Conversion rate | Columna Collective Foundation Group Invest

Key points at a glance

The Columna Collective Foundation Group Invest will gradually adjust its conversion rates until they reach 6.0% for mandatory and 5.3% for extra-mandatory assets by 2027 for both men and women aged 65.
In this way, it is significantly reducing the redistribution from people who are still working to those who have retired, ensuring fair, attractive and sustainable benefit levels for insureds.
There will be no changes to lump-sum payouts or existing pensions.

What will change?

Gradual adjustment of the conversion rate by 2027

The Columna Collective Foundation Group Invest will gradually adjust its conversion rate between 2025 and 2027 until it reaches 6.0% for mandatory and 5.3% for extra-mandatory assets for both men and women aged 65.

A second calculation for the retirement pension will also be made alongside the original calculation for each insured. This second calculation uses the statutory minimum conversion rate of 6.8% for the mandatory part and also applies an adjustment factor to the extra-mandatory part.

Depending on how much the mandatory and extra-mandatory parts of the retirement assets amount to, one of the pension calculations will be higher.

Insureds are always paid out the higher amount as an annual pension. This ensures the statutory minimum BVG/OPA benefits are met in each case. In addition, insureds with lower extra-mandatory retirement assets can also benefit from higher pensions. Since every franc they have saved serves to build their pension, even buy-ins for smaller extra-mandatory retirement assets pay off. See the sample calculations

The conversion rate adjustments will gradually take place over a total of three years. This means insureds can plan with greater reliability, and it cushions any pension reductions, especially for people who are about to retire.

The adjustment will not affect lump-sum payouts or existing pensions.

Attractive, fair and sustainable level of benefits for insureds

By adjusting the conversion rate, the Foundation significantly reduces the current redistribution from people who are still working to those who have retired , ensuring fair, attractive and sustainable benefit levels for insureds.

The Foundation will continue to use its split conversion rate model, i.e. it will apply one conversion rate to mandatory assets and another to extra-mandatory assets. Thus, expanding your plan or buying in will pay off in the future too, boosting your pension later, even if now the amounts involved are small.

Columna Collective Foundation Group Invest continues to use different investment strategies for mandatory and extra-mandatory assets. The two different investment strategies form the basis of the interest model that the Foundation also uses. Based on this approach, extra-mandatory retirement assets will tend to pay higher interest.

Why is the conversion rate being changed?

With the current conversion rate, the pensions promised on retirement cannot be financed sustainably. This is due in part to increased life expectancy: back in 1985, a 65-year-old man could have expected to live for another 15 years on average, but this figure has now risen to 20 years. This means that an annual pension has to be paid out for longer than was previously the case.

Longer life expectancy, low interest rates

When occupational pensions were first introduced, returns of up to 5% were expected, but they have fallen short of this for quite some time due to the low interest rate. This means that many people have not saved enough retirement capital to fund a pension that lasts for the rest of their life after retirement. This shortfall is known as a conversion loss.

Some of the investment return that should ideally accrue to working insureds must therefore be redistributed to retired pensioners to plug the gap. This redistribution is at odds with the fundamental principle of the second pillar, which is that everyone saves for their own retirement through their own pension contributions, their employer's contributions and the investment returns on their accrued retirement assets.

On top of this, demographic changes are causing a steady increase in the proportion of pensioners relative to working people, so the redistribution will grow over the coming years. The AXA Columna Collective Foundation Group Invest will not be able to escape this trend.

Less redistribution – greater generational fairness

By adjusting the conversion rate to 6.0% for mandatory assets and 5.3% for extra-mandatory assets, the Foundation is able to substantially lower the redistribution from working insureds to pensioners, ensuring everyone attractive, fair and sustainable benefits over the long term.

Understanding the conversion rate

The conversion rate determines which percentage is used to convert the retirement capital you have saved up into an annual pension when you retire. A conversion rate of 6.0% means that every CHF 100,000 saved (most people have far more than this) results in a pension of CHF 6,000 a year.

If the conversion rate currently in use is above the correct level from an actuarial (i.e. purely mathematical) point of view, then every time someone retires, the pension fund needs to have more capital in reserve than the assets that person has actually saved in order to fund his or her retirement pension. This is the reason for the ever-increasing redistribution from working insureds to pensioners. The difference between the assets accumulated and the capital actually needed is referred to as a conversion loss.

A comprehensive conversion rate means that the same conversion rate is applied to a person's entire retirement assets (i.e. both mandatory and extra-mandatory assets).

A split conversion rate means that mandatory and extra-mandatory assets are treated differently, with two different conversion rates used to calculate the annual retirement pension. You can find out more about the pension fund’s conversion rate here.

How are future retirement pensions calculated?

Each individual's future pension is different and depends on a range of factors, including how much retirement capital they have saved while working and the relative proportions of mandatory and extra-mandatory assets.

As a rule of thumb, retirement assets x conversion rate = annual pension.

The myAXA pensions portal lets you simulate your future pension at any time.

I will be retiring soon and plan to draw a pension. How does this change affect me?

The following conversion rates apply if you retire at age 65 in 2025 or 2026:

Insureds are always paid out the higher result of the two calculations as an annual pension.

The conversion rate adjustments will gradually take place over the next three years. This means insureds can plan with greater reliability, and it cushions any pension reductions, especially for people who are about to retire.

The conversion rate of the previous year applies to people retiring on January 1.

A conversion rate of 6.0% for mandatory assets and 5.3% for extra-mandatory assets will apply to all men and women retiring at age 65 starting in 2027. At the same time, a second pension calculation will still be made using 6.8% for mandatory assets, and for extra-mandatory assets, the conversion rate will be multiplied by a factor of 50%.

Insureds are always paid out the higher amount as an annual pension.

Sample calculation 1: Person with CHF 300,000 in mandatory assets and CHF 300,000 in extra-mandatory assets

This person will therefore receive a pension of CHF 33,900 a year.

Sample calculation 2: Person with CHF 300,000 in mandatory assets and CHF 75,000 in extra-mandatory assets

This person will therefore receive a pension of CHF 22,388 a year.

Frequently asked questions on the change in the conversion rate

The adjustment of the conversion rate has no effect on lump-sum payouts.

No, nothing will change for you. The adjustment of the conversion rate has no effect on existing retirement pensions, nor on survivors or disability pensions.

In the myAXA pensions portal, you can look up your current retirement assets at any time and learn more about your pension provision. Your latest pension fund certificate is also available for you in the portal.

The statutory minimum conversion rate, currently set at 6.8%, applies to the mandatory portion of occupational benefits, i.e. the minimum according to the BVG/OPA. Pension funds are free to set their own conversion rate for the extra-mandatory portion.

Even with a conversion rate below the statutory minimum (currently 6.8%), the statutory minimum benefits for mandatory assets are paid at all times. To monitor this, a control account (known as a shadow account) is kept for every single insured person.

The two-part calculation method that the AXA Columna Collective Foundation Group Invest uses ensures that the statutory minimum benefits are maintained because the current statutory minimum conversion rate of 6.8% is applied to the mandatory portion of the retirement assets.

You can increase your personal retirement assets through voluntary buy-ins, provided you have not already reached the maximum buy-in amount. You should check beforehand how a voluntary buy-in will affect both your future pension and your tax situation. You can also save additional capital for your retirement in the third pillar.

For more information and frequently asked questions on the change in the conversion rate, please consult the Q&A as well as the additional documents.

Your contact for further questions

E-mail
services.bvg@axa.ch
Phone
0800 809 810

Adjustment of conversion rates by 2027