Swiss LPP (2nd Pillar): Interactive Simulator, Taxation and Expert Withdrawal
Reading time: 9 minutes | Updated:
By Brice DELHOME, Pension & Finance Expert
- Coordinated salary: LPP contributions are not levied on your whole gross salary; the pension fund first subtracts a coordination deduction of CHF 26,460, and the LPP applies from an annual salary of CHF 22,680.
- Old-age credits: from 7% between 25 and 34 to 18% from 55, applied to the coordinated salary; the employer pays at least 50% of contributions (art. 66 LPP).
- Early withdrawal: it is possible to finance the purchase of your primary residence (home ownership promotion, WEF, minimum CHF 20,000, including for a property in the EU), on permanent departure from Switzerland, or to start a self-employed activity in Switzerland.
- Moving to the EU or EFTA: if you are compulsorily subject to social security there, only the extra-mandatory part can be paid out in cash; the mandatory part stays in a Swiss vested benefits account and can be paid out no earlier than five years before the reference age.
- Tax on the capital: the pension fund deducts Swiss withholding tax; the capital is then in principle taxed in your country of residence, and the Swiss tax is refunded on request, with a certificate from that country's tax authority, within three years of the payment.
1. How are LPP contributions calculated (coordinated salary and employer matching)?
The Occupational Pensions Act (LPP/BVG) is based on individual capitalization: unlike the AHV/AVS, the old-age credits paid by you and your employer build up your own pension assets.
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 26,460 from your gross salary.
- Entry threshold: You must earn at least CHF 22,680 per year to be subject to the LPP.
- Mathematical example: For a gross salary of CHF 80,000, the fund subtracts CHF 26,460. LPP contributions will only be levied on the remaining CHF 53,540 (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 26,460 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 90,720. 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 estimates the exchange savings from repatriating your funds via ibani rather than via a bank that would apply a 1.5% margin (assumption), if you choose to exchange this capital into euros at the end.
| 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) are an estimate: they compare a 1.5% bank margin (assumption) with the ibani margin from the pricing grid, i.e. 0.40% below CHF 10,000, 0.35% from CHF 10,000 to 50,000, 0.30% from CHF 50,000 to 100,000, 0.20% from CHF 100,000 to 250,000 and 0.15% from CHF 250,000 to CHF 1 million. Above CHF 1 million, the rate is set on a bespoke basis; the simulator then uses 0.15%. For the pension, the margin is calculated on each monthly payment. The margin actually charged by your bank may be lower or higher.
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.
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 stays in a vested benefits account in Switzerland and can be paid out no earlier than five years before the reference age (Vested Benefits Act, art. 25f; Vested Benefits Ordinance, art. 16, in French).
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: When the DTA gives the right to tax to your country of residence, the Swiss withholding tax is refunded on request: an official form provided by the pension fund, together with a certificate from the tax authority of your country of residence, to be submitted to the competent Swiss tax authority within three years of the payment. After that deadline, or if the DTA reserves taxation to Switzerland, the Swiss tax is final. See, for example, the Vaud tax administration's directive on withholding tax on pension benefits and the page of the Geneva tax administration (both in French).
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. Banks generally apply an exchange margin built into the rate, which does not always appear separately on the statement; its level varies by institution and amount (the simulator above gives an order of magnitude, based on a 1.5% assumption).
The ibani strategy: Enter the personal Swiss IBAN provided by ibani directly on your pension fund's form. Upon payment, ibani converts your capital at the market rate, with the margin from the pricing grid, from 0.40% to 0.15% depending on the amount (for example 0.20% from CHF 100,000 to 250,000); in manual mode, you trigger the exchange yourself once the margin is displayed.
Frequently Asked Questions
What is the coordination deduction in the LPP?
The coordination deduction is a fixed amount (CHF 26,460 in 2026) subtracted from your gross salary to determine the coordinated salary subject to the LPP. This amount is deducted because this part of the salary 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 compulsorily insured there against old-age, disability and death risks (that country's social security), you can only withdraw the extra-mandatory part of your LPP in cash. The mandatory part stays in a vested benefits account in Switzerland and can be paid out no earlier than five years before the reference age.
What is the taxation when a cross-border worker withdraws their 2nd pillar?
Upon a capital withdrawal, Switzerland levies a withholding tax. The cross-border worker must also declare this capital in their country of residence. When the double taxation agreement (DTA) gives the right to tax to that country, the Swiss withholding tax is refunded on request, using the official form together with a certificate from the tax authority of the country of residence, filed within three years of the payment.
Can I use my LPP to buy real estate after the age of 50?
Yes, through an early withdrawal for home ownership (WEF), but with a restriction. After 50, you can only withdraw the higher of the following two amounts: your vested benefits acquired at age 50, or half of your current vested benefits.