The BVG era and group life business

The three pillars and the Act of 1982

The occupational pension business, which the Rentenanstalt had begun with the Zurich schoolteachers in 1858 and developed through the group contracts of the interwar years, became a legal obligation for employers in the 1980s. On 3 December 1972 the Swiss voters adopted a new constitutional article on old-age, survivors' and disability provision, which established the three-pillar system: the state AHV as the first pillar, compulsory occupational pensions as the second and voluntary individual saving as the third. A history of the BVG written for its twenty-fifth anniversary records that the article was approved by about 1.4 million votes to 0.4 million.¹ The implementing legislation took another decade. The Federal Act on Occupational Retirement, Survivors' and Disability Pension Plans (BVG) was adopted on 25 June 1982 and entered into force on 1 January 1985.²

The BVG was, in the words of the history of Swiss social security, a minimal framework law that largely protected the autonomy of the existing pension funds, of which there were almost ten thousand by 1980. The life insurers had championed the three-pillar doctrine, and they benefited from the form the legislation took. Large employers continued to run their own autonomous pension funds, while small and medium-sized enterprises, which could not bear the investment and biometric risks of a pension fund themselves, affiliated to collective foundations (Sammelstiftungen). Many of these foundations were established by life insurers and reinsured their risks with them. The Vesting Act of 1995, which made pension assets fully portable between employers, and the promotion of home ownership with pension funds completed the system in the following decade.

The full-insurance model

The most distinctive product that the life insurers developed for the second pillar was the full-insurance solution (Vollversicherung). In this model, the collective foundation transfers all risks to the life insurer: the investment risk, the risk of death and disability before retirement and the longevity risk of pensioners. The insurer guarantees the minimum interest rate on the retirement savings and the conversion of the savings into a pension at the statutory rate, while the affiliated employer and its employees can never face a funding shortfall. For small enterprises the model offered complete security, and for the insurers it became a very large business, since the savings premiums of hundreds of thousands of employees flowed into their balance sheets.

The size of this business is visible in the figures of the market leader. Swiss Life reported for 2025 that some 49,000 companies were affiliated to its occupational pension solutions. Gross premiums in its BVG business amounted to 7.37 billion francs, of which 6.47 billion were savings premiums, 690 million risk premiums and 212 million cost premiums. The retirement assets in the full-insurance model were credited with interest of 2.65 per cent.³ The collective insurance business also dominates the statutory accounts of Swiss Life AG, the group's Swiss insurance company. Of the gross premiums of 11.4 billion francs shown in its annual report for 2025, some 7.5 billion came from collective insurance and some 2.0 billion from individual insurance.⁴

The full-insurance model has, however, become the business of a shrinking number of providers. AXA, which had taken over the Winterthur group, left the market for BVG full insurance with effect from 1 January 2019 and transferred more than 260,000 insured persons to semi-autonomous collective foundations. It justified the step with the constraints of the minimum distribution ratio, the minimum interest rate and the solvency requirements of the Swiss Solvency Test and with a statutory conversion rate of 6.8 per cent that it considered far too high.⁵ Swiss Life has remained in the full-insurance business and emphasised in its report on 2025 the strong demand for security-oriented BVG solutions. The decision of the market leader to continue offering guarantees that a major competitor has abandoned is one of the defining features of the present Swiss pension market.

The minimum distribution ratio

The central rule that governs the life insurers' occupational pension business is the minimum distribution ratio, known in Switzerland as the Mindestquote or legal quote. It was introduced with the first revision of the BVG in 2004.⁶ According to a FINMA fact sheet, the Federal Council has determined that at least ninety per cent of the returns generated, consisting of the premium income excluding savings premiums and the investment income, must be used for the benefit of the insured. Savings premiums pass in full to the insured. The life insurer may retain at most ten per cent, which means that at least nine out of ten francs of returns go to the insured. The surpluses are allocated to a surplus fund and serve to strengthen the technical reserves.⁷ The statutory basis lies today in the Insurance Supervision Act and the Supervision Ordinance.⁸

The minimum distribution ratio is the modern form of the mutual principle. When the Rentenanstalt was a cooperative, its members were entitled by its constitution to the surpluses of the business. When the company became a listed corporation with shareholders, the legislator stepped in to secure for the insured in the second pillar a fixed share of the returns that their contributions generated. The rule also requires the life insurers to keep a separate operating account for their occupational pension business and to disclose it annually, so that the distribution of returns between insured persons and shareholders can be verified. FINMA publishes aggregated data from these operating accounts, which has made the pension business of the Swiss life insurers one of the most transparent segments of the market.

