Vested benefits account payout: When it is possible, what to watch, how it is taxed

The Vested Benefits Act (FZG) has governed since 1995 what happens to your pension capital when you leave the pension fund before the insured event occurs. If the credit balance cannot be transferred directly to a new pension fund, a vested benefits account must be opened, for which the insured person is responsible.

A payout from a vested benefits account is only possible shortly before retirement or in narrowly defined exceptional cases, and the capital withdrawn is taxed separately from income. In this article we explain when a withdrawal is permitted, which rules apply since the AHV 21 reform, how taxation works and what to watch out for with interest and investing.

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The most important points at a glance

• Payout: The ordinary withdrawal is possible at the earliest five years before the AHV reference age, meaning from age 60, and at the latest on reaching the reference age of 65 (source: FZV/BSV, as of 2026).
• Deferral: A deferral beyond the reference age, up to age 70 at the latest, is possible only if continued employment is proven (AHV 21 reform, Art. 16 FZV).
• Early withdrawal: only in statutory exceptions (leaving Switzerland, self-employment, disability, residential property).
• Tax: The capital is taxed separately from income at a reduced rate. The amount varies considerably by canton and municipality (Art. 38 DBG, Art. 11 para. 3 StHG).
• Investing: Interest on pure savings accounts is low. Anyone who stays invested for longer can place the balance in securities within the statutory limits.

In which cases do I need a vested benefits account?

There are various situations in which the saved pension capital cannot be transferred directly to a new pension fund when your career changes. It then has to be parked temporarily in a vested benefits account, because pension assets must in principle remain within the pension cycle.

This applies, for example, in the following cases:

• new self-employment without follow-up insurance
• unemployment
• parental leave or a career break
• divorce (transfer of the claim to the former spouse)
• income falls below the BVG minimum wage
• emigration
• change of employer, if not all of the vested benefits credit can be transferred to the new benefits provider

The path to a new vested benefits solution

You choose for yourself which vested benefits foundation holds your retirement assets. If you leave a company, you are responsible for opening a vested benefits account yourself in the cases listed above. If you do not act, your pension capital is transferred to the Stiftung Auffangeinrichtung BVG, the national substitute occupational benefit institution, after two years at the latest.

To open an account, contact the provider of your choice directly. Online offerings make the setup easier. You then instruct your previous pension fund to transfer the credit balance there.

What to do with a new employer and a different pension fund?

If you take up employment subject to compulsory insurance again, the pension assets must flow into the new pension fund and your vested benefits account is closed. With a securities solution this can mean selling at an inopportune moment, more on that below.

What to watch with interest and fees

Unlike pension funds, vested benefits institutions are not bound by the BVG minimum interest rate. Interest on pure savings accounts has therefore been low for years and often lies below inflation. It is best to compare current conditions directly via independent portals such as FinanzMonitor or comparis, as the rates change continuously.

Negative interest on savings in vested benefits accounts is not permitted. However, if interest rates tend towards zero, pension assets still lose value in real terms once fees are taken into account. You should therefore pay attention to the cost structure:

• Opening an account is usually free of charge.
• For a WEF early withdrawal or for closing the account within the first year, many foundations charge a fee.
• Some banks grant fee reductions if a mortgage is taken out with them.

Vested benefits policies are also affected by low interest rates

Policies contain insurance benefits, which reduces the return. With low interest, the profitability of policies is questioned in a similar way to pure savings accounts. If insurance cover for disability or death makes sense for you, separating the two can be cheaper: a separate Pillar 3a or Pillar 3b risk insurance policy and investing the pension capital in more return-oriented solutions.

Securities for a longer investment horizon

If you expect to invest your vested benefits assets for longer than about three to five years, securities become an option. Banks and vested benefits foundations offer securities funds with different weightings of equities and bonds.

