Swiss BVG Pillar 2 for Company Founders: Obligations, Costs and Tax Strategy

Founders who incorporate a Swiss AG or GmbH and then pay themselves a salary face an obligation that catches many by surprise: they must enrol their company in an occupational pension fund (Pensionskasse) and pay BVG contributions — even if they are the sole employee. Swiss law treats a salaried founder the same as any other employee for second-pillar purposes. There is no exemption for shareholders, controlling owners, or sole directors. This guide explains the thresholds and calculations that apply, the employer contribution obligation, how to choose a pension fund, and the tax planning opportunities that BVG creates for founders — including the voluntary buy-in (Einkauf) strategy.

What Is BVG and Why It Applies to Founders

BVG stands for Bundesgesetz über die berufliche Alters-, Hinterlassenen- und Invalidenvorsorge — the Federal Act on Occupational Retirement, Survivors' and Disability Pension Plans. In French it is the LPP (Loi sur la prévoyance professionnelle). Together with AHV (first pillar) and private savings (third pillar), BVG forms Switzerland's three-pillar retirement system.

The second pillar is funded by contributions from both employer and employee, accumulated in an individual retirement account held by a pension fund. The funds earn a minimum guaranteed interest rate set annually by the Federal Council (1.25% as of 2026). At retirement, the accumulated capital is converted into a pension using the statutory minimum conversion rate of 6.8%, or can be taken partly or fully as a lump sum.

The key legal provision for founders is AHVG Art. 5 (the AHV Act), which classifies income from dependent employment as subject to social insurance contributions. When a founder pays themselves a salary from their AG or GmbH, that salary is income from dependent employment in the eyes of Swiss law — the corporate veil does not convert the employment relationship into self-employment for social insurance purposes. As a result, BVG coverage is mandatory once the salary exceeds the annual entry threshold.

This is the single most important distinction in Swiss pension law for company founders: only genuine sole proprietors (Einzelunternehmer) and general partners (Kollektivgesellschafter) without an AHV-subject employment relationship are truly self-employed for BVG purposes. Once you form an AG or GmbH and draw a salary, you are an employee of that company, and BVG follows automatically.

Entry Threshold and the Coordination Deduction (2026 Figures)

Swiss pension law sets precise numerical thresholds that determine who is insured, what salary is insured, and at what rate. The key figures, which the Federal Council left unchanged from 2025, are as of 2026:

The coordination deduction is the most misunderstood figure in BVG administration. It is not a contribution — it is a salary carve-out. The logic is that AHV (first pillar) already provides retirement income roughly equivalent to the full maximum AHV pension (CHF 30,240 per year as of 2026). The coordination deduction, set at 7/8 of this maximum AHV pension, removes that portion from the second-pillar calculation to avoid double-insuring it. The practical effect: a founder drawing CHF 60,000 per year insures only CHF 33,540 (CHF 60,000 − CHF 26,460) under mandatory BVG rules.

Founders often set their salary somewhere between CHF 100,000 and CHF 200,000 for a mix of tax and social insurance reasons. The mandatory BVG calculation caps out at CHF 90,720 gross. Salary above that ceiling is outside mandatory coverage but can be insured voluntarily through the pension fund's over-mandatory plan — a common arrangement at collective foundations. See the guide to Swiss payroll administration for how BVG deductions interact with the full payroll calculation.

Mandatory vs Over-Mandatory Coverage (Obligatorisch / Überobligatorisch)

Swiss BVG law defines a mandatory minimum that every pension fund must provide. Any benefits or coverage beyond this statutory floor is over-mandatory (überobligatorisch). The distinction matters for founders because the tax treatment, benefit rules, and lump-sum withdrawal rights differ between the two tiers.

Under the mandatory tier, savings contributions accumulate at no less than the statutory minimum interest rate (1.25% as of 2026), and the accumulated capital converts to a pension at the fixed 6.8% minimum conversion rate. The over-mandatory tier operates under the pension fund's own rules, which may offer a different conversion rate, different interest crediting, or more flexible investment options.