The minimum interest rate and the “Rentenklau” debate

The second rule that shapes the business is the minimum interest rate that pension institutions must credit to the compulsory retirement savings. Under Art. 15 para. 2 BVG, the Federal Council fixes the rate, taking into account the development of the return on marketable investments, in particular federal bonds, and additionally equities, bonds and real estate.⁹ From 1985 to 2002 the rate stood unchanged at four per cent. The collapse of equity markets after 2000 and the fall in bond yields made that figure increasingly difficult to earn.

The reduction of the rate in 2002 and 2003 provoked the most bitter public controversy in the history of the Swiss second pillar, and the Rentenanstalt was at its centre. On 3 July 2002 the Federal Council proposed to reduce the minimum rate from four to three per cent. A chronology of the Rentenanstalt's crisis published by swissinfo records that the proposal triggered criticism of the company's lobbying and of its lack of transparency in the occupational pension business.¹⁰ Critics coined the word “Rentenklau”, the theft of pensions, for the suspicion that the life insurers were keeping for their shareholders returns that belonged to the insured. The rate was reduced to 3.25 per cent from January 2003. In September 2003 the Federal Council lowered it further to 2.25 per cent, a compromise between its own preference for two per cent and the trade unions' demand for at least 2.5 per cent.¹¹

The minimum distribution ratio introduced in 2004 was the political answer to the “Rentenklau” debate. It linked the returns of the life insurers directly to the benefits of the insured and made the calculation verifiable. The minimum interest rate itself has since moved with the markets. It fell to one per cent for the years 2017 to 2023 and was raised to 1.25 per cent from 2024.¹² On 6 November 2025 the Federal Council left it unchanged at 1.25 per cent for 2026, stating that a reduction was not indicated and an increase not justified.¹³

The debate of 2002 has left a lasting mark on the reputation of the life insurers in the second pillar. It explains why their pension business is subject to a degree of transparency and profit regulation unknown in most other segments of the financial market. For the practitioner advising an employer on the choice between full insurance, a semi-autonomous collective foundation and an autonomous pension fund, the rules of 2004 remain the starting point of any comparison. For the historian, the controversy shows how deeply the mutual expectations of the nineteenth century survived in public opinion after the Rentenanstalt had ceased to be a mutual.

