What is the 2nd pillar?
The 2nd pillar is mandatory for employees whose annual income exceeds a minimum threshold (CHF 22,680 from 2025). Contributions are shared between the employee and the employer, and paid into a pension fund (pension fund). This savings system is based on the principle of capitalization: the contributions paid in are invested and generate personal assets.
Situations giving right to a withdrawal
Your BVG capital can be withdrawn under several conditions:
1. Ordinary retirement
The most common situation is withdrawal at the time of retirement. At the legal age (65 years for both men and women), the insured person can receive their assets in the form of a lifetime pension, a lump-sum payment, or a mix of both if allowed by their pension fund’s regulations. The insured is entitled to withdraw at least 25% of their capital.
The choice to receive all or part of the capital instead of a pension must be made in writing within a deadline set by the pension fund (often 1 to 3 years before retirement). Once this choice is made, it is irrevocable.
2. Early retirement
Most pension funds allow early retirement from 58 years old. In this case, the insured may request an early annuity (with a lower conversion rate), or a lump-sum payment in accordance with the terms of his or her regulations.
Some institutions impose a proportional reduction in benefits for each year of early retirement. In general, early retirement can reduce the conversion rate between 0.10 and 0.30% per year of anticipation.
3. Withdrawal for the purchase of a home as a principal residence
The Swiss Vested Benefits Act (LFLP) allows the use of 2nd pillar funds under the home ownership promotion scheme (EPL), meaning for the purchase, renovation, or repayment of the mortgage on your primary residence. Two options are possible:
- Early withdrawal: part or all of the equity can be used to finance the purchase, construction or mortgage repayment of a home for own use.
- Pledging: the capital remains in the pension fund but is pledged to the bank to increase borrowing capacity.
The property must be used as principal residence (and not as a second home or investment property). Withdrawals are subject to a one-off capital gains tax at a reduced rate.
4. Final departure from Switzerland
If the insured moves to a country outside the European Union or EFTA, they may withdraw their entire LPP assets (both mandatory and supplementary parts). However, if moving to an EU or EFTA country, only the supplementary assets can be withdrawn. The mandatory assets are transferred to a vested benefits account.
Proof of new residence abroad is required (certificate of residence, deregistration from the commune, etc.).
5. Starting a self-employed business
When a person leaves salaried employment to become self-employed, they can request the payment of their pension assets. This withdrawal is only possible within one year after the start of the self-employment activity and provided that this activity is not secondary.
Concrete evidence is required (AHV registration , tax status, etc.).
Taxation of capital withdrawals
In Switzerland, capital withdrawn from the 2nd pillar is subject to a capital benefits tax. Upon withdrawal, the amount is taxed at a reduced rate, equivalent to one-fifth of the normal income tax rate. The tax is levied in the canton of residence at the time of payment, based on the statement provided by the pension fund to the tax authorities. For individuals residing abroad, the tax is withheld directly at source in Switzerland.
The amount of tax varies greatly from canton to canton. In Geneva and Lausanne, for example, a withdrawal of CHF 500,000 results in a tax of around CHF 39,000 to 42,000 for a single person. In Valais and Fribourg, the amounts may be slightly lower, but are still substantial. The higher the amount withdrawn, the higher the effective tax rate, due to the progressive nature of the tax scale.
It’s worth noting that voluntary buy-ins to the 2nd pillar, often made to optimize retirement savings, are tax-deductible. However, to keep this benefit, you must wait at least three years before withdrawing the capital, or you risk having to repay the tax deduction.
There are two common strategies for limiting withdrawal tax. The first is to stagger withdrawals over several years in order to benefit from a lower rate each time. The second is to take up residence in a canton with more favorable tax conditions in the year of withdrawal. Some cantons, such as Zug, Schwyz and Obwalden, offer much more favorable conditions than Vaud, Geneva or Neuchâtel.
How can I collect my BVG assets?
Occupational pension provision, or the 2nd pillar, aims to maintain the standard of living at retirement as a supplement to the AVS. Upon reaching retirement age, insured individuals can choose between a life annuity, a lump-sum withdrawal, or a combination of both, depending on the rules of their pension fund.
A lump-sum withdrawal offers greater flexibility: it allows you, for example, to invest, pay off a mortgage, or plan your estate. However, it also carries risks, notably the challenge of managing your savings over an uncertain lifespan. Before deciding, it’s crucial to understand how much you can withdraw, under what conditions, and the tax and inheritance implications.
How much can I withdraw in capital?
In Switzerland, according to the Federal Law on Occupational Retirement Provision (LPP), every insured person has the right to withdraw at least one quarter of their mandatory retirement savings as a lump sum, regardless of their pension fund’s regulations.
