LPP pension provision: interest rate of 2% from Jan. 1, 2027
From January 2027, the minimum interest rate for the second pillar will rise from 1,25% to 2%, according to the decision of the Federal Council.
Context
TL;DR
- From January 2027, the minimum rate will rise to 2%
- The current rate is 1,25%
- Institution returns: 6,1% in 2025 and 5,4% in 2026
- Average coverage: 122,5% at the end of August 2026
Key facts
Decision → Federal Council Scope → second pillar, BVG Effective → January 2027 New minimum rate → 2% BVG fee recommendation → 1.75% Social partners' proposals → between 1.25% and 3% Average return of institutions → 6.1% in 2025; 5.4% in 2026, until the end of August Average reach → 122.5% at the end of August 2026
From January 2027, the minimum interest rate for the second pillar will rise from 1.25% to 2%, as decided by the Federal Council. The measure is part of the occupational pension system regulated by the BVG, the federal law dedicated to retirement, survivors' and disability pensions.
Prior to the decision, the BVG committee had recommended a rate of 1.75%, while the social partners had proposed values of between 1.25% and 3%. The 2% approved by the Federal Council thus exceeds the committee's indication, but remains within the range supported by the social partners.
The criterion used to set the minimum
To determine the minimum rate, the yields on federal bonds, equities and real estate are assessed. The government reported in a statement on Wednesday that the overall development of these three components was positive in both 2025 and 2026.
The Federal Social Insurance Office (FSIO) estimates that the average return on pension funds in 2025 is 6.1% and that of 2026 at 5.4% until the end of August. According to the government, this allows for a significant increase in the minimum interest rate and compensates for the relatively high inflation observed since 2022. The source therefore reports both the overall yield figure and the average of the institutions as elements of the picture.
Operational details
The comparison between the rate and returns
Arithmetically, the change from 1,25% to 2% amounts to 0,75 percentage points. Compared with the 1,75% recommended by the commission, the difference is 0,25 percentage points. The 2% also lies within the range between 1,25% and 3% indicated by the social partners. These are comparisons calculated from the source values, not additional rates decided by the Federal Council.
The indicators in the two periods
The minimum-rate criterion can be understood by comparing the results given for institutions and markets. The table retains the units and time windows present in the source.
| Indicator | 2025 | 2026 |
|---|---|---|
| Average return of pension institutions | 6,1% | 5,4%, through the end of August |
| Swiss Performance Index | increase of 17,8% | increase of 7,6%, through the end of September |
| Swiss Bond Domestic AAA - BBB | lost 0,2% | lost 1,1%, through the end of September |
The comparison does not have a single closing date for 2026: the estimate for the institutions runs through the end of August, while the two market indicators run through the end of September. This time limitation must be retained when comparing 2025 and 2026. The Swiss Performance Index increased in both periods considered, while the Swiss Bond Domestic AAA - BBB recorded a loss in both; real estate, on the other hand, showed a consistently positive trend. The source therefore describes an overall positive picture, but with different results among equities, bonds and real estate.
The figure for Confederation bonds also provides a separate comparison. The interest rate paid on ten-year bonds was 0,33% at the end of 2025 and 0,59% at the end of September 2026. These are two values referring to the same type of maturity, but at two different points in time. Comparing them with equity and real estate returns clarifies which indicators are cited to set the minimum rate, without turning the partial data for 2026 into a forecast.
Key points
The coverage of institutions and the limits of the framework
UFAS estimates indicated, at the end of August 2026, an average coverage ratio of 122.5% for pension institutions without state guarantee. The data indicates that, on average, these institutions had value fluctuation reserves and means greater than those necessary to fulfill their obligations.
An average data, with partial periods
The wording refers to the average and institutions without state guarantee. The 122.5% is not presented as the coverage ratio of each individual institution. The text also does not provide individual results, amounts per person or an estimate of the effect of the new rate on specific annuities. These elements remain outside the information reported.
The same scope applies to yield data. For 2026, the average performance of the institutions is calculated until the end of August, while the progression of the Swiss Performance Index and the result of the Swiss Bond Domestic AAA - BBB arrive until the end of September. The source therefore speaks of estimates and periods not yet closed in the same way; does not indicate a definitive annual balance sheet for 2026.
The press release does not indicate the precise day in January 2027 on which the new rate will take effect, nor does it describe changes for individual institutions or insured persons. Instead, it reports the scope of the decision, the indicators considered and the average degree of coverage. For institutional reference on social security, the [UFAS] page is available (https://www.bsv.admin.ch/it/telelavoro).
To learn more about pensions and LPP, pensione e LPP.
Source: rsi.ch
Frequently Asked Questions
- What is the new minimum rate of the second pillar and when will it come into force?
- The Federal Council has decided that, as of 1 January 2027, the minimum rate of the second pillar (BVG) will rise from the current 1.25% to 2%. This amendment concerns occupational pensions and the Federal Act on Occupational Retirement, Survivors' and Disability Pensions.
- How does the approved rate compare to the BVG commission recommendation?
- The commission in charge of the BVG recommended a minimum rate of 1.75%. The Federal Council set the rate at 2%, 0.25 percentage points above the recommendation, but still within the range proposed by the social partners (1.25%-3%).
- What is the average coverage ratio of pension funds at the end of August 2026?
- According to estimates by the Federal Social Insurance Office (FSIO), the average coverage ratio of pension funds without a state guarantee was 122.5% at the end of August 2026. This indicates that, on average, the reserves are 22.5% higher than the level required to meet the obligations.