Coordination deduction in Switzerland: explained and simplified

Switzerland’s pension system is based on a well-established 3-pillar model. The 1st pillar (AHV/IV) covers basic living needs in retirement, the 2nd pillar (BVG, occupational pension) helps you maintain your standard of living, and the 3rd pillar (private pension) allows you to build additional savings.

For people working in Switzerland and covered by the Federal Act on Occupational Retirement, Survivors’ and Disability Pension Plans (BVG), the coordination between these pillars is essential. In this context, the coordination deduction plays a key role, especially within the 2nd pillar.

But what exactly is the coordination deduction, how is it calculated, and how does it affect your personal pension? Let’s explore these questions together.

What is the coordination deduction and why does it matter?

The coordination deduction is a fixed amount that is subtracted from your annual salary in the 2nd pillar to determine your insured salary (also called the coordinated salary).

This mechanism ensures that the part of your income already covered by the 1st pillar (AHV/IV) is not insured twice. In other words: the AHV provides basic coverage for a portion of your income, and only the income above that level is insured by your pension fund. The coordination deduction prevents double coverage and helps align the benefits of the 1st and 2nd pillars.

Why is this important for you? Because the amount of the coordination deduction determines how much of your salary is actually insured by your pension fund – and therefore, how much pension capital you can accumulate.

The higher the deduction in relation to your income, the lower your coordinated (insured) salary. This directly impacts your contributions and your future retirement, disability, or survivor benefits. Part-time workers and low-income earners are particularly affected: even if they are covered under the BVG, only a small portion of their salary may be insured, potentially leading to pension gaps. If you want to optimise your retirement planning, it’s essential to understand how the coordination deduction works – and how you can respond if needed.

How is the coordination deduction calculated?

The coordination deduction is defined by law and based on the maximum AHV pension. As of 2025, it corresponds to 7/8 of the maximum annual AHV pension.

Since the maximum AHV pension in 2025 is CHF 30’240, the coordination deduction is CHF 26’460. (Note: This amount was CHF 25’725 until the end of 2024 and was increased on 1 January 2025 in line with the higher AHV pension.)

To determine your coordinated salary, you subtract CHF 26’460 from your AHV-relevant annual income.

Key thresholds for 2025:

• In addition to the coordination deduction, the BVG also sets an entry threshold and minimum values. If your annual salary is below CHF 22’680, you are not automatically insured under a pension fund (as of 2025). Once your salary exceeds this threshold, the coordination deduction applies.

• If your coordinated salary is calculated to be less than CHF 3’780, this minimum value will still be used as your insured salary. This ensures that even people just above the entry threshold are still insured under the 2nd pillar.

• For mandatory BVG insurance, only annual salaries up to CHF 90’720 are taken into account. This means the maximum insured (coordinated) salary is CHF 64’260. Any income above that can be insured voluntarily through the supplementary (non-mandatory) pension scheme – if your pension plan allows it.

Impact of the coordination deduction on retirement savings

The coordination deduction directly affects your occupational pension – both the contributions made during your working life and the benefits you receive at retirement. Here’s how it can influence your financial future:

• Pension fund contributions: Since only the coordinated salary is used to calculate contributions, a higher coordination deduction reduces the amount paid in. For low-income earners, this means only a small part of their salary is invested in the pension fund. The result? Lower pension savings and smaller retirement benefits from the 2nd pillar. Many people only notice this when they receive their annual pension fund statement – the gap between gross and insured salary can be surprisingly large.

• Part-time work and multiple employers: Part-time employees are especially affected by the coordination deduction. Usually, the full deduction is applied regardless of how much you work. The same applies if you work for multiple employers: if you exceed the BVG threshold with each job, the deduction is applied to each salary separately. This can leave a large part of your total income uninsured – compared to working the same total hours for a single employer.

• Impact on pensions and risk benefits: Because your pension savings are based on your coordinated salary, a high coordination deduction can result in a lower pension. And this doesn’t only affect retirement – invalidity and survivors’ pensions from your pension fund are also based on the insured salary. A lower insured salary means smaller payouts in the event of disability or death. While the AHV provides a basic safety net, it often only covers a modest standard of living. To maintain your usual lifestyle, you may need to close the gap with private pension options (3rd pillar) or additional insurance.

Lawmakers are aware that people on low incomes or working part-time are disproportionately affected by the coordination deduction. Planned reforms to the pension system aim to reduce or adjust the deduction to make it more flexible. This would ensure that a larger share of low incomes is covered. Whether and when these changes will take effect remains to be seen.

Ways to strengthen your retirement savings despite the coordination deduction

Although the coordination deduction is set by law, there are various ways to mitigate its effects on your retirement planning. Depending on your situation, the following options can help address potential pension gaps.

Make targeted use of pillar 3a

The tied private pension (pillar 3a) gives you the opportunity to build up capital for retirement in a tax-efficient way. If you're covered by the BVG, you can pay in up to 7’258 CHF per year (as of 2025) and benefit from tax deductions. These contributions can help protect the part of your income that isn't insured under the second pillar due to the coordination deduction. Depending on your risk profile, you can also invest your pillar 3a assets in investment funds to potentially earn higher returns.

Consider buying into your pension fund

Under certain conditions, it’s possible to make voluntary purchases into your pension fund – for example, after a career break, a late start to working life or following a salary increase. These purchases can help you build up your retirement capital and close potential gaps. In some cases, they may also be tax-deductible. Keep in mind that this capital is usually tied up, and there may be restrictions on how and when it can be used. A careful review of your personal situation is therefore recommended.

Understand your employer’s pension scheme

It’s worth reading through your pension fund regulations – especially if you work part-time. Some employers reduce the coordination deduction or adjust it in proportion to your employment rate. In some cases, they may even waive the deduction altogether to ensure better coverage for lower salaries. If you’re mobile in your career or changing sectors, this can be an important factor to consider when choosing a new employer. Public-sector jobs or collective labour agreements sometimes offer more generous pension terms. Some pension providers actively choose models with minimal or no coordination deduction.

Manage your capital wisely when changing jobs or taking a break

If you change jobs or take a career break, your pension assets are usually transferred to a vested benefits account. This ensures your retirement savings remain reserved for the future. Choosing an account that offers both security and investment potential can help make the most of this period. In many cases, you can invest your assets until you transfer them into a new pension scheme or withdraw them when you retire.

Consider additional savings with pillar 3b

If you’re already contributing the maximum to pillar 3a or want to save more, pillar 3b offers a flexible alternative. It includes options like savings accounts, securities, property or life insurance. Unlike pillar 3a, there are no legal limits on contributions or withdrawals. Pillar 3b can therefore be a useful way to protect the portion of your income that isn’t insured under the BVG – for instance, due to the coordination deduction. A long-term investment strategy with a focus on diversification can help you manage risk while improving your potential returns.

Conclusion: understand the coordination deduction to strengthen your retirement

The coordination deduction may sound like pension jargon at first, but it has a major impact on your financial future. It defines how much of your salary is insured under the second pillar – and therefore affects your future pension income. If you work part-time, have multiple employers or earn a lower salary, it’s especially important to understand its effects. Together with the AHV (first pillar) and your private savings (third pillar), the second pillar will help determine how financially comfortable your retirement will be.