) set by the Federal Council, which reviews it each autumn. That rate was 1.25 percent for 2025; because it can change annually, treat any single figure as provisional and confirm the rate applying in the relevant year before you rely on it.

At retirement the saved capital is turned into an annual pension using the conversion rate (Umwandlungssatz). The statutory minimum conversion rate on the mandatory portion is 6.8 percent at the reference age of 65, so CHF 100,000 of mandatory capital produces about CHF 6,800 of pension a year. That level still stands: the proposed BVG reform that would have changed it was rejected by referendum on 22 September 2024 (around 67 percent voted no), so any competitor page describing pre-vote uncertainty is out of date. An insured person may usually take all or part of the capital as a lump sum instead of a pension, subject to the fund's rules and notice periods.

When an employee changes job, their accrued capital does not stay behind. The vested benefit (Freizügigkeitsleistung) transfers to the new employer's pension fund, or, if there is a gap between jobs, to a vested-benefits account or policy until the next fund takes over. Early withdrawal (Vorbezug) is possible on limited grounds, mainly buying a main residence, starting self-employment, or permanently leaving Switzerland. Note the cross-border restriction: an employee relocating within the EU or EFTA cannot cash out the mandatory part if they remain compulsorily insured for old age, disability and survivors in the new country; that share stays in a Swiss vested-benefits account.

BVG is only one strand of the employer on-cost. On top of gross salary, a Swiss employer also pays AHV/IV/EO (the first pillar and related funds), ALV (unemployment insurance), and UVG (accident insurance), with the BVG contribution often the largest single line for older staff. Budget all of them together rather than in isolation. Our guide to hiring employees in Switzerland places the pension step in sequence with contracts, registration and the other social-insurance enrolments, and starting a business in Switzerland covers the incorporation that triggers the affiliation duty in the first place. We work on a custom-quote basis, so contact us with your headcount and salaries and we will scope the payroll.