Compare vested benefits accounts: interest and key information

1. Vested benefits accounts in Switzerland: what are they?

Vested benefits accounts are part of the occupational pension system (OPA). Employees pay into the pension fund when they earn 22,050 francs or more annually.

In the event of a job change, your occupational pension balance will be transferred to the pension fund of the new employer. However, if there is a gap between the jobs, you can transfer the pension savings to a vested benefits account. 

If you do nothing, the savings will be automatically transferred to the Substitute Occupational Benefit Institution (not available in English) after six months at the earliest. This national pension institution serves as a repository and safety net for the second pillar. Only on your instructions will the Substitute Occupational Benefit Institution then transfer your vested benefits to another provider.

Reasons for a delayed change in pension fund may include:

• Unemployment

• Career break

• Parental leave

• Period abroad

• Further education/training

What happens if I change employer?

In the event of a new job, you must contribute your vested capital to the new employer’s pension fund. You must also close your vested benefits account.

2. Comparing the interest of vested benefits accounts

Vested benefits accounts are available at:

• Banks

• Insurers

• Foundations

You often get a preferential interest rate. However, the interest on vested benefits accounts varies from one provider to another.

Pay attention to the costs and interest of the vested benefits account

High interest rates can be attractive for an account. However, also consider the account management fees. High account management fees mean lower interest gains. Compare interest rates and fees to find the right option for you.

3. Opening and switching vested benefits accounts

Tell your current pension fund about your chosen vested benefits solution. On your instructions, it will transfer your balance. You will then receive a final statement.

The provider of the vested benefits account will then send you an opening letter. This contains your account number and confirmation of receipt of payment.

Vested benefits investment accounts: how they differ from vested benefits accounts

A fixed interest rate is usually applied to vested benefit savings. Banks and vested benefits foundations offer securities funds as an alternative. Over a longer period, the returns are often higher than those of standard interest accounts.

What is a vested benefits policy?

You can also invest your vested benefits in a vested benefits policy. This covers risks such as disability or death. The interest rate of the vested benefits usually changes annually. It varies depending on the provider.

With a vested benefits policy, you have a guarantee for your entire balance. On the other hand, you can’t terminate the policy prematurely without a loss.

4. How many vested benefits accounts are you allowed to have?

You may transfer your pension fund balance to a maximum of two accounts with different providers. A maximum of one account per provider is allowed. You can no longer split funds once they are already in a vested benefits account.

The advantage of splitting: it reduces the risk of loss in the event that the bank goes bankrupt. That’s because in the event of bankruptcy, your pension account is only protected for up to a maximum of 100,000 francs.

Account balances over 100,000 francs are not protected. If a bankruptcy occurs, amounts above this are at risk. However, securities are not exposed to this risk; they are yours and will not be lost in the event of bankruptcy.

Save on taxes with two vested benefits accounts

Splitting not only reduces the risk of bankruptcy – you also save on taxes. That’s because if you withdraw your balance in stages when you retire, you’ll pay less due to the effects of tax progression. The condition is that you draw the balances in two different tax periods.

5. Closing a vested benefits account

When can I withdraw the balance to my vested benefits account?

You are not allowed to access your savings until you retire. Early withdrawals are only possible in exceptional cases:

• Becoming self-employed

• Emigration: leaving Switzerland permanently

• Death

• Disability

• Purchasing owner-occupied residential property

The vested benefits must be less than the annual contribution made by the employee.

Do none of the above cases apply? In that case, you can withdraw the vested benefits no earlier than at the age of 60.

When do I have to close my vested benefits account?

You must close the vested benefits account when you reach ordinary retirement age. An exception applies if you work beyond the ordinary retirement age. Then you may keep the vested benefits account until the age of 70 years.

From a tax perspective, it can make sense to defer withdrawal: your pension assets are exempt from wealth tax during the term of the investment. The interest earned is tax-free until the money is paid out. Upon payout, your balance will also be taxed separately from other income. The tax rate is reduced.

6. Vested benefits accounts on your tax return

You only need to declare money from the second pillar on your tax return when you have it paid out. As long as your money is still in a vested benefits account, you don’t have to declare it.