Introduction
While the AVS (Swiss state pension, 1st pillar) is the base of the Swiss pension system, it in no way makes it possible to keep a standard of living comparable to the one you had while working.
That is the role of the 2nd pillar, also called the LPP (Loi sur la Prévoyance Professionnelle).
This scheme, compulsory for most Swiss employees, is nevertheless poorly understood. Many people do not know how it really works, what it can do for their wealth, or the options it offers at retirement.
Others find out too late that they could have made far better use of it.
And yet, managed well, the 2nd pillar can become one of the most powerful pillars of a complete retirement strategy.
This guide offers a clear and accessible reading of it, to understand it, make the most of it, and make the right choices at every stage.
What is the 2nd pillar (LPP)?
The Swiss 2nd pillar is a compulsory occupational pension system, designed to top up the AVS. Its aim is to give insured people an overall income of around 60% of their last salary once they retire.
It works on a funded basis: contributions are paid by the employer and the employee, then placed in a personal account within a pension fund.
Who is concerned?
Membership of the 2nd pillar is compulsory for:
- All employees from the age of 25, provided their annual income exceeds 22 680 CHF (2024 threshold)
- The self-employed, who can join voluntarily, but most of whom prefer the 3rd pillar for reasons of flexibility.
How does it work?
Every employer must enrol its employees in a pension fund, which it chooses itself. The employee, for their part, contributes automatically to that plan.
Contributions are paid in equal shares by employee and employer, but some companies opt for a more generous contribution in favour of their employees. This is called the super-mandatory contribution.
The insured salary is calculated from the gross annual salary, less the coordination deduction (26 460 francs in 2025). The contribution rates apply on this basis.
Every fund has its own rules, in particular on the rates applied, the choice of investment vehicles, the retirement benefits or the withdrawal arrangements.
| Employee’s age | Minimum contribution rate (LPP) |
|---|---|
| 25 to 34 years | 7% |
| 35 to 44 years | 10% |
| 45 to 54 years | 15% |
| 55 to 65 years | 18% |
What happens at retirement?
From the age of 58, depending on your fund’s rules, you can:
- Withdraw all or part of your capital
- Opt for a life annuity
- Choose a combination of the two
Withdrawal as capital
This option lets you recover your assets in a single payment. It is particularly popular with cross-border workers or people with investment plans (property, passing on wealth, and so on).
If you live in France, the capital is subject to a flat-rate tax of 6.75%, which remains very competitive.
Withdrawal as a pension
The capital is converted into a monthly pension for life, at a conversion rate set by the fund. The legal minimum is currently 6.8% for the mandatory part, but super-mandatory schemes can apply a different rate.
For example: capital of 300 000 CHF would give an annual pension of 20 400 CHF if the rate applied is 6.8%.
And in the event of death?
The 2nd pillar includes cover in the event of death or disability, depending on the beneficiary’s situation.
| Beneficiary | During working life | Annual allowance |
|---|---|---|
| Spouse | Death benefit or pension equal to 40% of the insured salary | Pension equal to 60% of the pension received |
| Child (up to 18/25 years) | Pension equal to 12% of the insured salary | Pension equal to 20% of the pension received |
Some funds also recognise civil partners or unmarried partners, subject to declaration conditions.
And in the event of early departure or a change of situation?
The system allows for several cases of withdrawal or transfer:
- From the age of 58: you can withdraw the assets, subject to the fund’s rules
- If you leave Switzerland or lose your job: the funds are transferred to a vested benefits account
Vested benefits can be managed with:
- A public institution (very safe return, but low)
- A private institution (potentially better return, but not guaranteed)
This flexibility means you can adapt your retirement strategy to your plans to move or live abroad.
Need personalised support?
The 2nd pillar is a mechanism that is at once compulsory, technical and strategic. Understanding its subtleties lets you not only plan your retirement better, but also make the most of your tax and wealth choices.
At WYP Consulting, we support you to:
- Read and decipher your pension certificate
- Estimate your capital or your future pension precisely
- Choose between capital or pension depending on your personal situation
- Put in place a top-up strategy (3rd pillar, life insurance, property)
Book an appointment with a WYP Consulting adviser
First conversation free of charge and with no commitment.
