Pension or lump sum in Switzerland: how to decide
Published 2026-10-19 · Updated 2026-10-19 · 2 min read · 3 sources · Verified Swiss federal benchmarks
Direct answer
At retirement you often choose between a monthly BVG pension and a one-time capital payout from your pension fund. A full AHV pension in 2026 is CHF 1,260–2,520 per month; couples are capped at CHF 3,780. Lump sums are taxed separately at a reduced rate, but buy-ins must stay in the fund for at least three years before you withdraw capital.
Key facts
- Reference retirement age is 65; women reach 65 gradually by birth year.
- AHV full pension range: CHF 1,260–2,520/month; married couples max CHF 3,780 combined.
- BVG buy-ins are tax-deductible but block lump-sum withdrawal for three years after each buy-in.
- Pillar 3a cannot be split across accounts; withdrawal timing follows separate rules.
- From December 2026, eligible AHV recipients receive a 13th monthly payment.
What you are actually choosing
AHV pays a lifelong state pension. BVG builds on salary at work. The pension-or-capital choice applies mainly to BVG when you retire at or after reference age 65. AHV does not pay as a lump sum.
Funds offer annuity, capital, or a mix. Capital funds housing or debt; annuity spreads longevity risk. Neither fixes a short AHV record: each missing year toward 44 costs about one forty-fourth of a full pension.
Tax and timing
BVG capital faces reduced cantonal lump-sum tax; annuities are taxed as income. Buy-ins lock lump-sum withdrawal for three years. Pillar 3a accounts cannot be split.
Worked example: mixing annuity and capital (illustration)
Assume (not a forecast) a BVG balance of CHF 400,000 at age 65 and a conversion rate of 6%. A full pension might pay about CHF 2,000 per month. Half capital and half annuity might yield CHF 1,000 per month plus CHF 200,000 cash.
Assume (not a forecast) 4% capital tax on CHF 200,000: about CHF 8,000. Staggering across two tax years may help; confirm with your canton.
| Option | Monthly (assumed) | One-time capital |
|---|---|---|
| 100% pension | CHF 2,000 | CHF 0 |
| 50% / 50% mix | CHF 1,000 | CHF 200,000 |
| 100% capital | CHF 0 | CHF 400,000 |
Second example: AHV plus BVG (illustration)
Assume (not a forecast) you qualify for CHF 2,200 per month AHV at 65 and take a CHF 1,500 per month BVG pension on the remaining balance after a partial capital withdrawal. Cash flow might be about CHF 3,700 per month before tax, plus any 3a drawdown you plan separately.
If you are married and both receive AHV, the combined cap is CHF 3,780 per month while both pensions run. Coordinate timing and amounts with your spouse before locking BVG elections.
Common mistakes
Taking 100% capital without modelling survivor benefits or lost annuity income.
Ignoring the three-year buy-in lock or health premiums (franchise CHF 300–2,500, retention cap CHF 700).
FAQ
- Can I change my mind after choosing capital?
- Usually no. Confirm options with your fund before payments start.
- Does a lump sum affect AHV?
- BVG capital is not AHV income; cantonal tax and benefits may still change.
- What happens to my spouse if I take capital?
- Survivor pensions may be lower than with a joint annuity—check fund rules.
- Should I annuitise if I am healthy and have other savings?
- Run fund projections for both paths; longevity favours annuities, liquidity favours capital.
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Keep reading
- BVG buy-ins in Switzerland: deductibility and the three-year ruleVoluntary BVG buy-ins (Einkauf) are tax-deductible in the year you pay, within limits set by your pension fund. Each buy-in starts a three-year waiting period before you may withdraw that money as a lump sum at retirement. BVG applies from CHF 22,680 annual salary, with coordination deduction CHF 26,460 and insured salary capped at CHF 90,720.
- Retiring early in Switzerland: pension reductions and cash needsEarly retirement is possible but pensions are permanently reduced. AHV can start before 65 with a lower monthly amount; deferral by 1–5 years increases it instead. Plan for health premiums (franchise CHF 300–2,500, retention 10% cap CHF 700) and lost salary years that also cut AHV (1/44 per missing year toward 44 years).
- Using Pillar 3a to buy a home in SwitzerlandPillar 3a allows early withdrawal for purchasing or building owner-occupied residential property in Switzerland. Annual contribution limits are CHF 7,258 with a pension fund and CHF 36,288 without. Withdrawals are taxed separately at a reduced rate; accounts cannot be split, so you withdraw from each 3a account as a whole.
- Guide: Swiss gross-to-net salary in 2026: AHV, ALV, BVG and taxes explainedIn Switzerland, mandatory employee social security and pension deductions reduce gross salary by roughly 10% to 16% before income tax: 5.30% for AHV/IV/EO, 1.10% for ALV (up to CHF 148,200), ~1.3% for NBU/KTG, and 3.5% to 9.0% of coordinated salary for the 2nd-pillar pension (BVG/LPP).
- Guide: Pillar 3a maximum for 2026: CHF 7,258 or 20% of incomeIn 2026 you can pay up to CHF 7,258 into Pillar 3a if you have a pension fund. Without one, the limit is 20% of net earned income, up to CHF 36,288.