Why your future pension is lower than you think.
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The LPP conversion rate determines your pension: capital × rate = annual pension. The legal rate of 6.8% only applies to the mandatory part. On the extra-mandatory part, funds apply 4.5 to 5% — so the real blended rate is often below 6%, and it keeps falling.
What is the conversion rate?
At retirement, your pension fund converts your accumulated capital into a lifelong annuity. With CHF 100’000 of capital and a rate of 5.5%, you receive CHF 5’500 gross per year — about CHF 458 per month, for life.
6.8% legal… but only on the mandatory part
The LPP minimum rate (art. 14 LPP) protects only the mandatory part of your assets (salary insured up to CHF 88’200). Everything above — the extra-mandatory — is freely converted by the fund, typically at 4.5–5%. The result is a “blended” rate: many funds are already below 6% overall.
Why does it keep falling?
- Life expectancy rises: the same capital must finance more years of pension.
- Low expected returns: the technical rates used by funds have been cut.
- Intergenerational transfers: active members partly finance current pensioners.
Concrete impact: what your capital is really worth
| Capital | Rate 6.8% | Rate 5.5% | Rate 5.0% |
|---|---|---|---|
| CHF 100’000 | CHF 6’800/yr | CHF 5’500/yr | CHF 5’000/yr |
| CHF 300’000 | CHF 20’400/yr | CHF 16’500/yr | CHF 15’000/yr |
| CHF 500’000 | CHF 34’000/yr | CHF 27’500/yr | CHF 25’000/yr |
What can you do about it?
You cannot negotiate your fund’s rate — but you can control where your free-passage capital sits. Assets left in a vested benefits account are NOT subject to a conversion rate: the capital remains yours, can be invested (OPP 2), and is passed on in full on death. For many profiles, taking the capital rather than the annuity — or consolidating dormant accounts — materially changes retirement income.
Frequently asked questions
Does the falling rate affect current pensions?
No: once your pension starts, the rate is locked in. The fall affects future retirees.
Can a fund go below 6.8% on the mandatory part?
No, 6.8% is the legal minimum on the mandatory part. The blended rate can be lower because of the extra-mandatory part.
How do I know my fund’s real rate?
Check your pension certificate or the fund’s regulations — or ask us: we read those documents every day.
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