Swiss pension fund conversion rate

What is meant by "conversion rate" in Swiss pension fund terms and conditions?

Hi there,

The conversion rate used by your Swiss pillar 2 pension fund indicates the size of your pension in relation to your pension fund assets. This rate is shown as a percentage of total savings. You receive an amount equal to this percentage of your pillar 2 savings as a pension every year until your death.

The minimum conversion rate is dictated by the Swiss Federal Government (in 2017 this rate is 6.8%). Although pension funds are free to use higher rates, they cannot use rates lower than the minimum rate specified by Swiss law..

If your pension fund uses a 6.8% conversion rate and you have 100,000 francs of pillar 2 savings, you receive an annual pension of 6800 francs per year from the time you retire until you die. The higher the conversion rate, the larger a pension you receive.

Best regards from Moneyguru

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