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Swiss pension funds (LPP/BVG): performance, solidity and what businesses and workers need to know in 2026

In a nutshell. In 2026 the LPP entry threshold remains at CHF 22,680, the coordination deduction at CHF 26,460, the minimum rate at 1.25% and the mandatory conversion rate at 6.8% — following the popular rejection of the LPP 21 reform in September 2024. Pension funds show positive returns and solid coverage ratios in private funds; the situation of some public-law institutions is less reassuring. For SMEs, the 2nd pillar remains a crucial point of cost, compliance and contribution attention.

What it is and how the 2nd pillar works

In Switzerland, pension provision rests on the three-pillar system. The 2nd pillar is occupational pension provision (LPP/BVG), mandatory for employees already insured with the AVS (DE: AHV) who exceed a certain income threshold. Together with the AVS, it serves to enable the maintenance of one's standard of living after retirement.

In simple terms: each month the employer and the employee pay contributions to a pension fund, which sets aside and manages this capital until retirement. At the end, the worker can choose to receive the capital as a pension, as a lump sum, or as a combination of the two.

The insurance for death and disability risks kicks in from 1 January after the age of 17, while contributions for old-age savings start from 1 January after the age of 24.

The key figures for 2026

These are the values that every employer and every employee would do well to know, because they end up on the payslip:

• LPP entry threshold: CHF 22,680 annual salary. Below this figure the obligation does not kick in.
• Coordination deduction: CHF 26,460.
• Minimum coordinated salary: CHF 3,780.
• Maximum coordinated salary: CHF 64,260.
• LPP minimum rate: 1.25%.
• Minimum conversion rate (mandatory regime): 6.8%.

In practice, the coordinated salary is the part of the salary on which the mandatory LPP is actually paid: it is calculated by subtracting the coordination deduction (CHF 26,460) from the gross salary, up to the maximum insured salary limit. It is a mechanism that concentrates mandatory coverage on the central income bracket and it is one of the most sensitive points for part-time workers and low salaries.

Minimum rate and conversion rate: what they really mean

The LPP minimum rate is the minimum remuneration that the pension fund must guarantee each year on the worker's mandatory old-age savings. For 2026 the Federal Council confirmed it at 1.25%, the same value already in force in 2024 and 2025. Before that, from 2017 to 2023, it was at 1.0%. It is a prudential parameter, designed to protect the insured even in periods of weak returns.

The conversion rate, by contrast, is the multiplier that, at retirement, transforms the accumulated capital into an annual pension. In the mandatory regime it is at 6.8%: this means that capital of CHF 100,000 gives a theoretical gross annual pension of CHF 6,800. It is a figure attached to many technical and political debates: in a society where people live ever longer, keeping such a high rate generates funding tensions. The LPP 21 reform, which proposed lowering it to 6.0%, was however rejected by the people on 22 September 2024. So in 2026 the parameter remains at 6.8% for the mandatory regime.

How much do employer and employee really pay

The statutory old-age savings credit rates on the coordinated salary are progressive by age:

The employer pays at least half of the total cost by law: the employee's share is withheld from the payslip. Many funds offer more generous plans on the extra-mandatory portion (the bracket above the maximum coordinated salary), often with higher credits and contributions different from the legal minimum.

There is, however, a point that many SMEs underestimate: in addition to old-age savings credits there are risk premiums (death, disability), contributions to the LPP guarantee fund and the fund's administrative costs. The total cost for the employer is therefore, in practice, higher than the savings rates alone, especially in higher age brackets. It is useful to know this before building a labour-cost budget.

How much do Swiss pension funds yield

A question both entrepreneurs and employees often ask: how is our money in the pension fund actually performing? It is worth distinguishing two different things.

The performance of net assets is the total return that the fund obtains on its investments. According to data from the Occupational Pension Supervisory Commission (OAK BV):

• in 2024, the average performance was 7.4%;
• in 2025, 6.1% for institutions without state guarantee and 6.2% for those with state guarantee.

The interest actually credited on the assets of active insured persons is, in general, lower than the performance on assets, because part of the return is used to build reserves and strengthen coverage. Again according to the OAK BV, the average remuneration of assets was 3.76% in 2024 and 4.33% in 2025.

This is the important distinction: the fund may have earned 6–7%, but on the individual worker's old-age savings the credited return will typically be more contained.

The solidity of the system

The coverage ratio is the figure that says how much a pension fund has in assets to cover its commitments: above 100% it is solid, below it is underfunded. The official data tell a two-speed story:

• At the end of 2025, funds without state guarantee had an average coverage ratio of 117.1%, up from 114.7% at the end of 2024.
• Public-law institutions with state guarantee were at 91.3%, up from 88.3% at the end of 2024 but still below the safety threshold.

The system, taken as a whole, is in good health: in most private funds the coverage level is well above 100%. Some public-law institutions, by contrast, continue to be underfunded, a situation managed thanks to the state guarantee but nonetheless to be monitored.

The LPP 21 reform: what happened to it

It is worth clarifying this point well, because there is often confusion. The LPP 21 reform was an important project that, in summary, provided for:

• reduction of the conversion rate from 6.8% to 6.0%;
• reduction of the coordination deduction (from a fixed amount to 20% of the salary), to improve coverage of low salaries and part-time work;
• lowering of the entry threshold, to include more workers in the mandatory LPP;
• a new structure of old-age savings credits, with a more balanced weighting between ages.

