LPP conversion rate: how your capital becomes a pension

The principle: capital × rate = annual pension

At retirement, your pension fund multiplies your retirement savings by the conversion rate to give your annual pension. With savings of CHF 500,000 and a rate of 6.8%, the pension is CHF 34,000 a year, or about CHF 2,833 a month, paid until you die and then partly to your surviving spouse.

The conversion rate is not a return: it reflects the fact that the capital is used up over the whole of your retirement. It therefore depends mainly on life expectancy at 65 (about 20 years for men and 22 years for women in Switzerland) and on the return the fund can expect on its investments.

6.8% on the mandatory part, less on the extra-mandatory part

The LPP sets a minimum rate of 6.8% at the reference age, but only on the mandatory savings, that is, savings built on the part of your salary between the coordination deduction and the maximum LPP salary. On extra-mandatory savings (higher salaries, contributions above the minimum), each fund sets its own rate.

Most funds are envelope (comprehensive) pension funds: they manage the mandatory and extra-mandatory parts together and apply a single rate, often somewhere between about 5% and 5.8% depending on the fund, to the whole capital. Some funds keep the two parts separate and apply 6.8% to one and a much lower rate to the other.

An envelope fund must nevertheless always pay at least the LPP minimum pension. It runs a comparison, known as the shadow calculation: the pension paid can never be lower than 6.8% of the mandatory savings.

The LPP reform rejected on 22 September 2024

The LPP reform passed by Parliament would have lowered the minimum conversion rate from 6.8% to 6.0%, with compensation measures for a transitional generation. It was rejected in a popular vote on 22 September 2024. The legal minimum therefore remains 6.8% on the mandatory part.

That rejection does not protect everyone equally. If your savings are mostly extra-mandatory, your fund's envelope rate matters far more than the legal minimum, and many funds have kept lowering their rate gradually in recent years.

Early retirement: a lower rate

If you take your pension before the reference age, it will be paid for longer, so the fund applies a reduced rate. The cut is often around 0.2 percentage points per year of early retirement, depending on the fund. Combined with smaller capital (fewer years of contributions and interest), the effect on the pension is significant.

Why the rate weighs on the pension-or-lump-sum choice

The higher the conversion rate, the more attractive the pension compared with the lump sum. At 6.8%, it takes about 14.7 years of pension to 'recover' your capital; at 5.0%, it takes 20, roughly the average life expectancy of a 65-year-old man. With a low rate, taking the capital and managing it yourself becomes more competitive, at the cost of market risk and the risk of living longer than expected.

Tax also plays a part: the pension is fully taxed as income every year, whereas the capital is taxed once at a reduced rate. Our 'Pension or lump sum' guide covers these trade-offs in detail; your fund's conversion rate is the starting point.

Where to find your conversion rate

Your annual pension certificate usually shows the projected savings at the reference age and the projected old-age pension. Divide the pension by the savings and you get the conversion rate your fund applies. For example, a projected pension of CHF 23,760 on projected savings of CHF 440,000 corresponds to a rate of 5.4%.

Your fund's pension regulations set out the rates by retirement age, along with any cuts already announced. Bear in mind that the projected pension often assumes a future interest rate and can change from one year to the next.

In RetirePlan, you enter your savings and your fund's rate, and the planner automatically compares the pension, the lump sum and a mix of the two, free of charge. If you want the result checked, an analysis with an expert is available as an option.

Frequently asked questions

What is the LPP conversion rate in 2026?

The legal minimum is 6.8% at the reference age, on the mandatory part of your savings. On the capital as a whole, envelope funds often apply a lower rate, frequently between about 5% and 5.8% depending on the fund.

How do I calculate my LPP pension with the conversion rate?

Multiply your retirement savings by the rate: CHF 500,000 × 6.8% = CHF 34,000 a year, or CHF 2,833 a month. At 5.4%, the same capital gives CHF 27,000 a year, or CHF 2,250 a month.

Will the conversion rate fall to 6%?

Not the legal minimum: the LPP reform that planned 6.0% was rejected in the vote of 22 September 2024. Pension funds nevertheless remain free to lower their rate on the extra-mandatory part.

What is an envelope pension fund?

A fund that insures the mandatory and extra-mandatory parts together and applies a single rate to the total. It must check through a shadow calculation that the pension paid is at least 6.8% of the mandatory savings.

Does the conversion rate change if I retire early?

Yes. The rate falls with early retirement, often by about 0.2 percentage points per year, depending on the fund. The pension regulations give the exact rates by age.

Where can I find my pension fund conversion rate?

On your pension certificate (divide the projected pension by the projected savings) and in your fund's pension regulations, which set out the rates by retirement age.