• ●Insured salary up to CHF 64,260: Covered under mandatory BVG. Contributions, benefits, and conversion rate are all legally prescribed minima.
• ●Insured salary from CHF 64,260 to the over-mandatory ceiling: Covered under over-mandatory rules of the specific pension fund. Many collective foundations extend over-mandatory coverage to salaries up to CHF 220,500 or higher.
• ●Lump-sum withdrawal: Both mandatory and over-mandatory capital can be withdrawn as a lump sum at retirement, subject to conditions. The lump sum is taxed separately from regular income at a reduced rate (the exact rate varies by canton).
• ●Death and disability coverage: BVG covers risk benefits (disability pension, spouse's and orphan's pension) even during the savings phase. These risk premiums are included in the total contribution rate.

For a founder optimising retirement provision, over-mandatory coverage is not just an add-on — it is where the most tax-efficient accumulation often happens, because contributions remain fully deductible and earnings compound tax-free within the pension fund.

Contribution Rates by Age Band

BVG savings contributions rise with age. The mandatory minimum savings rates are set by statute and apply to the insured (coordinated) salary. Risk premiums for disability and death insurance are additional and vary by pension fund. The mandatory minimum savings contribution rates are:

The total BVG contribution deducted from payroll includes the savings credit plus the risk premium for death and disability insurance. The risk premium component varies by pension fund and plan. Combined total contribution rates (savings + risk) typically range from approximately 9% (ages 25–34) to around 20–22% (ages 55–65) of insured salary. Pension funds publish their full contribution schedules in the plan rules (Reglement).

The law requires the employer to pay at least 50% of the total BVG contribution. Many collective foundations offer plans where the employer pays 55% or 60% voluntarily. For a founder-employee who owns the AG, this distinction is largely a book-entry choice — both halves ultimately flow from the company. However, choosing a plan where the employer share is maximised increases the company's deductible expense and reduces taxable company profit, with no corresponding increase in personal income tax for the founder-employee.

The Employer Obligation: What the AG or GmbH Must Do

The company — not the employee — is responsible for fulfilling the BVG affiliation requirement. The AG or GmbH must:

• ●Affiliate with a pension fund: Before or promptly after the first employee (which may be the founder) begins receiving a salary above the entry threshold, the company must sign an affiliation agreement (Anschlussvertrag) with a recognised pension fund. There is no grace period specified in BVG, but the obligation arises the moment the employment relationship and salary threshold are met.
• ●Register employees: All employees meeting the entry threshold must be individually registered with the pension fund. The pension fund opens an individual retirement account for each insured person.
• ●Collect and remit contributions: The company withholds the employee's contribution from the salary and adds its own employer contribution. Both amounts are remitted to the pension fund, typically monthly or quarterly depending on the pension fund's schedule.
• ●Notify salary changes: When the founder's salary changes — which is common as the company grows — the pension fund must be notified so the insured salary and contributions are recalculated.
• ●Report to employees: Each insured person must receive an annual pension certificate (Vorsorgeausweis) showing the accumulated retirement capital, projected pension, and the purchase gap available for voluntary buy-ins.

Failure to affiliate is not a minor administrative oversight. The Federal Social Insurance Office (BSV) and cantonal compensation offices audit payroll and AHV accounts. Companies without a valid pension fund affiliation face back-contributions (including interest), compulsory enrolment in the Stiftung Auffangeinrichtung BVG (the safety net institution), and administrative sanctions. The Auffangeinrichtung is legally required to accept any employer and is the fund of last resort — its contribution schedules and costs are less favourable than most collective foundations. See the guide to Swiss accounting and compliance for the annual obligations that accompany BVG.

Selecting a Pension Fund: Sammelstiftung vs Company-Specific Fund

A newly formed AG or GmbH has genuine freedom in choosing which pension fund to affiliate with. The main structural options are:

Collective foundations (Sammelstiftungen) are the dominant model for SMEs and new companies. A collective foundation is a single pension fund that pools contributions from many unrelated employers under one administrative umbrella. Each participating employer has its own sub-plan within the collective foundation, allowing some plan customisation (contribution levels, investment strategy, over-mandatory coverage limits) while sharing actuarial risk, administrative infrastructure, and regulatory overhead with thousands of other employers. Well-known collective foundations include Asga, AXA BVG Sammelstiftung, Swiss Life BVG-Sammelstiftung, Helvetia, Profond, and Zurich Vita. For a company with one to five employees, a collective foundation is almost always the appropriate and most cost-efficient choice.