However, some pension funds offer the option of withdrawing more, or even all, of the accumulated capital, provided this is expressly provided for in their internal regulations. This right does not apply automatically to the entire capital.
A concrete example
Mr Dupont reaches retirement age with a pension fund balance of CHF 400,000 (compulsory) and CHF 100,000 (supplementary). By law, he can withdraw at least CHF 100,000 (i.e. 1/4) in capital. If his pension fund regulations so permit, he may also choose to withdraw the entire CHF 500,000.
Should I withdraw my 2nd pillar capital for retirement?
The temptation to withdraw capital from your 2nd pillar is a natural one. Being free to dispose of your savings gives you a sense of security and autonomy. But it's a decision that deserves careful consideration, as it involves considerable financial stakes.
For ordinary retirement, the 2nd pillar offers life annuity calculated with a currently very high conversion rate: 6.8% on the compulsory credit balance. This means that with a capital of CHF 400,000you would receive an annual pension of approximately CHF 27,200. Based on an average life expectancy after retirement estimated at 20 yearsthis represents a total of CHF 544,000 over time. Compared to the initial capital, this corresponds to a gain of CHF 144,000. This "surplus" is substantial and difficult to reproduce by other means: obtaining an equivalent return on the financial markets would imply a gain of around 36% is of course possible (and could be much higher), but would mean accepting a certain volatility.
It’s also important to remember that an LPP pension is guaranteed for life, regardless of market fluctuations or your actual lifespan. By choosing the annuity, you protect yourself against the risk of outliving your savings.
That said, withdrawing the capital can be relevant depending on your personal goals. If you want to pay off a mortgage to reduce fixed expenses, invest in a personal project, or plan an inheritance for your children, the capital offers flexibility that the annuity does not. However, it’s important to carefully assess the impacts—especially tax-related ones—such as the deductibility of mortgage interest if you decide to fully repay a home loan.
How do I withdraw my 2nd pillar?
You must notify your intention to withdraw a lump sum well in advance—several months before your official retirement date. Each pension institution sets its own internal deadlines, but it is common for the formal request to be submitted at least six months before retirement. Missing this deadline may result in losing the right to a lump-sum payment, leaving only the option of receiving an annuity. The spouse’s consent (husband or wife) is required under the LPP.
How can I withdraw my vested benefit capital?
Withdrawing capital from a vested benefits account is possible at normal or early retirement age, in accordance with the terms of your vested benefits contract and within the scenarios defined by the LPP.
To make a withdrawal, you must submit a written request to your vested benefits institution. It is essential to provide all required supporting documents, which vary depending on the reason for the withdrawal. Additionally, it is important to note that vested benefits assets, like those in a pension fund, are subject to capital benefits tax at the time of withdrawal.
Frequently asked questions
Withdrawal from the 2nd pillar is possible in 5 cases:
- retirement (ordinary or early),
- purchase or construction of a principal residence / repayment of a mortgage,
- definitive departure from Switzerland,
- setting up a self-employed business,
- or, in some cases, a disability pension.
Yes, if you remain a member of a pension fund after the legal retirement age (e.g. by extending your working life), most regulations stipulate a limit of no later than 70 years old. After this age, only an annuity can be paid.
You must submit a written request to your pension fund or the vested benefits institution holding your assets. The request must be accompanied by the required supporting documents (proof of property purchase, certificate of independence, certificate of departure, etc.).
If you suspect that your vested benefits have been lost, you must submit a request to asset search to the Centrale du 2ème pilier.
The lump-sum withdrawal is taxed separately from your income, at a reduced and progressive rate. The rate depends on the canton, the amount withdrawn, and your marital status. Staggering withdrawals over several years or accounts can help optimize taxation.
Yes, but the withdrawn capital cannot be reintegrated into the pension fund. If you return to Switzerland, you will start contributing again based on your new income, like any new insured person, while having the option to make buybacks.
No. Withdrawal is allowed only for your primary residence — the one you personally live in. Secondary residences, rental properties, or investment assets are excluded.
You can usually apply for early withdrawal from the age of 58, depending on your pension fund regulations. Please note: this will permanently reduce your benefits, as the conversion rate falls for each year of early withdrawal.
In this case, only the supplementary portion of your BVG/LPP credit can be withdrawn. The compulsory portion is transferred to a vested benefits account in Switzerland, until you retire.
Yes, most pension funds allow a mixed withdrawal: one part in capital, the other in annuity. This choice must be announced in writing within the set timeframe (often 1 to 3 years before retirement).
