Occupational Pension Scheme (BVG, Second Pillar)
The BVG governs mandatory occupational pension provision in Switzerland and, as the second pillar alongside the AHV, aims to maintain the accustomed standard of living in old age, upon disability, and in the event of death.
Concept
The Federal Act on Occupational Old Age, Survivors’ and Disability Pension Provision (BVG) forms the second pillar of the Swiss pension system and, together with the first pillar (AHV/IV), aims to appropriately maintain the accustomed standard of living. Employers are required to insure employees earning above a certain minimum salary (entry threshold) with a pension fund; mandatory provision covers salary between the entry threshold and a legally defined maximum amount, while pension funds may offer benefits beyond this mandatory minimum (supplementary provision).
Financing and Benefits
Unlike the AHV, occupational pension provision is financed on a funded basis: each insured person accumulates individual retirement savings through annual retirement credits, which can be drawn as a pension or lump sum upon reaching retirement age. In addition to retirement savings, the BVG covers disability and survivors’ risks and, under certain conditions, allows an early withdrawal to finance owner-occupied residential property.
Relevance for Insurance Practice
Together with the AHV, the BVG forms the foundation for securing both subsistence and standard of living within holistic financial planning. For private pension advisory work, understanding BVG benefits (as shown on the pension certificate) is essential to correctly identify coverage gaps in the event of disability, death, and old age, and to supplement them sensibly with the third pillar (Pillar 3a/3b).