Industry and trade association pension funds are collective foundations structured for a specific sector — for example, pension funds for the construction industry, hospitality sector, or liberal professions. They may offer industry-tailored contribution schedules. A founder whose AG operates in a sector with a mandatory industry fund must use that fund if so prescribed by a collective bargaining agreement (Gesamtarbeitsvertrag, GAV).

Company-specific pension funds (Firmenpensionskassen) are standalone pension funds created by and for a single large company or corporate group. The actuarial risks are fully borne by the sponsoring company. Establishing and supervising a company-specific fund requires regulatory registration with the cantonal occupational pension supervisory authority (Kantonale Aufsichtsbehörde BVG) and ongoing actuarial management. This structure is only economical for companies with 200+ insured persons and specialist pension management capacity. It is not appropriate for a newly formed AG or GmbH.

Tax Advantages: Why BVG Is the Most Efficient Remuneration Component

BVG contributions are, from a tax perspective, among the most efficient uses of company funds for a founder. The tax advantages operate on both the company side and the personal side:

At the company level: Employer BVG contributions are a deductible business expense for direct federal tax (DBSt) and cantonal corporate income tax purposes. They reduce the company's taxable profit franc for franc. Unlike dividends, employer BVG contributions are not subject to withholding tax (Verrechnungssteuer) and do not trigger stamp duty. They are also excluded from AHV/IV/EO salary for both the employer and the employee, meaning neither party pays social insurance on this portion of remuneration.

At the personal level: The employee's (founder's) BVG contribution deducted from salary reduces their taxable income for Swiss direct tax purposes. Pension fund savings accumulate free of income and wealth tax during the accumulation phase. At retirement, the pension income is taxed as ordinary income, but the lump-sum withdrawal — if taken — is taxed at a separate, lower rate in most cantons.

The combined effect for a founder at a typical combined marginal tax rate of 25–35% (federal + cantonal + municipal): each franc of employer BVG contribution saves approximately CHF 0.25 to 0.35 in corporate tax, and each franc of employee contribution reduces personal income tax by a similar amount. Over a 20- to 30-year accumulation horizon, this compounding tax shelter significantly outperforms equivalent savings in a personal brokerage account. See the guide to Swiss taxes for the interaction between salary structure, BVG contributions, and overall tax burden.

Voluntary Buy-Ins (Einkauf): The Lump-Sum Tax Lever

Every insured person has a theoretical maximum retirement capital defined by their age, years of insurance, and current insured salary. If the actual accumulated capital falls short of this theoretical maximum — which is almost always the case for founders who joined the pension fund late, who had periods of lower insured salary, or who came from abroad — the difference is the purchase gap (Einkaufspotenzial). The pension certificate issued annually by the pension fund shows the current purchase gap.

A voluntary buy-in payment fills part or all of this gap. The tax rule is straightforward: the entire buy-in amount is deductible from taxable income in the year of payment. There is no annual cap — unlike Pillar 3a, which is limited to CHF 7,258 per year for employed persons as of 2026. A founder with a purchase gap of CHF 300,000 can potentially deduct the full amount in a single year if the pension fund rules and their financial position allow it.

In practice, founders typically stage buy-ins across multiple years to smooth the tax benefit and avoid pushing income below the AHV minimum salary threshold for other social insurance calculations. Key rules to observe:

• ●Three-year lump-sum restriction: Capital contributed via a buy-in cannot be withdrawn as a lump sum within three calendar years (not three years from the contribution date — three full calendar years). If it is withdrawn earlier, the cantonal tax authority reclaims the tax deduction. This rule is strictly enforced. Plan buy-ins with a clear view of when retirement capital withdrawal is intended.
• ●New arrivals in Switzerland: Persons who have not previously been insured in a Swiss pension fund (or equivalent foreign pension scheme) may only buy in up to 20% of their insured salary per year for the first five years of Swiss insurance. After five years, the full purchase gap becomes available without restriction.
• ●Pension certificate is authoritative: The purchase gap shown on the pension certificate is the legally binding ceiling for a given year. Contributions above the gap are returned by the pension fund.
• ●Pillar 3a and buy-ins are independent: A buy-in does not affect or reduce the Pillar 3a deduction limit. Both can be maximised in the same tax year.

