AXA Foundation for Supplementary Benefits Changes with effect from January 1, 2025

The AXA Foundation for Supplementary Benefits will gradually adjust its conversion rate between 2025 and 2027 in order to minimize redistributions from the people who are still working to those who have retired. This will provide insureds with a sustainable and attractive rate of interest in the future.

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Key points at a glance
  • Between 2025 and 2027, the AXA Foundation for Supplementary Benefits will gradually lower its conversion rate to 4.6% for men and women retiring at age 65. This will minimize the redistribution from people who are still working to those who have recently retired, opening up the prospect of higher interest income for insureds going forward.    
  • The gradual adjustment over the course of three years means insureds can plan with greater reliability and it cushions any pension reductions.  
  • There will be no change to existing retirement pensions or lump sums.
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What will change from January 1, 2025? 

Gradual adjustment of conversion rate by 2027

From 2025 to 2027, the AXA Foundation for Supplementary Benefits will gradually lower its conversion rate to 4.6% for men and women retiring at age 65. 

The adjustment will take place over a span of three years. This means insureds can plan with greater reliability, and it cushions any pension reductions, especially for people who are about to retire. 

No changes to existing pensions or lump sums for those retiring at or before the end of 2024

The former conversion rates of 5.0% for men aged 65 and 4.88% for women aged 64 will continue to apply to anyone retiring before the end of 2024.   

It has no effect on existing retirement pensions or lump sums. 

Prospect of higher interest income for insureds 

By adjusting the conversion rate, the AXA Foundation for Supplementary Benefits reduces the increasing redistribution so that more of the investment return will be available to pay interest on retirement assets. The current interest model will therefore be adjusted with effect from January 1, 2025. 

Even an additional half of a percentage point in interest has a significant impact over the long term, as the following example shows:

  • CHF 100,000, earning interest at 1.0% a year over 20 years, grows to CHF 122,019
  • CHF 100,000, earning interest at 1.5% a year over 20 years, grows to CHF 134,685
  • CHF 100,000, earning interest at 1.0% a year over 40 years, grows to CHF 148,886
  • CHF 100,000, earning interest at 1.5% a year over 40 years, grows to CHF 181,401

The Board of Trustees is determined to provide a fair distribution of funds for all generations. To this end, it has also decided to introduce a pension participation model starting in 2025. After they retire, the insureds themselves will profit from the Foundation’s strong performance.

Insureds can count on robust supplemental retirement savings that offer capital protection and pension options at fair conditions.

Why is the conversion rate being changed? 

In view of rising life expectancy, many people do not have enough retirement savings to fund the current pension for the rest of their life. This shortfall is known as a conversion loss.

Some of the investment return that should ideally accrue to working insureds must therefore be redistributed to pensioners to plug the gap. This redistribution is at odds with the fundamental principle of the second pillar, which is that everyone saves for their own retirement through their own pension contributions, their employer's contributions and the investment returns on their accrued retirement assets. 

On top of this, demographic changes are causing a steady increase in the proportion of pensioners relative to working people, so the redistribution will grow over the coming years. The AXA Foundation for Supplementary Benefits will not be able to escape this trend.

Less redistribution – more interest

By adjusting the conversion rate to 4.6%, the AXA Foundation for Supplementary Benefits is minimizing the increasing redistribution. Insureds can thus expect to receive more interest in the future, allowing them to accumulate more retirement assets by the time they retire.

Understanding the conversion rate

  • What is a conversion rate?

    The conversion rate is the percentage of the retirement capital you have saved up that is converted into an annual pension when you retire. A conversion rate of 4.6% means that every CHF 100,000 saved results in a pension of CHF 4,600 a year.

  • What is meant by conversion losses?

    If the conversion rate currently in use is above the correct level from an actuarial (i.e. purely mathematical) point of view, then every time someone retires, the pension fund needs to have more capital in reserve than the assets that person has actually saved in order to fund his or her retirement pension. This is the reason for the ever-increasing redistribution of assets from working insureds to retirees. The difference between the assets accumulated and the capital actually needed is referred to as a conversion loss.

What is the extent of redistribution at the moment?

Up to CHF 2 million a year is currently being redistributed from working insureds to retired pensioners in the AXA Foundation for Supplementary Benefits, and the latest forecasts suggest that this will rise to more than CHF 4 million in the next five years. 

This money should really be used to pay interest on the former group's retirement assets. If more of it could be used for that purpose, the effect of compound interest would increase their retirement assets over the long term compared with the current redistribution situation.

How are future retirement pensions calculated?

Each individual's future pension is different and depends on a range of factors, including how much retirement capital they have saved while working.  

As a rule of thumb, retirement assets x conversion rate = annual pension. 

Now you can also simulate your future pension in the myAXA pensions portal. 

I will be retiring soon and plan to draw a pension. How does this change affect me?

  • Retirement by end of 2024
    Calculation example for old-age pensions

    Nothing will change if you retire by the end of 2024. The current conversion rates – 5.0% for men retiring at age 65 and 4.88% for women retiring at age 64 – will continue to apply to you.

  • Retiring in the transitional years between 2025 and 2026

    The following conversion rates apply to the voluntary retirement savings if you retire at age 65 in a transitional year: 

    Table with the current conversion rates

    The conversion rate of the previous year applies if you retire on January 1. 

  • Retirement from 2027 onwards
    Illustration of a pension calculation

    A standard conversion rate of 4.6% will apply to all men and women retiring at age 65 starting in 2027.

Frequently asked questions on the change in the conversion rate

For more information and frequently asked questions on the change in the conversion rate, please consult the Q&A as well as the additional documents.

Your contact for further questions

If you have any further questions, we recommend that you get in touch with your AXA contact or advisor. 

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