Conversion rate explained - how the BVG pension is calculated

The conversion rate determines how high the Pension from the pension fund is. This is used to calculate how much money you will receive from your accumulated capital each year after retirement.

The subject is often presented in a complicated way and while the details are indeed relatively complex, you only need to know a few basic details to understand the principle. The following is therefore the Conversion rate explained simply.

What is the conversion rate simply explained?

The conversion rate is a Percentagewhich determines what percentage of your Pension fund (2nd pillar) saved capital you annually as a pension will be paid out.

The 2nd pillar consists of a mandatory and a non-mandatory credit balance.

All employees with a salary of between CHF 22,680 and CHF 90,720 are subject to the mandatory scheme (as at 2026). For salary components below and above these thresholds, pension funds offer additional pension schemes, for which they have greater flexibility in setting the terms and conditions.

The conversion rate for the mandatory part of the pension fund is set by the federal government and is the same for all institutions. If your employer has also taken out extra-mandatory insurance, a different rate may apply.

If the same rate applies to both the mandatory and supplementary pension schemes, this is referred to as a enveloping conversion rate. If this is not the case, the Conversion rate split.

The so-called Minimum conversion rate The rate for the compulsory pension is 6.8%. A BVG reform would have reduced it to 6%. Voters rejected this reform in September 2024, so the rate remains at 6.8%.

Sample calculation of conversion rate

With the Conversion rate of 6.8% you will receive an annual pension of CHF 6,800 per CHF 100,000 of your retirement assets. With a Savings capital of CHF 1,000,000 this results accordingly CHF 68,000 per year or around CHF 5,667 per month.

In the case of a supplementary pension scheme, the conversion rate may even be lower than the minimum conversion rate, provided that it does not fall below the statutory minimum pension under the compulsory scheme.

If your pension fund has a split conversion rate the retirement assets are divided.

Let us assume that 80% of the accumulated capital consists of mandatory contributions and 20% of non-mandatory contributions. The conversion rate for the mandatory portion is 6.8%, whilst for the non-mandatory portion it is 6%. The calculation would then look like this:

CHF 800'000 * 6.8% = CHF 54'400
CHF 200,000 * 6% = CHF 12,000

In total, you therefore receive CHF 66,400 per year or around CHF 5,533 per month.

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Who sets the conversion rate?

The Confederation sets the conversion rate in the Federal Law on Occupational Retirement, Survivors' and Disability Pension Plans (BVG) for the mandatory pension fund. This is defined in particular on the basis of general life expectancy and the expected return.

Each pension fund can set its own rate for the extra-mandatory scheme.

By the way: It can all get complicated very quickly. Even some politicians can't explain the conversion rate, even though they debate it. If you don't think so, take a look at this Fintool video an.

Can the conversion rate change?

Yes, the conversion rate can be adjusted with a Revision of the law be amended. The most recent attempt to do so failed at the ballot box in 2024.

Changes are being discussed mainly on the basis of increased life expectancy. Whilst in 1948 it was assumed that 65-year-old men would live for an average of 12 more years and 65-year-old women for an average of 13 more years, it is now assumed that today aged around 20 and 22. This means that the capital saved must last for considerably longer, which is why a reduction in the conversion rate is a recurring topic of discussion.

Also relevant are Survivors' pensionsif the insured person dies. It must also be possible to pay these from the capital saved.

Another factor is the Technical interest rate. This is an arithmetical value that reflects the Expected return reflects. If future returns on the financial markets are low, a high conversion rate may no longer be guaranteed, depending on the circumstances.

Is the conversion rate the same for all pension funds?

The Minimum conversion rate is the same for all pension funds. This means that your retirement assets in the mandatory scheme are always converted at 6.8%.

The conversion rate for the extra-mandatory scheme may vary from one pension fund to another.

Which pension fund has the highest conversion rate?

Which pension fund offers the highest conversion rate varies from year to year. You can find the latest figures in the comparison of Pension fund comparison.ch. When doing so, pay attention to the total conversion rate, i.e. the mandatory and supplementary components combined.

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Conclusion - conversion rate explained

The conversion rate is a Percentagewhich is used to calculate how high your Annual pension from the 2nd pillar is. The statutory minimum conversion rate is 6.8%. With retirement savings of CHF 1,000,000, you will therefore receive an annual BVG pension of CHF 68,000.

The sentence is based, in particular, on the average life expectancy and the expected return. As life expectancy rises, there are repeated political discussions about lowering it. The most recent proposal on this matter was rejected by voters in 2024.

Pension funds are free to set their own rates for the extra-mandatory balance and may determine a different rate.

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