On the surface, Swiss pension funds appear to face a trade-off: each franc can be used either to credit members' accounts or to build financial buffers. A higher credited interest rate reduces the reserve cushion, while a lower rate leaves more room to strengthen it. In an extreme formulation, funds would accumulate investment returns while restraining benefits for members.
The relationship is more nuanced. Volatility reserves are a key measure of a pension fund's financial robustness. They are set as a percentage of pension capital, typically built in strong market periods and used to smooth weaker returns. Swiss law requires funds to define reserve rules in their statutes, and the supervisory commission OAK BV issues additional instructions. Foundation boards set the target level, for example 16% of pension capital.
Under OAK BV rules, collective foundations may credit a maximum of 1.75% on pension accounts when their volatility reserves are below three-quarters of the target. Such funds must first rebuild the buffer before they can offer a higher rate and move closer to the Swiss average. According to the 2025 Pensionskassen-Jahrbuch from consultancy PPCMetrics, the average credited interest rate for Swiss pension funds was 4.43%.
The restriction is intended to limit competition among collective foundations for small and medium-sized enterprises. PPCMetrics expert Luzius Neubert says the rules are understandable because an attractive credited interest rate could otherwise encourage funds to postpone reserve building. A higher rate than 1.75% is permitted only once volatility reserves reach at least 75% of the target.
Company-specific funds are not covered by the commission's interest-rate cap and have more flexibility. Neubert says they nevertheless have a strong incentive to maintain well-filled reserves, because employees and the sponsoring employer may have to pay repair contributions if the fund becomes underfunded.
PPCMetrics data show that the average target value for volatility reserves was 17.7% in the previous year, with a range from 3.1% to 37.0%. Some funds had not filled their reserves, while others reached their target. The analysis found that a higher reserve target was associated with a higher average credited interest rate, and funds with fully built reserves regularly posted higher rates than those with partially built reserves.
The median credited interest rate was 5.00% for funds with full volatility reserves, compared with 3.25% for funds with only partially built reserves. The 1.75 percentage-point difference can be significant over several years because of compounding. Neubert and colleagues say an adequate reserve can expand a foundation board's discretion and help maintain continuous credited interest in difficult market phases. Funds with full reserves can pass a larger share of good investment results to members, and the data show that funds that had done their homework could keep interest rates high even in weaker investment years.
For members, volatility reserves are an important indicator of financial strength and of the likelihood that pension accounts will remain attractively credited when markets weaken. Neubert warns, however, that a single year or a single metric can be misleading. Credited interest can be 3% in one year and 6% in the next, so a five-year or longer view is more relevant. A fuller assessment should also consider the coverage ratio, conversion rate and savings contributions, all of which are available in annual reports.
He adds that external assessment can be difficult because foundation boards can use a high technical interest rate to make the coverage ratio and reserves look better than economically justified, and because they set the reserve target themselves. The risk assumptions behind that target are not always transparent. Pension experts, however, are regulatorily required to flag material deviations, which makes the published figures a reliable guide for members.
