What is the coordination deduction in the LPP?

The coordination deduction is a fixed amount (CHF 25,725 in 2026) subtracted from your gross salary to determine the 'coordinated salary' subject to the LPP. This amount is deducted because it is already covered by the 1st pillar (AHV).

Can I withdraw my LPP if I return to live in the EU?

If you settle in an EU/EFTA country and are subject to mandatory health insurance there, you can only withdraw the 'extra-mandatory' part of your LPP in cash. The 'mandatory' part is transferred to a vested benefits account in Switzerland until retirement.

What is the taxation when a cross-border worker withdraws their 2nd pillar?

Upon a capital withdrawal, Switzerland levies a withholding tax. However, under the Double Taxation Agreement (DTA), the cross-border worker must declare this capital in their country of residence. Once the tax is paid in the residence country, they can request a full refund of the Swiss withholding tax.

Can I use my LPP to buy real estate after the age of 50?

Yes (WEF early withdrawal), but with a major restriction. After 50, you can only withdraw the maximum amount between: either your vested benefits acquired at age 50, or half of your current vested benefits.

Swiss LPP (2nd Pillar): 2026 Simulator, Taxation & Expert Withdrawal Guide

Beyond the basics: The essence of the 2nd pillar

The Occupational Pensions Act (LPP/BVG) is a strict individual capitalization system. Unlike the AHV/AVS, the money contributed (by you and your employer) funds your own pension account. Understanding the engineering of the LPP (coordinated salary, conversion rate, extra-mandatory part) is vital, as this capital generally represents over 60% of an employee's total financial wealth in Switzerland at retirement age.

1. The mechanics of contributions: Coordinated Salary and Matching

LPP savings contributions only appear on your payslip from January 1st following your 24th birthday. But beware, the contribution percentage does not apply to your total gross salary, but to a so-called "coordinated" salary.

The Coordinated Salary explained (2026 Figures)

The Swiss system considers that the first tranche of your income is already insured by the AHV (1st pillar). The LPP therefore subtracts a coordination deduction of CHF 25,725 from your gross salary.

Entry threshold: You must earn at least CHF 22,050 per year to be subject to the LPP.
Mathematical example: For a gross salary of CHF 80,000, the fund subtracts CHF 25,725. LPP contributions will only be levied on the remaining CHF 54,275 (the famous coordinated salary).

Legal Rates and Employer Contributions

The law sets progressive "old-age credits" rates based on age:

25 - 34 years: 7 %
35 - 44 years: 10 %
45 - 54 years: 15 %
55 - 65 years: 18 %

Employer's obligation: Article 66 of the LPP requires the employer to bear at least 50% of the total amount of contributions. Thus, the amount deducted from your payslip is always doubled (at a minimum) by your company before being paid into your pension account.

2. Diagnosis: Do you have a "Good" LPP?

To attract talent, many companies (especially in pharma, finance, or watchmaking) offer pension plans that go well beyond legal obligations. Here are the 3 points to check on your annual certificate:

The Employer / Employee ratio: While the law requires 50/50, an attractive plan offers a 60/40 split in your favor, or even 100/0 where the company covers the entire savings contribution.
Removal of the coordination deduction: The most generous funds eliminate the CHF 25,725 deduction. Contributions are then calculated from the first franc earned, massively increasing your final capital.
The "Extra-mandatory" pension: The mandatory LPP caps the insured salary at CHF 88,200. If you earn more, check that your fund covers the "extra-mandatory" part. This guarantees the maintenance of your real standard of living at retirement.

3. Expert Simulator: Estimate your Capital and Exchange Savings

The power of the 2nd pillar lies in the compound interest accumulated over the decades. Use our interactive simulator to project the evolution of your pension based on your global savings effort.

Cross-border bonus: The table also calculates the savings achieved by repatriating your funds via ibani (rather than via a traditional bank) if you choose to exchange this capital into Euros at the end.

Monthly contribution (CHF)
(Employee + Employer share)

Annual interest rate (%)
(Capital remuneration)

Conversion rate (%)
(For pension calculation)

Duration	Total Accumulated Capital	Projected Annual Pension

* The LPP calculation uses the annual compound interest formula (smoothed payments). The evolution of inflation and legal rates with age are not taken into account to simplify the projection.
** The exchange savings (in blue) represents the money you save by repatriating your Swiss francs into euros with ibani, compared to the average exchange margin (1.5%) charged by a traditional bank or a non-specialized broker.

4. How to withdraw your LPP and under what conditions?

The money in your 2nd pillar is locked until the legal retirement age (or early retirement, generally from 58). However, Swiss law provides three major cases authorizing an early withdrawal (total or partial).

Case 1: Purchasing a primary residence (WEF)

This is the most frequent reason for withdrawal. The Promotion of Home Ownership (WEF) allows you to withdraw a portion of your LPP to constitute your equity when buying your primary residence (or to amortize an existing mortgage). This rule applies even if the property is located in the EU for a cross-border worker. The minimum withdrawal amount is CHF 20,000.

Crucial restriction after 50: If you are over 50, the law locks a portion of the funds to guarantee your retirement. You can only withdraw the maximum amount between:
1. Your LPP capital as it was on your 50th birthday.
2. Half of your current LPP capital.

Case 2: Permanent departure from Switzerland

If you leave Switzerland to return to live in your home country, the withdrawal conditions depend on your destination:

Departure to a non-EU/EFTA country: You can withdraw your entire LPP capital in cash.
Departure to an EU/EFTA country (e.g., France, Germany, Italy): If you are compulsorily subject to social security in that country, you can only withdraw the extra-mandatory part of your LPP in cash. The mandatory part must be transferred to a vested benefits account in Switzerland and will remain locked until your legal retirement age.

Case 3: Setting up as an independent business owner

If you become self-employed in Switzerland (with confirmation from the AHV compensation office) and are no longer subject to mandatory occupational pension provision, you can request the cash payment of your entire vested benefit. The request must be made within the year following the start of your self-employed activity.

Withdrawal Taxation (Withholding tax and DTA)

Upon a capital payment (total or partial withdrawal), the amount is taxed:

In Switzerland (Withholding tax): The pension fund deducts a tax (the rate varies depending on the canton of your pension foundation).
In the country of residence (e.g., France/Germany): Under the Double Taxation Agreement (DTA), the capital must be declared in your home country. It will be subject to local taxation.
The refund: Once your local tax assessment notice is presented to the Swiss tax administration, the Swiss withholding tax is fully refunded to avoid double taxation.

The Final Trap: Foreign Exchange

Whether buying a house or for your retirement, if you repatriate this capital to the Eurozone, you will have to convert large sums of CHF into EUR. A traditional bank will systematically apply a hidden exchange margin upon receipt of the funds (as demonstrated in our simulator above).

The ibani strategy: Enter the personal Swiss IBAN provided by ibani directly on your pension fund's form. Upon payment, ibani will convert your capital at the true live market exchange rate with full transparency. Your savings on exchange fees will often finance a large part of your taxes!