Note for the securities solution:

• If you re-enter employment, the securities must be sold and transferred to the new pension fund. If prices have fallen during the investment period, only a reduced credit balance can be transferred. The investment period should therefore span several years.
• Choose an investment strategy that suits your risk profile.
• Compare the performance of different funds over a longer period, including weaker years. Past performance is not an indicator of future returns.

Vested benefits account payout: When is a withdrawal possible?

At what point can I request the payout?

The statutory provisions are decisive. The ordinary payout of the vested benefits is possible at the earliest five years before the AHV reference age, meaning from age 60. The credit balance must be withdrawn at the latest on reaching the reference age of 65.

With the AHV 21 reform, the reference age of 65 has applied uniformly to women and men since 2024; the reference age for women is being raised step by step to 65. The earlier gender-based deferral rule (women to 69, men to 70) has thus been abolished.

A deferral beyond the reference age, up to age 70 at the latest, is now only possible if you prove continued employment (for example with an employment contract or salary statement). For people who reach the reference age in the years 2024 to 2029, a transitional rule applies: they may defer the withdrawal until 31 December 2029 at the latest, even without employment. From 1 January 2030 onwards, proof of employment is mandatory (Art. 16 FZV, AHV 21 reform).

The payout is generally made as a one-off capital payment. Pensions from the second pillar are paid exclusively by pension funds. If you are still employed subject to compulsory insurance, it can be worthwhile to bring existing vested benefits into the pension fund in order to increase your pension entitlement.

When is an early payout possible?

Before the ordinary withdrawal window, a payout is only permitted in narrowly defined exceptions:

• Leaving Switzerland for good: When emigrating to an EU/EFTA country, the mandatory part of the retirement assets can only be paid out if there is no longer any compulsory insurance in the destination country. The non-mandatory part can generally be paid out.
• Disability: If a full disability pension is drawn from the Federal Disability Insurance, the payout of the vested benefits account can be requested.
• Taking up full-time self-employment without mandatory occupational pension provision.
• Purchase of residential property (WEF): Under the homeownership promotion scheme, the balance can be withdrawn for owner-occupied residential property. A minimum of CHF 20’000 applies, and an early withdrawal is possible at most every five years. The money can be used for purchase or construction, the amortisation of mortgages or participation in housing cooperatives (Art. 30c BVG).
• Cross-border commuters: If gainful employment in Switzerland is given up for good and there is no Swiss residence, the balance can be paid out when the cross-border commuter permit is cancelled.
• Death: If the account holder dies, the balance goes to the legal beneficiaries. Spouses or registered partners rank first. They are followed by children, persons who were substantially supported or who lived in a domestic partnership with the deceased for at least five years, and finally the other legal heirs. The balance does not fall into the free estate.

How is the payout taxed?

All balances from the second pillar as well as from Pillar 3a are taxed once and separately from other income on payout, at a reduced rate. This capital withdrawal tax is governed at federal level by Art. 38 DBG and at cantonal level by Art. 11 para. 3 StHG. The income during the term, meaning interest and dividends, remains tax-free.

The tax rates are progressive in most cantons, but differ in amount. Because of this progression, it is worth staggering the payouts of pension fund, vested benefits and Pillar 3a balances over several years. Withdrawals from the 2nd and 3rd pillar in the same year are added together for the calculation.

Good to know: up to two vested benefits accounts are permitted, provided they are held at different foundations. Splitting the balance across two accounts allows the withdrawal to be spread over two tax years and thus softens the progression. The actual tax saving depends on the canton of residence and the individual situation.

Tax and assets during the term

Pension assets from occupational provision and Pillar 3a are exempt from wealth tax during the period in which you cannot dispose of them. You also pay no income tax on interest and dividends on them. A later withdrawal extends this tax-free phase, provided the statutory withdrawal deadlines are observed.

Forms of investment are regulated by law

Vested benefits accounts are offered by banks as well as by non-bank vested benefits foundations. In addition to the classic account, the law provides for insurance policies that offer cover in the event of death and disability. This cover is paid for with a premium that is charged to the return.

