The BVG conversion rate is to be reduced to 6 percent.

With the BVG conversion rate, an annual pension is calculated from the pension fund's retirement savings. Currently, the BVG conversion rate is 6.8 percent. If it is up to the National Council, that should change soon.

How high is the annual retirement pension from the accumulated pension fund assets? The answer to this question depends on the BVG conversion rate.

Calculation of the pension with the BVG conversion rate

The BVG conversion rate is a fixed percentage that helps convert the retirement savings in the pension fund into the annual retirement pension. While the conversion rate in the area of above-minimum occupational pensions can be determined arbitrarily by the pension funds, the minimum conversion rate for mandatory occupational pensions is regulated by the Federal Law on Occupational Retirement, Survivors', and Disability Pensions (BVG). Currently, the BVG conversion rate is still at 6.8 percent. A rate of 6.8 percent means that those who have accumulated a retirement capital of CHF 100,000 will receive an annual pension of CHF 6,800.

National Council wants to lower the BVG conversion rate

Last week, the National Council approved the reform of the second pillar with 126 to 66 votes. As part of the BVG reform, the following changes are to be implemented:

• ‍Conversion rate: The BVG conversion rate is to be reduced to 6 percent. A motion calling for a reduction to only 6.4 percent was rejected. Therefore, those with CHF 100,000 in the second pillar will only receive CHF 6,000 per year going forward.
• ‍Pension bonus: A transition generation of a maximum of 15 years will benefit from a pension bonus. Annually, a maximum of CHF 2,400 is planned for the first five years, a maximum of CHF 1,800 for the second five years, and a maximum of CHF 1,200 for the third five years. However, due to the planned accounting of the above-minimum contributions, it is expected that only about 40 percent of insured individuals will benefit from the pension bonus.
• ‍Mandatory entry: The entry age, previously 25 years, is to be lowered to 20 years. Young individuals will thus be subject to contributions earlier.‍
• ‍Retirement credits: The BVG reform also foresees a reduction and smoothing of salary contributions to the pension fund. Henceforth, retirement credits are to be 9 percent between the ages of 22 and 44 (previously: 7 or 10 percent) and 14 percent (previously: 15 or 18 percent) starting from the age of 45. This change is intended to improve the chances of older employees in the job market.
• ‍Insured salary: The coordination deduction, which determines the insured salary, is to be halved from the current CHF 25,095 to CHF 12,443. Contributions will thus have to be paid on the part of the annual salary from CHF 12,443 to CHF 85,320. The amendment aims to improve retirement provision for low earners.‍
• ‍Entry threshold: Also with the aim of strengthening retirement provision for low-income individuals, the BVG entry threshold is to be reduced from the current CHF 21,510 to CHF 12,548.

Left parties have announced a referendum

Following the clear result in the National Council, the next step will be for the Council of States to decide on the BVG reform. However, left-wing parties, the Greens, and trade unions have already announced their intention to launch a referendum if the proposal is also confirmed in the Council of States. If a referendum is indeed launched, the BVG reform will go to the people.

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