Picture two colleagues. Same company, same salary for 40 years, same savings effort. At retirement, both have CHF 500'000 in their pension account. The first retired in 2000. The second in 2026. The first colleague's monthly pension: CHF 3'000. The second's: CHF 2'125. The difference: CHF 875 every month, for life. Not inflation. Not the stock market. A single number that shifted silently over 25 years.
The mechanism in one formula
The BVG conversion rate is the percentage applied to your accumulated capital to calculate your annual pension. The formula is one line:
With CHF 500'000 at 7.2% (year 2000 generation): CHF 3'000 per month. With the same capital at the 2024 effective median rate of 5.1%: CHF 2'125 per month. Annual difference: CHF 10'500. Over 20 years of retirement: CHF 210'000 less pension, paid for life.
previous generation
mandatory portion only
all pension funds (Swisscanto)
25 years of silent decline
The chart below shows two curves. The blue line: the legal minimum rate guaranteed by law for the mandatory BVG portion. The terracotta line: the effective median rate actually applied by Swiss pension funds across the entire capital balance. Source: Swisscanto, the sector's benchmark study.
BVG conversion rate — Trend 1985 to 2026
Two structural trends explain this decline: Swiss retirees' life expectancy has grown by 5 years since 1985, and bond yields have fallen durably. Pension funds must finance longer pensions from lower-yielding assets. For the supra-mandatory portion of your capital, which often represents the majority for middle and higher earners, pension funds set their own conversion rate freely.
What your capital actually produces at each rate
| BVG capital | at 7.2% (year 2000) | at 6.8% (legal 2026) | at 5.5% (common) | at 5.1% (median 2024) |
|---|---|---|---|---|
| 200'000 | 1'200 / mo. | 1'133 / mo. | 917 / mo. | 850 / mo. |
| 350'000 | 2'100 / mo. | 1'983 / mo. | 1'604 / mo. | 1'488 / mo. |
| 500'000 | 3'000 / mo. | 2'833 / mo. | 2'292 / mo. | 2'125 / mo. |
| 700'000 | 4'200 / mo. | 3'967 / mo. | 3'208 / mo. | 2'975 / mo. |
| 1'000'000 | 6'000 / mo. | 5'667 / mo. | 4'583 / mo. | 4'250 / mo. |
CHF 500'000 row : the gap between the 2000 rate (7.2%) and the current median (5.1%) is CHF 875 per month, CHF 10'500 per year. Over 20 years of retirement: CHF 210'000 less pension with identical starting capital.
How long does your capital last if you manage it yourself?
If you take the capital and invest it yourself, drawing down a monthly amount equal to your pension equivalent, how long does it last? The chart below shows the depletion of CHF 500'000 invested at 3% net annual return, with a monthly withdrawal of CHF 2'292 (equivalent to a 5.5% conversion rate).
Capital CHF 500'000 — duration at 3% net return, CHF 2'292/month withdrawal
Assumptions: capital CHF 500'000, conversion rate 5.5%, monthly withdrawal CHF 2'292 (pension equivalent), 3% net annual return. Capital exhausted after 26.7 years (age 91.7 for retirement at 65). Life expectancy CH per FSO 2023.
The capital lasts statistically until age 91.7. Swiss life expectancy is 82.3 years for men and 85.6 years for women (FSO 2023, retirement at 65). In purely statistical terms, the capital scenario is advantageous for the majority of insured persons. Two factors can reverse the conclusion: the survivor's pension (your partner receives approximately 60% of your pension for life under the annuity option; nothing under the capital option) and taxation (pension taxed annually as ordinary income; capital taxed once at a reduced rate).
Three levers you still control before age 64
- Check the effective conversion rate of your pension fund, not just the legal rate. Your pension regulations (which your employer is legally required to provide) state the rate applicable to your total capital, including the supra-mandatory portion. This figure may be significantly below 6.8%.
- Assess voluntary BVG contributions if you have a contribution gap. Time abroad, prolonged part-time work, or a late career start create gaps that can be closed with voluntary contributions, fully tax-deductible. Note: contributions made within 3 years before a capital withdrawal may be subject to recapture tax.
- Compare capital and pension with your real parameters. The pension is not automatically the better choice. The decision depends on your effective rate, family situation, health status, and canton of residence. The simulator below makes this calculation with your actual figures.
Timing : the capital-or-pension decision is made once, is often irrevocable, and must be communicated to your pension fund usually 3 to 6 months before the retirement date. Plan at 55, not at 64.
Simulate your own capital or pension scenario with your pension fund's effective conversion rate, your projected capital, and your retirement horizon.
Open the Capital or Pension simulatorSources : FSIO (BVG mandatory conversion rate 2026: 6.8%) ; Swisscanto Pension Fund Study 2024 (effective median rates 2006-2024) ; FSO (Swiss mortality tables 2023: life expectancy at 65, men 82.3 yrs, women 85.6 yrs) ; BVG/LPP Art. 14.