Coordination Deduction 2025: Complete Guide for Swiss Employers and Employees

Understanding the “coordination deduction” is vital for proper pension planning in Switzerland. The CHF 26,460 deduction (as of 2025) directly affects how much of your salary gets insured under the second pillar. This seemingly minor technical detail can have a major impact on retirement security and presents challenges for part-time workers and those with multiple employees.

This guide covers everything you need to know about the coordination deduction: what it is, how it’s calculated, whether employers can waive or reduce it, its impact on part-time workers and multiple job holders, and the implications of the failed BVG 21 reform.

What is the coordination deduction in Switzerland’s pension system?

The coordination deduction is a fixed annual amount subtracted from your gross salary to determine how much of your income gets insured under the second pillar (BVG).

It is set at 7/8 of the maximum annual AHV pension, which therefore equates to a coordination deduction of CHF 26,460 in 2025. The remaining insured salary after the deduction is known as the “coordinated salary”.

This deduction exists within Switzerland’s three-pillar pension system, where the first pillar (AHV) covers basic needs, the second pillar (occupational pension) maintains your standard of living, and the third pillar provides additional private savings. The coordination mechanism ensures that salary portions already covered by AHV aren’t insured twice in the occupational pension scheme.

The legal foundation for the coordination deduction is found in Article 8 of the BVG (Federal Act on Occupational Retirement, Survivors’ and Disability Pensions), which mandates this coordination to prevent double insurance. The Federal Council updates the amount annually, ensuring consistency across all Swiss employers and pension funds.

Important note: The Federal Council sets the coordination deduction for minimum mandatory BVG coverage, but pension funds have significant flexibility in how they apply this requirement. Many pension funds exceed the minimum coverage requirements by reducing or eliminating coordination deductions while still operating within the regulatory framework.

How much is the coordination deduction in 2025?

The coordination deduction for 2025 is CHF 26,460 for all employees, regardless of their salary level or working hours.

This figure represents exactly 7/8 of the maximum annual AHV pension, which increased to CHF 30,240 in 2025 (previously CHF 29,400 in 2024). The coordination deduction thus rose from CHF 25,725 in 2024, reflecting the annual adjustment tied to AHV pension increases.

Here are the key 2025 figures:

• Coordination deduction: CHF 26,460
• Entry threshold: CHF 22,680 (minimum annual salary for BVG coverage)
• Minimum coordinated salary: CHF 3,780 (if the calculated coordinated salary is lower, it must be rounded up to this amount)
• Maximum coordinated salary: CHF 64,260 (for mandatory BVG coverage)
• Maximum insurable salary: CHF 90,720 (for mandatory BVG coverage)

The Federal Council evaluates these amounts annually and adjusts them if needed based on wage and pension developments.

For example, if you earn CHF 70,000 annually, CHF 26,460 gets deducted as the coordination amount, leaving CHF 43,540 as your coordinated salary. This is the base for calculating your pension contributions and future benefits.

What is the purpose of the coordination deduction?

The coordination deduction prevents double insurance between the first and second pillars by ensuring that salary portions already covered by AHV aren’t insured again in occupational pension schemes.

Switzerland’s pension system operates on the principle that the first pillar should cover basic living needs while the second pillar maintains your accustomed standard of living. The coordination deduction represents the portion of salary considered already covered by AHV, which is estimated to typically be 7/8 of the maximum AHV pension.

This coordination serves both legal and practical purposes. Legally, it fulfills the BVG mandate that occupational pensions supplement rather than duplicate AHV coverage. Practically, it prevents excessive insurance costs while ensuring appropriate coverage levels across both pillars.

Without coordination, employees would pay contributions on salary portions already covered by AHV, potentially creating unnecessary costs without proportional benefits. The system thus balances comprehensive coverage with cost efficiency.

How is the coordination deduction calculated and applied in practice?

Your coordinated salary is calculated by subtracting the coordination deduction of CHF 26,460 from your gross annual salary. If the result is above CHF 3,780, that becomes your coordinated salary (insured portion of salary for second pillar). If the result is below CHF 3,780, it gets rounded up to the minimum coordinated salary of CHF 3,780.

Here’s the step-by-step calculation for the coordination deduction:

1. Determine maximum AHV pension: CHF 30,240 (2025)
2. Calculate 7/8: CHF 30,240 × 7/8 = CHF 26,460
3. Apply to all salaries above the BVG entry threshold of CHF 22,680: This fixed amount applies regardless of actual salary level

To find your coordinated salary:

Gross annual salary − CHF 26,460 = Coordinated salary

Important exception: If this calculation results in less than CHF 3,780, the minimum coordinated salary of CHF 3,780 automatically applies instead.

For example:

• Employee earning CHF 22,680 (entry threshold): CHF 3,780 coordinated salary (minimum applied)
• Employee earning CHF 50,000: CHF 50,000 − CHF 26,460 = CHF 23,540 coordinated salary
• Employee earning CHF 80,000: CHF 80,000 − CHF 26,460 = CHF 53,540 coordinated salary

Can employers reduce or eliminate the coordination deduction?

While employers cannot unilaterally modify coordination deductions in a mandatory pension plan, they can select pension funds that offer plans with reduced or waived coordination deductions. These provide better pension coverage for their employees, especially for low earners.

The BVG sets minimum requirements, but pension funds can exceed these standards. Many offer plans with no (or flexible) coordination deductions, resulting in higher insured salaries and better employee benefits. This is acceptable provided the plan doesn’t exceed regulatory limits for mandatory and extra-mandatory coverage.

