I’d guess 3-4%, but it would be good if someone has real data on this.

I think it depends on expected life expectancy, age of the person and expected Investment returns (for different asset classes) at the moment of annuity discussion.

For example -: If expected life expectancy is 85 and someone retires at age of 65. Then minimum conversion rate would be 5% (assuming zero residual value) because this is basically assuming zero returns from capital markets. If provider doesn’t offer 5% then no one will buy annuity.

However if someone is seeking a **perpetual** **annuity** then the rates would be lower because institutions need to factor in the risk of extended life. I believe they have some models

I have no knowledge of a way to access private annuity rates in Switzerland (I have also no knowledge that a true lifelong product past 65 y.o. is even sold by private insurances) and will be glad if someone can provide one (same for an example of such product).

Comparing with the UK and the US:

## TLDR;

**Non-vetted mega rough** comparisons with the UK and the US seem to show that roughly 5% for couples (with survivorship benefits) and 5.5% for singles **could** be competitive private rates in similar conditions in Switzerland.

**Personal assessment:** 6% would still be too high but a little adjustment is better than no adjustment at all.

Source for UK annuity rates: Annuity Rates: View Best Annuity Rates from the UK Market

US annuity calculator: https://www.immediateannuities.com/

**In the UK:**

The best rate is apparently 7.165% for a 65 y.o. single. Swiss BVG pensions have survivorship benefits so it’s probably fairer to compare to the 6.493% of the joint life 50%.

The UK currently have a central bank rate of 5% and year on year (YOY) inflation of 2.2%.

The SNB has a 1.25% policy rate and has had YOY inflation of 1.1%.

Using the interest rate differential in a similar way than we’d use it for future currency exchanges expectations, and considering 80 years of life expectancy (for ease of calculation) that would put us toward expected mean of, **for the UK**:

- 4.94% expected mean nominal pension conversion rate for the joint life 50% in CHF
- 5.45% expected mean nominal pension conversion rate for a single 65 y.o. in CHF

**In the US:**

The best rate is apparently 7.62% for a 65 y.o. single male (7.296% for a female) or 6.66% for a pseudo equivalent to joint life 100%.

The US central bank rate is currently 5.25%.YOY US inflation is 3.2%.

With the same hypothesis than for the UK, that would put us on an expected mean of, **for the US**:

- 4.90% expected mean nominal pension conversion rate in CHF for a pseudo joint life 100%.
- 5.60% expected mean nominal pension conversion rate in CHF for a single male.
- 5.36% expected mean nominal pension conversion rate in CHF for a single female.

Note that male and female pensions should even out due to a higher life expectancy for women, which isn’t taken into account in this quick calculation (everybody dies at 80).

**. /!\CAUTION/!\ .**

**I would caution that this is a very, very rough back of the envelope assessment**, The hypotheses made for the calculation are almost criminally rough, I haven’t vet the numbers nor the hypotheses behind them (what actually is a joint life 50% annuity, same for the US, plus it seems to be State dependent for them, I’ve used “other” for that field) and it would be the cheapest annuity available, which might be subject to conditions. I doubt most people would get those rates as sellers are probably doing their job of selling more expensive products when they can. Also, taxes would have to be deducted at withdrawal as mentioned by Cortana.

This might not necessarily be worse than paying income taxes each year on the pension. Depends on canton and possible splitting of withdrawal amount across tax years.

I think that would be too simplified a calculation. There are expected returns on the initial capital, risk pooling and profit expectations from the insurer to take into account too.

They probably use a statistical life expectancy (so lower than 95 years and closer to 85 years for 65 years old males and 88 years for 65 years old females). I would add their returns on investable assets, deduct their costs and margin and sprinkle miscellaneous upon it all to try to model it.

3.33% seems to be a lower floor at that particular point in time, then. If there’s a discretionary part depending on actual returns, that one could be pooled with all other risk takers to add to the guaranteed part in a mandatory scheme.

If you die before you retire, do the funds stay within the PF? If so, that could be a source of additional capital (along with those who die relatively early) - of course reduced by widow/orphan pensions.

Yes. This is a good number of people choose lump sum because then the money is at least staying within the family and not in fund

Stupid question maybe, but does the widow/orphan pension insurance stop when retiring? So no more insurance from then on?

For people choosing annuity, the widow pension would still be applicable after retiring. But the amount is less than what a retiree gets

Again depend on pension funds but most likely there are some general regulations around it

Retraites Populaires, based in Lausanne, has an online calculator.

It is somewhat limited in the choices and options proposed, but it gives interesting values and trends, e.g.

- for a 65y old man wishing a pension immediately for life and with no survivor benefits, the conversion ratio is 5.23%
- the ratio is 4.54% when the contract includes survivor benefits (the heirs receive, after death of the contractant, the remainder of the money = the original deposit minus the sum of all pension paid)
- the ratio is 5.80% when the deposit is done at 65y old, but with pension starting only at 70y old and with survivor benefits.