Annuity or lump sum: see both side by side

What this comparison shows, and what it deliberately does not

At retirement, your pension fund balance can become a lifelong monthly pension, a one-time capital payment, or a mix of the two. The calculator above shows both forms of the same balance side by side: the annuity as an annual and monthly amount, and the lump sum as the capital you would receive once.

It deliberately shows no winner. A pension balance and a conversion rate are two numbers; the decision between annuity and capital depends on your life expectancy, your household, your other income, your taxes and your relationship with investing. Any calculator that declares one side the right answer from two inputs is pretending to know things it cannot know.

What the conversion rate really means

The conversion rate turns your balance into a yearly pension. The statutory minimum rate of BVG Art. 14 Abs. 2 applies only to the mandatory part of your balance, and only at the reference age. Most funds insure mandatory and extra-mandatory savings together and apply a single, blended rate to the whole balance; that blended rate is usually below the statutory minimum, which is legal because the law protects the mandatory part only.

Drawing early, possible from age 63 under BVG Art. 13 Abs. 2, lowers the rate your fund applies; deferring, possible up to age 70 provided you continue gainful employment (BVG Art. 13b Abs. 2), raises it. The exact figures are set by your fund's regulations. The rate on your pension certificate is therefore the number that matters, and the pre-filled statutory minimum in this tool is only a starting point.

Taxes: ongoing versus one-time

The annuity is taxed as ordinary income every year, together with your AHV pension and any other income. The lump sum is taxed once, at a reduced rate, separately from your other income; afterwards the capital counts toward your taxable wealth and its returns are taxed as investment income.

This tool intentionally shows no tax amount on either side. The one-time capital withdrawal tax varies by canton, commune, amount and church affiliation, and the annuity's income tax depends on your total income in every retirement year. A single illustrative number would suggest a precision that does not exist. Our articles on the capital withdrawal tax by canton and on staggering withdrawals cover the mechanics in depth.

Timing matters too: drawing pension fund and Pillar 3a capital in the same year pushes the one-time tax up its progressive scale, while spreading withdrawals over several years can lower it. That is a planning question in its own right.

The dimensions no calculator can weigh for you

These are the questions that actually decide between annuity and capital:

• Longevity: the annuity is paid for life, however long that life is. The capital has to last exactly as long, without you knowing the end date.
• Inflation: most pension funds do not index current pensions, so a fixed annuity loses purchasing power over the years. Invested capital can grow, but only by taking market risk.
• Flexibility: capital is available for a mortgage payoff, renovations or family support. An annuity cannot be brought forward, increased or bequeathed.
• Survivors: with the annuity, your spouse or partner receives the survivor percentages set by law and your fund's regulations. Remaining capital, by contrast, is part of your estate.
• Responsibility: capital means you, not your pension fund, carry the investment decisions for two or three decades, in good markets and bad ones.

How AHV changes the picture

The decision never stands alone. Your AHV pension is a lifelong, inflation-adjusted base income; the pension fund payout sits on top of it. The larger the share of your fixed living costs already covered by AHV and other lifelong income, the more freedom you have with the pension fund balance, and the other way around. Couples weigh two AHV pensions, two pension funds and the survivor rules of each. Anyone retiring before the reference age also has to bridge the years without AHV, which changes how much lifelong income the household still needs from the fund.

Mixing, deadlines, and the next step

You do not have to choose all or nothing. By law, you can demand a quarter of your mandatory balance as capital (BVG Art. 37 Abs. 2), and many funds allow more or any split. Note the deadlines: funds set notification periods for a capital withdrawal in their regulations, sometimes months or even years ahead, and the choice is generally irreversible once the pension starts.

A serious answer needs your whole picture: AHV, pension fund, Pillar 3a, taxes, property and your spending plan, projected over your lifetime. That is exactly what a full SORVA plan models, so you can see both payout forms inside your own numbers before you talk to your pension fund.