Alternatives to pillar 2 for early retirement

Hello, I am on track to retire around the age of 53. I would love to be able to get a pillar 2 type of pension as I find a guaranteed ~4-5% return very attractive for retirement planning. However, that would require me to work for another 5-7 years minimally.

The only alternatives that I could think of are,

  1. To buy in to annuities with a portion of my savings. I realize that I can theoretically get better return in the market, but I would prefer to have 30-40% of my retirement income coming from a pension type of structure. Does anyone know what kind of withdrawal rate you get with such annuities in Switzerland?

  2. Another option might be to try to find work at age 59-60. A type of a “sabbatical” from retirement, if you may. Put in 1-2 years of work and then get early retirement from the new pillar 2 fund. This obviously relies on me finding work that I wouldn’t mind doing for 1-2 years, but it is not impossible. Can I quit after 3 months and still get pension from the new employer’s pillar 2 based on my lifetime pillar 2 savings?

Are there any other alternatives that I did not consider?


Have you already looked at this from the angle of “Safe Withdrawal Rate”? For someone at retirement age the commonly accepted guideline is you can withdraw ~4% of a portfolio per year and probably not run out of money. At 53 it would need to be lower. There are discussions about the safe rate elsewhere on the forum

If you buy an annuity from an insurance company I expect they would offer you a lower % rate than above. You would have the reassurance of not needing to worry about your portfolio but the trade off would be lower income. Don’t forget about Inflation


To answer question 1: Life annuities from insurance companies are only useful for insuring against the “risk” of longevity. The premiums-to-conversion-rate ratio does not make much sense for any other use case, because the conversion rates are low. Even for this use case, only life annuities without cash value (pure risk insurance) are affordable enough to make financial sense.

To answer question 2: If you prefer a lifelong pension over cashing out your benefits, then getting a job for a Swiss employer shortly before retirement age and working for them until you can claim your pension is a good move. You can then transfer your vested benefits to your employer’s pension fund, and receive a pension based on your total benefits (or at least the compulsory portion). Assuming the retirement age and conversion rate remains unchanged (which is unlikely), doing this can end up being a good deal.

But as Barto mentioned, it’s worth comparing your possible future pension with the safe withdrawal rate for invested assets.


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There are few others

You should also consider employability in Switzerland after 50 y.o. It could be an challenge to find a company ready to hire you and pay extra for the 2nd pillar contribution due to your age.

Thanks for your input. I am still in my early 40s. So few more years to go :slight_smile: If everything goes according to plan, then I will have enough savings for a 3% withdrawal rate based on fairly conservative estimates. So much higher potential for an upside. But, I still find the pension element of pillar 2 extremely attractive for a stable long term retirement planning. Just from the logistics point of view, it would be nice to have a significant pension element if I start getting senile at an old age lol.


This really depends on your skills. You can always accept a lower net salary to compensate for the higher gross salary, so if you are are willing to look at your gross salary when applying for jobs (which many job applicants in Switzerland are not), then the higher pension fund contributions shouldn’t be an issue.

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This is a very interesting point. If you were to stop working for let’s 10 years (at 50), you can move your pillar 2 into a stock vested account that hopefully will generate higher return than traditional pillar 2. Then if you get a job at 60 years until retirement age, you can opt for a good pension annuities conversion from the new pension fund provider.

It’s an interesting option for which we need to be aware of 2 downsides:

  1. it may be tough to find and unpleasant to work again after 10 years time off :slight_smile:
  2. exchange pension pot for annuities may be less risky for the individual but worse deal for the heirs. They won’t get a pot from you

If I die early then my heirs will get plenty of money from my other savings. I don’t care if they miss out on 20-30%. But if I freakishly live till 110 then my heirs will be very happy that I have a stable pension :slight_smile:

Finding a pleasant job is the most difficult part. But if there is really no minimum time requirement, you could just quit after you pot is transferred to the new pension fund. But who knows, maybe it would be a nice change of pace to work again after 10 years. Even if it is only for like 60% which I think is close to the minimum for getting integrated into a pension fund.

no 2nd pillar expert at all, but what about some ‘alibi’ job for about a year by:

a) self-employment with voluntary 2n pillar (perhaps less flexibility re pension provider)

b) founding a company

may be a bit pricier but less ‘pressure’, if feasible at all?

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It makes no sense to take your 2nd pillar, pay the withdrawal taxes and then get an annuity which is fully taxed as income. To make matters worse, the conversion rate is much lower than those from your 2nd pillar.

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I might add: Annuities are hardly ever inflation-adjusted. Guess why :stuck_out_tongue_closed_eyes:


With a conservative WR your wealth will likely grow meaning you could pay someone to administer your finances when no longer able. Would be more cost effective than an annuity


This is an important point. However, pillar 2 is not inflation adjusted either (at least not by law). I.e. this is an issue that both have in common, and for me that alone would be sufficient reason not to get an annuity or pillar 2 pension.


I do not think that any pension provider will accept you (either as self-employed or as a company) in this scenario. They usually look at the (average) salary and the (average) age of the employees because they do not want to enter contracts where they lose money in expectation. In this scenario, both would be very bad for them.

So you could probably only choose AEIS ( which does not pay an annuity.


They offer both a vested benefits foundation as well as a full pension fund. As I understand it, the latter does pay an annuity. If you’re truly self-employed, I would expect it be possible to join that fund. I don’t know whether there is a minimum contribution duration or some other condition to get the annuity.


True, I only looked at the vested benefits foundation. In this case, the strategy should really be possible. Unlike other providers, they are obliged to accept everyone, regardless of age or salary.

Do keep in mind that there’s a maximum buy-in to most (all?) pension funds. Any additional amount you bring may not be eligible for pension annuities.

So taking up new employment at the age 64, for a few months, at a minimum salary that‘s just barely surpasses the threshold for mandatory BVG/LPP insurance: Sure why not? You may even become eligible for a pension annuity, if you transfer your benefits.

But don’t count on converting your capital into a pension annuity based on the full amount in that case.

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The dividing line is compulsory benefits (pillar 2a) vs. voluntary benefits (pillar 2b). Returns which you earn on compulsory benefits (while they are vested) form part of your compulsory benefits. That means the minimum conversion rate applies to those.

Pension funds are free to set their own conversion rates for benefits made up of voluntary contributions (either via your employer or directly through buy-ins). Some pension funds use the average of their pillar 2b conversion rate and the legal 2a conversion rate for the total benefits. If you have a lot of voluntary benefits, the result can be that your total pension has a conversion rate lower than the legal minimum for compulsory assets. Some pension funds only pay a pension on pillar 2a benefits, while making you cash out the pillar 2b benefits as a lump sum. What setup you end up with is entirely dependent on which pension fund your employer has. But that is true whether you work your whole life, or just get a job shortly before retirement age.

I agree. But the OP was curious as to whether there is a way to get a lifelong pension without a pension fund (i.e. benefits are vested until retirement age). Currently available life annuities do not make much sense, in my opinion, because even though only 40% of a life annuity pension counts as taxable income, the conversion rates are generally lower than even very conservative safe withdrawal rates.

I can see an argument for pure risk-insurance life annuities being used to safeguard income in the case of extreme longevity (e.g. you begin receiving a life annuity at age 80). But that would only be beneficial in specific cases (e.g. you plan to use up your savings to fund your retirement, rather than just returns).


I’d say it’s very common to use at least part of your savings, not just net returns, during your retirement. If you’re fortunate with returns or have accumulated a lot more net worth than needed for retirements it may not be necessary, of course.

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