BVG Reform (BVG 21): What the Referendum Rejection Means for Founders

A wide-ranging reform of BVG — known as BVG 21 — was put to Swiss voters on 22 September 2024 and was rejected with approximately 67% of votes against. The reform would have made material changes to the mandatory framework, several of which were directly relevant to founders and SMEs.

The key provisions that were rejected include: a reduction of the minimum conversion rate from 6.8% to 6.0% (to reflect longer life expectancy and lower long-term returns); a change to the coordination deduction from a fixed CHF amount to a proportional deduction of 20% of salary (which would have increased the insured salary for low earners and part-time workers); and a reduction in the entry threshold from CHF 22,680 to CHF 19,845.

Because the reform was rejected, none of these changes entered into force. The current fixed coordination deduction of CHF 26,460, the entry threshold of CHF 22,680, and the minimum conversion rate of 6.8% all remain in effect. The rejection does not mean that the BVG framework is permanently frozen: the Federal Council has indicated that it will consider a revised proposal that addresses the concerns that drove the rejection, which focused primarily on the impact on women's pensions and the financing of the conversion rate reduction. However, as of May 2026, no new bill has been formally introduced in Parliament. Founders should plan on the current rules applying for at least the next two to three years.

The rejection also means that some pension funds that had built over-mandatory plans anticipating the reform's passage are revisiting their plan structures. This is worth checking with your pension fund when reviewing the annual pension certificate or when renegotiating the affiliation agreement — particularly if the fund had communicated planned changes that were contingent on BVG 21 passing.

Self-Employed Founders: Voluntary BVG Membership

Founders who operate as sole proprietors (Einzelunternehmer) — without an AG or GmbH — are not employees and are therefore not subject to mandatory BVG. Their social insurance picture is different: AHV contributions as self-employed are compulsory (calculated on net profit), but second-pillar membership is entirely voluntary.

A self-employed person who chooses to join a pension fund voluntarily may do so through three main channels:

• ●Professional or trade association pension fund: Many associations for the liberal professions, craftspeople, and freelancers operate pension funds open to their members. The insured salary is based on the declared professional income rather than an employment contract.
• ●Pension fund for employees of the sole proprietorship: A self-employed person who employs staff may ask the pension fund that insures their employees whether they can also be insured under the same plan as a self-employed person. Not all pension funds offer this option, but many collective foundations do.
• ●Stiftung Auffangeinrichtung BVG: The statutory safety net institution accepts self-employed persons on a voluntary basis. Contribution schedules and investment returns are generally less favourable than market alternatives, but it remains an option for those who cannot access the above channels.

The tax deductibility of voluntary BVG contributions for the self-employed follows a different rule than for employees. A self-employed person without an employer to share contributions may deduct up to 20% of net income as voluntary Pillar 2 or Pillar 3 contributions (combined). This cap of 20% replaces the unlimited deductibility available to employed persons. If the sole proprietor converts to an AG or GmbH, the voluntary membership ends and mandatory BVG coverage begins once a salary is drawn above the entry threshold — and the higher employer-deductibility rules then apply.

For the complete picture of payroll obligations — including AHV/IV/EO, unemployment insurance (ALV), accident insurance (UVG/SUVA), and how BVG contributions are processed in the monthly payroll run — see the guide to Swiss payroll administration. For the interaction between BVG contributions and annual tax filings, including the deductibility of employer and employee contributions in the Zug cantonal return, see the Swiss taxes guide. For annual financial statements and how BVG liabilities are disclosed in the balance sheet, see the guide to Swiss accounting.

Legal note: BVG threshold figures are set annually by the Federal Council and may change. All CHF amounts in this article reflect the 2026 values published by the Federal Social Insurance Office (BSV), which the Federal Council left unchanged from 2025. These figures are adjusted periodically and should be verified at bsv.admin.ch before use in payroll calculations. Tax deductibility rules and cantonal tax rates vary; this article does not constitute legal or tax advice.