What will be your second pillar contribution (LPP)?

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While part of the LPP contributions is paid by the employee, another part is paid by the employer. 

  • Mandatory part: the law imposes certain basic rules all employers must follow: Namely, 
    • Minimal retirement credits per age range (see below). 
    • Interest rates paid yearly based in the policyholder’s assets (1%).
    • Minimal conversion rate on the mandatory part (6.8%).  
    • The employer must pay at least as much as the employee 
  • Non-mandatory part: the law always determines minimum requirements but does not preclude them from being more generous. They can decide freely on how to insure their employees, as long as their situation remains at least as good as what the law prescribes. 
    • Retirement credits greater than the minimal requirements per age range. 
    • The portion paid by the employer can be higher than the portion paid by the employee.
    • A coordination deduction below 25,095 CHF. 

Whew, I know what you are thinking: “why do you keep adding new complicated words Noé? There are enough already!”

Graph showing the rules on LPP  contributions for compulsory and non-compulsory 2nd pillar pension schemes

Ok, first of all, I bet what I explained is 10x clearer than what you have read elsewhere. Or else, I quit. What would FBK Conseils be without its mascot? Excellent question which, I hope, will remain unanswered!

As regards the pension fund, I will get to it right away. First, let’s calculate our LPP contributions. The legal minimums are the following. 

  • From 25 to 34 years old: 7% of the annual salary (3.5% on you, 3.5% on your employer). On a monthly income of 5,000 CHF at 27 years old, a 350 CHF contribution will be required in total. 175 CHF will be deducted from your salary and your employer will be in charge of the other 175 CHF. 
  • From 35 to 44 years old: 10% of the annual salary (5% on you, 5% on your employer). On a monthly income of 6,000 CHF at 39 years old, a 600 CHF contribution will be required in total. 300 CHF will be deducted from your salary and your employer will be in charge of the other 300 CHF.
  • From 45 to 54 years old: 15% of the annual salary (7.5% on you, 7.5% on your employer). On a monthly income of 7,000 CHF at 52 years old, a 1,050 CHF contribution will be required in total. 525CHF will be deducted from your salary and your employer will be in charge of the other 525 CHF.
  • From 55 to 64 or 65 years old: 18% of the annual salary (9% on you, 9% on your employer). On a monthly income of 8,000 CHF at 61 years old, a 1,440 CHF contribution will be required in total. 720 CHF will be deducted from your salary and your employer will be in charge of the other 720 CHF.
How much of the gross salary is taken into account when calculating the BVG 2nd pillar pension contributions

That is what is called a sharp increase! But since salaries tend to increase as we grow older. The fact that LPP contributions increase should not be an issue, turns out, the whole thing is rather well thought through. 

How much of the gross salary is taken into account when calculating the BVG 2nd pillar pension contributions ?

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