Anyone looking for a more return-oriented solution can choose a vested benefits custody account and invest in funds. The providers ensure that the pension assets are invested in accordance with the statutory investment rules. These follow the Vested Benefits Ordinance (FZV) and the investment provisions of the Ordinance on Occupational Old Age, Survivors’ and Disability Pension Provision (BVV2), and they limit in particular the share of risky investments. Unlike with pension funds, the balance may in many solutions be invested with a high equity allocation, provided you have been informed about the risks.

Investment horizon as a basis for decisions

In the long run, a broadly diversified investment in the stock market has historically proven robust. What matters in each individual case is how long the balance is likely to remain invested, because the stock market repeatedly sees price slumps that have to be weathered. Will your balance remain invested until retirement, or will you soon bring it back into a pension fund? For investing in funds, an investment horizon of at least three to five years is considered sensible.

Low interest rates: is individual management worthwhile?

Individual asset management of the vested benefits balance is possible and little known to many savers. Possible advantages are a transparent cost structure, tax optimisation and the individual management of the pension capital within the statutory investment guidelines.

ETFs and individual securities with individual asset management

The investment is made individually, taking into account the statutory investment guidelines for pension assets. With some providers, individual securities are also possible from a higher balance; alongside these, investments are made in investment funds and ETFs (exchange-traded funds).

Institutional tranches

With institutional asset classes, no retrocessions are incurred, meaning no reimbursements from product providers to the wealth manager. This lowers the cost of the investment for the client and increases transparency.

Frequently asked questions (FAQ)

When can I request a payout from my vested benefits account?

The ordinary payout is possible at the earliest five years before the AHV reference age, meaning from age 60. The credit balance must be withdrawn at the latest when the reference age of 65 is reached. Anyone who keeps working beyond 65 and provides proof can defer the withdrawal to age 70 at the latest (Art. 16 FZV).

When is an early payout from a vested benefits account possible?

Only in narrowly defined statutory cases: leaving Switzerland for good, taking up full-time self-employment, drawing a full disability pension and acquiring owner-occupied residential property under the homeownership promotion scheme (WEF). For a WEF early withdrawal, a minimum of CHF 20’000 applies, and it is possible at most every five years (Art. 30c BVG).

How is a payout from a vested benefits account taxed?

The capital is taxed separately from other income at a reduced rate, the capital withdrawal tax (Art. 38 DBG, Art. 11 para. 3 StHG). The amount depends on the canton and municipality of residence and the sum withdrawn, and varies considerably between cantons. Withdrawals from the 2nd and 3rd pillar in the same year are added together for the calculation.

Can I lower the tax with a staggered withdrawal?

Yes. Up to two vested benefits accounts at different foundations are permitted. Withdrawing them in different tax years softens the progression of the capital withdrawal tax, because each withdrawal is taxed separately. Staggering pension fund and Pillar 3a withdrawals over several years can also reduce the overall burden.

What happens to the vested benefits account in the event of death?

If the account holder dies, the credit balance goes to the legal beneficiaries. Spouses or registered partners rank first, followed by children and other supported persons in the statutory order. The balance does not fall into the free estate.

Sources

• Federal Act on Vesting in Occupational Old Age, Survivors’ and Disability Pension Plans (FZG, SR 831.42)
• Vested Benefits Ordinance (FZV, SR 831.425), Art. 16 on the withdrawal date
• Federal Act on Occupational Old Age, Survivors’ and Disability Pension Provision (BVG, SR 831.40), Art. 30c on homeownership promotion
• Federal Act on Direct Federal Taxation (DBG, SR 642.11), Art. 38 on the capital withdrawal tax
• Federal Act on the Harmonisation of Direct Taxes (StHG, SR 642.14), Art. 11 para. 3
• Federal Social Insurance Office (BSV): AHV 21 reform, reference age and withdrawal of vested benefits

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