Notes

1. Werner Hug, 25 Jahre BVG. Entstehung, Weiterentwicklung und Zukunft der beruflichen Vorsorge, http://www.wernerhug-ag.ch/PDF/25%20Jahre%20BVG.pdf. The document records the popular vote of 3 December 1972 on Art. 34quater of the Federal Constitution, the adoption of the BVG on 25 June 1982, its entry into force on 1 January 1985, the Vesting Act of 1995 and the stages of the first BVG revision between 2004 and 2006. ↩
2. Federal Act on Occupational Retirement, Survivors' and Disability Pension Plans (BVG) of 25 June 1982, SR 831.40, https://www.fedlex.admin.ch/filestore/fedlex.data.admin.ch/eli/cc/1983/797_797_797/20230701/de/pdf-a/fedlex-data-admin-ch-eli-cc-1983-797_797_797-20230701-de-pdf-a.pdf, title and date of the Act. ↩
3. finews.ch, “BVG: Swiss Life bleibt stabil, Pax legt zu”, 27 May 2026, https://www.finews.ch/news/versicherungen/72345-bvg-swiss-life-pax-2025-versicherungen-vorsorge-finanzplatz-schweiz-altersguthaben-einmaleinlagen-verszinsung. The report gives the number of affiliated companies, the premium figures and the interest credited by Swiss Life for 2025, as well as the figures of Pax. ↩
4. Swiss Life AG, Geschäftsbericht 2025 (cited above), which reports gross premiums of CHF 11,369 million, collective insurance premiums of about CHF 7.5 billion, individual insurance premiums of about CHF 2.0 billion and a net profit of CHF 915 million. ↩
5. Neue Zürcher Zeitung, “Axa steigt aus dem Markt mit BVG-Vollversicherungen aus”, 2018, https://www.nzz.ch/wirtschaft/axa-steigt-aus-dem-markt-mit-bvg-vollversicherungen-aus-ld.1375847. The article gives the date of the exit, the number of insured persons affected, the reasons given by AXA and the expected fall in premium volume from about CHF 8 billion to CHF 2.5 billion. ↩
6. FINMA, “Occupational pension schemes”, https://www.finma.ch/en/supervision/insurers/sector-specific-tools/occupational-pension-schemes/. The page states that the minimum quota has applied since the first BVG revision of 2004, that it limits the profit that private life insurers may retain and that the occupational pension business is reported in a separate operating account. ↩
7. FINMA, “Faktenblatt Mindestquote: Verteilung der Überschüsse aus der zweiten Säule”, 1 February 2018, https://www.finma.ch/de/~/media/finma/dokumente/dokumentencenter/myfinma/faktenblaetter/faktenblatt-mindestquote-verteilung-ueberschuesse-zweite-saeule.pdf. The fact sheet describes the 90 per cent rule, states that the life insurers manage about one fifth of second-pillar assets and insure about 1.8 million employees and explains the role of the surplus fund. ↩
8. Federal Office of Private Insurance (BPV), “Berufliche Vorsorge”, archived page on finma.ch, https://www.finma.ch/FinmaArchiv/bpv/d/themen/00501/00563/01264/index.html?lang=de, which gives Art. 37 para. 4 of the Insurance Supervision Act (VAG, SR 961.01) and Art. 147 of the Supervision Ordinance (AVO, SR 961.011) as the basis of the minimum quota. The AVO article number reflects the archived page and should be read against the current consolidated text. ↩
9. BVG, SR 831.40 (cited above), Art. 15 para. 2: “Der Bundesrat legt den Mindestzins fest. Dabei berücksichtigt er die Entwicklung der Rendite marktgängiger Anlagen, insbesondere der Bundesobligationen, sowie zusätzlich der Aktien, Anleihen und Liegenschaften.” ↩
10. swissinfo.ch, “Die Krise der Rentenanstalt im Zeitraffer”, 2002, https://www.swissinfo.ch/ger/archive-finanzplatz-schweiz/die-krise-der-rentenanstalt-im-zeitraffer/3011644. The chronology records the proposal of 3 July 2002 to reduce the BVG minimum rate from 4 to 3 per cent, the criticism of the Rentenanstalt's lobbying and the events of the crisis year cited in Section VIII. ↩
11. swissinfo.ch, “Kompromiss beim Mindestzinssatz”, 10 September 2003, https://www.swissinfo.ch/ger/kompromiss-beim-mindestzinssatz/3505308. The report records the rate of 4 per cent since 1985, the reduction to 3.25 per cent in January 2003, the decision on 2.25 per cent, the positions of the Federal Council and the unions and the criticism of the insurers. ↩
12. Schwiizerfranke, “BVG-Eckwerte: Alle Kennzahlen Pensionskasse seit 1985”, https://www.schwiizerfranke.com/bvg-eckwerte. The table lists the BVG minimum interest rate for each year since 1985. Cited for orientation. ↩
13. finews.ch, “Weiterhin 1,25 Prozent für das BVG-Obligatorium”, November 2025, https://www.finews.ch/news/finanzplatz/70038-bvg-mindestzinssatz-obligatorium-vorsorge-bundesrat. The report gives the Federal Council's decision of 6 November 2025 and its reasoning. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.