LPP: funds for free passage at the Federal Treasury

Context

In brief

• The Federal Council has submitted the message to Parliament on the LPP.
• The LPP collecting institution will be able to invest funds with the Confederation.
• The measure applies in contexts of low or negative interest rates.
• The validity of the legislative amendment will be limited to six years.

Key facts

• What: Investment of vested benefits funds with the Federal Treasury.
• When: Message submitted on September 2, 2026.
• Where: Bern, Switzerland.
• Who: Federal Council and LPP collecting institution.
• Condition: SNB policy rate equal to or less than 0 percent and coverage less than 103 percent.

On September 2, 2026, the Federal Council took note of the results of the consultation on the amendment of the Federal Law on Occupational Old-Age, Survivors' and Disability Pension Provision (LPP), submitting the relevant message to Parliament. The initiative aims to allow the LPP collecting institution to deposit vested benefits funds with the Federal Treasury, operating in conditions of absence of interest. This option is strictly linked to specific market scenarios, particularly when the policy rate of the Swiss National Bank is at levels equal to or less than zero percent. The primary objective of this regulation is to offer a risk management strategy in a financial context characterized by low or negative interest rates, while ensuring the stability of the institution.

The role of the LPP collecting institution

The LPP collecting institution, a foundation managed by the social partners, plays a fundamental role in the Swiss pension system. It has the obligation to accept the vested benefits funds of all those insured who, following the termination of their employment relationship and in the absence of a new affiliation, find themselves having to manage their pension position. To guarantee the nominal value of such assets, the institution is required to invest the capital in financial markets. However, the intrinsic volatility of such markets and the uncertainty related to the evolution of interest rates make access to risk-free deposit forms necessary. Historically, this possibility has already been exploited between May 2022 and March 2023, demonstrating the usefulness of this option to reduce the risk of insufficient coverage. The new legislative amendment, the validity of which will be limited to six years, represents an extension and consolidation of a mechanism already authorized by Parliament in September 2020.

Operational details

Managing occupational pension schemes in Switzerland requires extremely robust capital protection tools, especially during phases of economic instability. The option granted to the LPP substitute occupational benefit institution to deposit its assets with the Federal Treasury acts as a sort of financial parachute. This is not speculative management, but rather a defensive measure aimed at protecting the nominal value of vested benefit assets which, by law, must not suffer losses. When financial markets experience high volatility or negative returns, resorting to the Confederation prevents the institution's coverage ratio from falling below the critical threshold, in this case set at 103 percent. This approach reflects the need to balance the prudence required by occupational pension schemes with the dynamics of a market that, cyclically, can offer extremely low interest rates.

Comparison between past and future

The system has already been tested in the past, when Parliament had authorized this operation due to negative interest rates. The current procedure, which will expire in September 2027 regarding the previous regulation, is now being integrated and renewed through the Federal Council's new dispatch. The substantial difference lies in the structuring of a more solid and lasting legal basis, planned for a duration of six years. The public consultation highlighted broad consensus, with 36 out of 38 participants in favor of the project as a whole. This cross-party support confirms the perception of the instrument's validity among stakeholders. For anyone managing their pension or their pension assets, the stability of the substitute institution is a fundamental security factor. In a market where the cost-of-living and inflationary dynamics influence purchasing power, knowing that pension institutions have access to capital protection tools free from speculative risks represents a guarantee of solidity for the entire national pension system.

Useful planning tools

To estimate your pension strategy, use the pension planner and the pillar 3 simulator.

Key points

The management of vested benefits is a crucial aspect for every worker in Switzerland. When an employment relationship is terminated and no immediate new affiliation is made, the funds must be transferred to a vested benefits account or policy. The choice of the institution in which to deposit such sums is a personal decision that requires careful evaluation of the manager's solidity and investment strategies. Although the collecting LPP institution is the default option for those who do not have a new pension institution, it is useful to periodically monitor one's pension situation. Transparency and the security of the funds are guaranteed by the supervision of the pension foundations, which must operate in accordance with federal directives. To better understand how changes in interest rates or modifications to the LPP can influence one's future pension, it is advisable to regularly consult one's documentation and inform oneself about the conditions offered by the pension institutions.

Plan your cross-border pension: calculate AVS, second pillar and INPS coordination to avoid retirement surprises.

Source: admin.ch