The hidden decision-maker – your pension fund

Two people, same salary, same contributions, for 40 years. One retires with CHF 359,100 in retirement savings, the other with CHF 596,100. The entire difference of around CHF 237,000 comes from something that never appears on a payslip: the interest paid by their pension fund.

For many employees in Switzerland, the pension fund is one of their largest assets, often larger than their pillar 3a account and investment portfolio combined. Yet in our consultations we regularly see that people read their pension fund statement carefully for the first time shortly before retirement. That is when the big decision comes up (in 2025, according to Swisscanto, more than half of all retirement savings were withdrawn as a lump sum for the first time), and the figure being decided on is the result of 40 years in which nobody was paying attention.

This article briefly explains how the pension fund works and then looks at the two levers that determine your retirement savings during your working life: the contribution split and the interest rate.

In brief: the pension fund in the three-pillar system

Swiss retirement provision rests on three pillars with different roles. AHV is meant to secure a basic livelihood, the pension fund is meant to maintain your accustomed standard of living together with AHV, and the third pillar closes the remaining gaps.

The principle of the pension fund is quick to explain. The coordination deduction (2026: CHF 26,460) is subtracted from your gross salary, because this part is already covered by AHV. What remains is the coordinated or insured salary. On this salary, you and your employer pay savings contributions every month, which are credited to your personal retirement account. The pension fund invests the money and pays interest on your balance every year. At retirement, it is paid out as a lifelong pension or as a lump sum (we cover that trade-off in the article Pension fund: pension or lump sum).

This leads to a simple equation: retirement savings at 65 = all savings contributions + all interest. The contributions depend on how much is paid in and who pays what share. The interest depends on how well your pension fund performs and how much of that it passes on to you. Neither is fixed by law; to a large extent, both are set by your pension fund's regulations.

Lever 1: the contribution split

The law prescribes minimum savings contributions, known as retirement credits. They rise with age and are calculated as a percentage of the coordinated salary (Art. 16 BVG). For our example, we take a person with an annual salary of CHF 85,000. After the coordination deduction, the coordinated salary is CHF 58,540.

Who pays these contributions is governed by Art. 66 BVG: the employer must contribute at least as much as all of its employees combined. In practice, this usually means the employer covers at least half. On top of this come risk contributions for disability and death, as well as administrative costs, which are not included in the table.

The law only sets the minimum, though. Many employers go further, in two ways that are worth keeping apart:

• The employer covers a larger share, for example 60 percent or two thirds instead of 50 percent. Your retirement savings stay the same, but less is deducted from your salary, so your net pay is higher.
• The savings plan is more generous, for example with savings contributions above the statutory rates, a lower coordination deduction or none at all. More money flows into your account overall, and your retirement savings grow.

How much this matters is shown by comparing three employers for the same person. Salary and interest (2.5 percent a year) are identical in all three cases; only the regulations differ.

With employer B, the person ends up with the same savings as with A, but has paid around CHF 48,800 less out of their own salary over their working life. With employer C, both are better: around CHF 79,000 more in retirement savings and still just over CHF 10,000 less in own contributions than under the statutory minimum.

Lever 2: the interest rate

Each year, the Federal Council sets a minimum interest rate; in 2026 it remains at 1.25 percent. However, it only applies to the mandatory part of the balance. The actual interest paid on the entire retirement balance is decided by each pension fund's board of trustees, depending on how well the fund has invested, how large its reserves are and how much it has to cross-subsidise pensioners.

Accordingly, the differences are large. According to the Swisscanto Pension Fund Study 2026, the 528 funds surveyed paid an average of 4.7 percent interest on the balances of active members in 2025, the highest value since the study began in 2000. The top 10 percent of funds credited 9.25 percent, the bottom 10 percent just 2 percent. Over five years, this gap added up to 26 percentage points. A survey by the Swiss consumer programme Kassensturz (SRF) found a five-year average range from 7.5 percent at the best-ranked large company pension fund to 1.23 percent at the bottom of the table.

2025 was an exceptionally good investment year. Over decades, however, differences of 1.5 to 3 percentage points between a cautious fund and one that pays good interest are realistic. Our example therefore uses 1.25, 2.5 and 4 percent.

Why the same percentage point is worth much more later

One percentage point more or less interest always applies to the entire balance saved so far. At 30, with perhaps CHF 50,000, it hardly shows. At 60, with CHF 700,000, it is an amount you would notice if it appeared on your payslip.

This is exactly what makes the pension fund a hidden decision-maker. In the first years of your career, the differences between a good and a weak fund are so small that nobody cares. They only become visible once the balance is large, and by then most of the years have already passed.

At 35, the balances at 1.25 and 4 percent interest are only around CHF 5,800 apart. At 45 the gap is CHF 32,100, at 55 already CHF 98,600. In the last ten years, more than CHF 138,000 is added on top, more than in the thirty years before combined.

At 4 percent interest, more than half of the retirement savings comes from interest, more than from all employee and employer contributions combined. Converted at the statutory conversion rate of 6.8 percent, the difference is around CHF 1,340 of pension per month, for life. When it comes to whether you can maintain your standard of living in retirement, this is often the decisive amount.

What you can influence and what you cannot

First things first: as an employee, you cannot pick your pension fund. At larger companies it is fixed, often as the company's own pension fund. At smaller companies, switching is possible but involves effort and risk for the employer. The affiliation agreement has to be terminated, the staff have to consent to the switch (Art. 11 BVG), and a new fund will not take on every group of insured persons on good terms. A small business switching pension funds because of one employee is therefore rare.

It is still worth understanding the system, because there are moments when you do have influence:

• When changing jobs. When comparing a new offer, look at the pension plan alongside the gross salary. Ask for the regulations or a sample statement, and ask about the interest paid over the last five years. What else to consider when changing jobs is covered in the article Job change and retirement provision.
• In salary negotiations. A higher employer share or a better savings plan is sometimes easier for the employer to agree to than a pay rise, and it is attractive for you from a tax perspective.
• When choosing a savings plan. Some pension funds offer up to three savings plans. The higher plan means a larger salary deduction, but it increases your retirement savings and is deductible from taxable income.
• Through the pension committee. Every pension fund is managed on a joint basis, with employees represented on the board of trustees or the pension committee. Asking there how the fund's interest compares with others is a legitimate question.

Where to find this information on your statement is explained section by section in the article Understanding your pension fund statement.

Conclusion

The contribution split and the interest rate work in the background, year after year, and go unnoticed for a long time. In our example, the gap between the statutory minimum and a fund paying good interest with a generous savings plan is around CHF 348,000, on exactly the same salary (CHF 359,100 versus CHF 707,400). You can rarely choose the pension fund itself. But you can make sure it is part of the calculation at every job change and in every salary negotiation.

I consider this one of the most effective and at the same time most overlooked levers in building wealth. If you understand your pension fund statement at 35, you have 30 years to make something of it. If you read it for the first time at 62, all that is left to decide is how to draw the result.