The Swiss pension system is based on three pillars. The legislator intends to ensure that the 1st pillar (AHV) and 2nd pillar (BVG) pension schemes are coordinated. Accordingly, only wages that exceed 7/8 of the maximum annual AHV retirement pension are insured in the second pillar. This prevents wage components in the AHV pension area from being insured twice.
The pension funds are allowed to waive a coordination deduction. However, the pension plans must remain appropriate and may not exceed a certain level of benefits.