The reform was rejected by the Swiss people on 22 September 2024. So in 2026 none of these changes are in force and pre-reform rules apply. The political debate continues and new proposals will come, but to date the regulatory framework is the previous one, with all the well-known long-term criticisms (conversion rate high compared with return expectations, weak coverage for part-time and low incomes).

What an employer must do

For a Swiss SME, managing LPP correctly is a non-trivial part of HR obligations. The main points:

• Join a pension institution within two months of the obligation arising for the first liable employee. In the absence of affiliation, the LPP substitute occupational benefit institution (Auffangeinrichtung BVG) intervenes ex officio.
• Correctly notify entries and exits to the pension fund and manage salary changes, leaves of absence and absences.
• At the end of the employment relationship, correctly manage the vested benefit and the transfer of capital to the new institution.
• Any advances for home ownership or early withdrawals must be managed according to the rules of the fund and the law.
• Inform employees clearly about coordinated salary, own and employer contributions and expected benefit.

This last point, trivial in theory, is one of the areas where SMEs have the most internal disputes: the employee who wonders "why do I see such high LPP deductions on my payslip?" deserves a clear explanation, and understanding it is also a factor of satisfaction and corporate climate.

What changes for cross-border workers

For cross-border workers, the 2nd pillar works as for resident employees: the same thresholds, the same rates, the same employer contributions apply. The real difference comes at the time of departure.

If the cross-border worker leaves Switzerland for good, they can request payment of the vested benefit according to the applicable rules (with distinctions between the mandatory and the extra-mandatory parts, and with limitations if they move to an EU/EFTA country). If, instead, they continue to work in Switzerland, they remain in the system like the other insured persons.

A sensitive practical point concerns part-time or low-salary cross-border workers: because of the fixed coordination deduction, their coordinated salary is low and LPP coverage is modest. For those with several employment relationships or partial activity, it is important to assess the pension position carefully.

The mistakes we see most often in SMEs

From the fiduciary observatory, some recurring mistakes:

• Failing to check the affiliation obligation immediately when hiring the first above-threshold employee.
• Miscalculating the coordinated salary, especially in case of part-time or variable salaries.
• Late or incorrect communications to the pension fund on entries, exits and salary changes — these later generate disputes, recalculations and costs.
• Treating LPP as a formality, rather than as a structural item of labour cost and compliance.
• Confusing mandatory and extra-mandatory, choosing plans unsuited to the company profile (too little covered or too costly).
• Not explaining well to employees why the real corporate cost exceeds just the amount withheld on the payslip.

These are all mistakes that can be solved with good coordination between HR, payroll and fiduciary.

How we help

For an SME, the 2nd pillar is not just a contribution item: it is a piece of HR strategy, an important cost and a continuous source of compliance. Fidav has been a Canton Ticino fiduciary since 1982 and manages HR administration and payroll for many Swiss firms, cross-border workers and clients with cross-border IT–CH set-ups.

In practical terms, we help you set up affiliation with the pension fund correctly, check salary statements, manage entries, exits and vested benefits, and verify that your collaborators' pension position is in order and well explained. For cross-border workers, we also coordinate the tax and withholding-tax side, on which we have a dedicated page.

Read more on our HR administration and payroll, the page dedicated to cross-border workers and withholding tax and our tax advisory for individuals for personal pension planning.

Have doubts about your company's LPP or your position as a worker? Chat with us on WhatsApp at +41 79 741 02 89 or call +41 91 640 40 20.

FAQ (visible on page + FAQPage schema above)

At what salary does the 2nd pillar LPP obligation kick in in 2026? In 2026 the LPP entry threshold is CHF 22,680 of annual salary. Below this threshold the affiliation obligation for the 2nd pillar does not kick in. Above it, the employer must affiliate the employee to a pension institution. The coordinated salary (the part actually insured) is calculated starting from the gross salary and subtracting the coordination deduction of CHF 26,460.

What is the LPP minimum interest rate for 2026? The LPP minimum interest rate for 2026 is set at 1.25%, the same value already in force in 2024 and 2025. It is the minimum rate that pension funds must guarantee on the old-age savings of the mandatory regime. It was confirmed by the Federal Council after a phase, from 2017 to 2023, during which it had been set at 1.0%.

Is the LPP conversion rate really still at 6.8%? Yes. In 2026 the minimum conversion rate in the mandatory LPP regime is still 6.8%. This means that capital of CHF 100,000 in the mandatory regime generates a theoretical gross annual pension of CHF 6,800. The LPP 21 reform, which provided for lowering it to 6.0%, was rejected by the Swiss people on 22 September 2024, so no legal change came into force. The political debate, however, remains open.

How much do employer and employee really pay for LPP? By law, the employer must cover at least 50% of the total cost of occupational pension provision. The worker's share is withheld on the payslip. Old-age savings credits on the coordinated salary follow age-progressive rates: 7% between 25 and 34 years, 10% between 35 and 44, 15% between 45 and 54, 18% between 55 and 65 years. To these are added the risk premiums (death and disability) and contributions to the guarantee fund, so the total cost for the employer is generally higher than the savings rates alone.

Are Swiss pension funds solid in 2026? Yes, overall the system appears solid. At the end of 2025 the average coverage ratio of institutions without state guarantee was at 117.1% and that of institutions with state guarantee at 91.3%, both up from 2024. Average net asset returns were 7.4% in 2024 and 6.1–6.2% in 2025. Underfunding situations concern especially some public-law institutions, while the vast majority of private funds is well capitalised.