Selecting plans with reduced coordination deductions allows companies to:

• Support part-time employees who are most affected by coordination deductions
• Demonstrate social responsibility in employee welfare
• Gain competitive advantage in recruitment and retention

Only the pension fund itself can modify plan provisions, but employers have significant choice in selecting funds that align with their employee benefit goals. Some pension funds specialize in offering plans without coordination deductions, while others provide various “in-between” options for employer selection.

Nexova helps Swiss SMEs evaluate these pension fund options, comparing plans and providers to identify solutions that balance employee welfare with cost considerations while supporting both business goals and employee security.

How does the coordination deduction affect part-time employees?

Part-time workers face disproportionate disadvantages from the fixed coordination deduction, with the potential for significantly reduced pension coverage relative to their income needs.

Consider the following example:

• Full-time employee earning CHF 80,000: CHF 53,540 coordinated salary (67% coverage)
• Part-time employee earning CHF 40,000: CHF 13,540 coordinated salary (34% coverage)

The typically lower income associated with working part-time causes a much greater proportional decrease in insured salary due to the fixed coordination deduction.

This is not just a minor issue, as part-time employment is widespread in Switzerland, especially among women. According to the Federal Statistical Office, as of 2024, 38.4% of Swiss workers were employed part-time (a figure that continues to rise each year), with 58.7% of women working part-time compared to just 20.5% of men. This gender disparity makes the coordination deduction a significant women’s pension issue.

Smart employers address this issue by offering pension plans that allow for a reduction or complete waiver of the coordination deduction. This is often a proportional adjustment based on employment level.

For example, let’s assume the part-time employee earning CHF 40,000 has a 40% workload. The employer could offer a plan which reduces the coordination deduction to CHF 10,584 (40% of CHF 26,460), resulting in an insured salary of CHF 29,416 as opposed to only CHF 13,540 if the full coordination deduction had been applied.

Employers can also offer plans with reduced entry thresholds to include more part-time workers in the occupational pension who fall below the minimum mandatory BVG entry threshold. These approaches help ensurepart-time employees build adequate retirement savings despite working reduced hours.

What happens to the coordination deduction when you work for multiple employers?

Employees working for multiple employers can end up having separate occupational pension plans for each employment arrangement in which they earn the minimum BVG threshold of CHF 22,680. This also means they face coordination deductions applied to each salary separately, creating a significant coverage disadvantage compared to single-employer arrangements.

For example, an employee earning CHF 90,000 from a single employer would have CHF 63,540 in coordinated salary after the standard coordination deduction. However, if that same income comes from two jobs, e.g. CHF 55,000 and CHF 35,000, each employer typically applies the full deduction separately, resulting in only CHF 37,080 total coordinated salary (CHF 28,540 + CHF 8,540).

There are potential solutions to overcome the issue of multiple coordination deductions, including:

• Consolidating coverage through one pension fund. Under Article 46 of the BVG, employees with multiple jobs may join either the BVG substitute pension scheme or one of their employers’ schemes (if regulations permit), provided their total salary exceeds CHF 22,680.
• Enhanced voluntary contributions to compensate for reduced mandatory coverage. This involves supplementing reduced pension coverage through additional savings like voluntary pension fund purchases and maximizing pillar 3a contributions. Employers can also choose to offer pension plans that allow higher voluntary contribution rates and/or reduced coordination deductions.

The challenges affecting part-time workers and multiple job holders were recognized by policymakers, leading to comprehensive reform efforts. The BVG 21 reform specifically aimed to address coordination deduction inequities by replacing the fixed deduction with a proportional model, but Swiss voters ultimately rejected these changes in September 2024.

What did the BVG 21 reform propose and why was it rejected?

The BVG 21 reform proposed replacing the fixed coordination deduction with an 80% salary coverage model among other key changes, but was clearly rejected by Swiss voters on September 22, 2024, with 67% opposition across all 26 cantons.

The rejected reform proposed:

• Replacing the fixed coordination deduction (CHF 25,725 at the time the reform was rejected) with a proportional deduction of 20% of the annual salary subject to OASI contributions (ensuring 80% coverage)
• Lowering the BVG entry threshold (from CHF 22,050 at that time to CHF 19,845)
• Reducing conversion rate from 6.8% to 6.0% to improve financial stability amid lower investment returns and longer life expectancy
• Providing transition supplements for affected generations (compensation for the pension reductions caused by the lower 6% conversion rate)

The reform aimed to improve coverage for part-time workers and low-income earners, the groups most disadvantaged by the current fixed deduction system. However, voters rejected it primarily due to concerns about reduced conversion rates and higher contribution requirements. It was perceived by many as “pay more, get less”.

The rejection of the BVG 21 reform means the current coordination deduction system remains unchanged, and so the fixed CHF 26,460 deduction and its associated disadvantages for part-time workers and multiple job holders persist. It will likely be several years before policymakers attempt comprehensive pension reforms again, meaning businesses and individuals must continue to work within the existing framework for the foreseeable future.

How can private retirement savings help compensate for pension coverage gaps?

The voluntary pillar 3a retirement savings provides a practical solution to coverage gaps caused by the coordination deduction. This is particularly useful for part-time workers and multiple job holders who are most impacted by the fixed deduction. It is also attractive for high earners looking to top up their retirement savings and optimize taxes.

Employed individuals can contribute up to CHF 7,258 annually (2025) while enjoying immediate tax deductions. For a part-time worker with reduced coordinated salary, maximizing pillar 3a contributions helps compensate for lower second pillar coverage.

Self-employed individuals who are not voluntarily contributing to the second pillar can contribute up to 20% of net income up to a maximum of CHF 36,288 (2025) to pillar 3a. Starting early, contributing consistently, and filling any contribution gaps with subsequent pillar 3a purchases allows these savings to grow over time, helping bridge pension gaps created by the coordination deduction system.