Capital or pension? Taking your Swiss Pillar 2 as cash or income
| 01 | Your three choices |
| 02 | How big is the monthly pension? |
| 03 | How each one is taxed |
| 04 | Pension or cash: what to weigh |
| 05 | Good to know: a proposed reform (not in force) |
| 06 | Common questions |
When you retire in Switzerland, you can usually take your workplace pension (Pillar 2) in one of three ways: as a monthly pension for life (Rente), as a lump sum of cash (Kapital), or a mix of both. This is the classic capital-or-pension choice. The monthly pension is steady, and it's taxed as income every year. The cash is taxed once, at a low rate, and then it's yours to manage. Neither is better for everyone. It depends on your other income, your health, whether you have a partner, and how comfortable you are looking after a large sum.
In one line: a steady income for life vs. a lump of cash you manage yourself - the right mix depends on your health, your partner, and how hands-on you want to be.
Educational information, not financial advice. Figures are for 2026 and may change.
Your three choices
- A pension for life. A fixed monthly income from the fund, usually with something for your partner if you die first.
- Cash in one go. The whole pot paid out once; it becomes your own savings.
- A mix. Many funds let you take part as a pension and part as cash (some of it may have to stay as a pension).
How big is the monthly pension?
If you choose the pension, the fund turns your savings into a yearly income using a set percentage. In 2026 the mandatory (basic) part is 6.8%. So CHF 100'000 of savings becomes roughly CHF 6'800 a year for life. Savings above the legal minimum often convert at a lower percentage - around 5% in 2026, set by each fund.
How each one is taxed
- The monthly pension is added to your income each year and taxed at your normal rate - every year you receive it.
- The cash is taxed once, on its own, at a low rate - and the canton you live in changes how much (see the tax by canton). After that it's savings, with the small yearly tax on savings.
Pension or cash: what to weigh
There's no single right answer. Here's what to weigh:
- How long you might live. A pension suits a long retirement and gives certainty. Cash carries the risk you outlive it.
- Your partner. A pension usually keeps paying something to a surviving partner; cash can be passed on as money.
- Flexibility. Cash can be invested and spent freely - but you carry the ups and downs yourself.
- Tax. A pension is taxed as income for life; cash is taxed once (lower), then adds a little to your savings tax.
- Effort. A pension runs itself; cash needs a plan.
Good to know: a proposed reform (not in force)
There was a plan to tax the cash option more heavily from 2027 (Entlastungspaket 27). It is not law. As of mid-2026 it isn't being advanced, so today's rules still apply. We'll update this guide if a confirmed change is ever enacted.
Common questions
Can I take part as a pension and part as cash?
Often yes - many funds let you mix the two, though some of it may have to stay as a pension. Check your fund's rules.
How is the cash taxed?
Once, on its own, at a low rate - and your canton affects how much. After that it counts as your own savings.
How is the monthly pension worked out?
The fund turns your savings into a yearly income using a set percentage - 6.8% for the mandatory (basic) part in 2026. Savings above the legal minimum often convert at a lower rate.
Can I change my mind later?
Usually not - the choice is normally final and has to be declared in advance, often months before you retire. Confirm the deadline with your fund.
See the choice on your own numbers
This choice is hard to judge in your head, because the two options are taxed differently and play out over decades. SORVA puts them side by side on your own numbers: the monthly pension taxed as income every year, versus the one-time tax on the cash and what your money does afterwards, calculated for your canton and commune. You can see how each version carries you through retirement year by year, and what a mix of the two could look like. The choice is usually final, so seeing it in full before you declare it is worth the few minutes it takes. Compare pension and cash on your own numbers: create your plan at sorva.ch, free during the private beta.