What can I expect from my second pillar for my retirement?

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Let’s take the most common case: you reach 64 or 65 years old, you saved during 40 years. This accumulated capital (that can vary greatly based on the pension fund conditions) bears the sweet name of “retirement assets”. 

Between us, let’s call it a pie. A pumpkin pie since we will enjoy it at the autumn of our lives.  

Each month, we will enjoy a piece of our pumpkin pie. Most of the time, we will not be able to, eat it at once. Pension funds protect us from suffering a terrible indigestion. Thank you pension funds! 

That being said, we may, at this time and legally, take out a fourth of our capital assets and the remaining in the form of a pension. This rule is not always applicable, some pension funds can include in their internal regulation the possibility for their insurees to take out more than a quarter of their capital assets and in certain cases, it is possible to take out the entire amount. 

Be careful: the more the percentage taken out as capital is high, the more the pensions paid will be low. 

How to calculate my second pillar pension? 

Everything stems from your retirement assets: what you saved to your second pillar when you worked.You simply have to take your assets, multiply them by the applicable conversion rate. Currently, it is 6.8% for the mandatory part. 

If my retirement assets (aside from the over-mandatory part) are of 200,000 CHF at retirement age, all I have to do is multiply this amount by 0.068. Which gives us 13,600 CHF, paid out yearly. This means my second pillar pension will be 1,133 CHF per month, which will be added to my OASI.  (=Lien vers “A combien de rentes AVS aurai-je droit?”).

Noé explains how to calculate the pensions you will receive from the 2nd pillar when you retire, based on your BVG capital

If your income is above 86,040 CHF per year, then you enter into the above-mandatory regime we discussed above. The conversion rate is not fixed. It is determined by your pension fund. 

Be careful: in addition to significant differences in contributions, interest rates and insured salaries, it is also frequent to find considerable differences in terms of conversion rates for the above-mandatory part. 

Let’s take for example and my mother Jacqueline TheBroker, throughout their lives, they dealt with a good pension fund for all that related to savings and managed to set aside on their second pillar the modest sum of 700,000 CHF each. When they retired, they were told that of the 700,000 CHF, 400,000 CHF related to the mandatory part and that the 300,000 CHF remaining came from the over-mandatory part. 

As they did not have the same employer, they did not have the same conversion rate on their over-mandatory part. My mother was lucky enough to get a 6.5% rate, compared to 5% for my father and here is the result: 

Example of the impact of conversion rates on 2nd pillar pensions
Graph showing the impact of conversion rates on 2nd pillar pensions.

Which amounts to a 90,000  difference over 20 years. 

When you retire, your second pillar will be a major part of your income. It is therefore important to pay attention to all these details. 

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