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Guide

Vested Benefits

Vested benefits (Freizügigkeit) refer to the preservation of your second-pillar pension cover when you leave a pension fund. If you change jobs or leave your pension fund without joining a new one, the retirement capital you have built up is transferred as a vested benefits payment to a vested benefits account or a vested benefits securities deposit. The capital stays locked there until it is paid into a new pension fund or drawn at retirement.

The essentials

When you leave a pension fund without joining a new one, the pension institution transfers the vested benefits to a vested benefits account or securities deposit; without instructions, the assets pass to the BVG Substitute Occupational Benefit Institution (Auffangeinrichtung) at the earliest after six months and at the latest after two years (art. 4 Vested Benefits Act, FZG).
Vested benefits may be split across no more than two vested benefits institutions, which allows a staggered and often tax-efficient capital withdrawal (Vested Benefits Ordinance, FZV).
A cash payment is permitted only in three cases: permanently leaving Switzerland, taking up self-employment, or a minimal vested benefits amount (art. 5 FZG).
When moving to an EU or EFTA state, the mandatory portion of the retirement capital cannot be paid out in cash as long as you remain subject to compulsory insurance there; only the extra-mandatory portion is payable (art. 25f FZG). When moving to a third country, the entire balance can be withdrawn.

Sources: FZG Art. 4, Erhaltung des Vorsorgeschutzes in anderer Form (fedlex, DE) · FZG Art. 5, Barauszahlung (fedlex, DE) · FZG Art. 25f (fedlex, DE)

Who has to report what on leaving

Anyone who leaves a pension fund without joining a new one tells the former institution in which permitted form the cover is to continue, as an account or as a policy. Without that notice, the institution transfers the vested benefits including interest to the Substitute Occupational Benefit Institution at the earliest after six months and at the latest after two years (art. 4 FZG). Anyone who later joins a new fund reports the entry to the vested benefits institution, and tells the new fund which vested benefits institution holds the capital and in which form. Both notices are for the insured person to make.

When a cash payment is allowed

A cash payment is the exception. Art. 5 FZG names three cases: permanently leaving Switzerland, taking up self-employment outside compulsory occupational provision, and vested benefits smaller than the person's own annual contribution. For married people and registered partnerships, the written consent of the partner is also required. On moving to an EU state, Iceland or Norway, the mandatory portion stays locked as long as compulsory insurance for old age, death and disability continues there; for Liechtenstein, residence alone is enough (art. 25f FZG).

How the withdrawal is taxed

A lump-sum withdrawal from occupational provision is taxed separately from other income, as a levy for a full year. At federal level it amounts to one fifth of the ordinary tariffs, and social deductions do not apply (art. 38 DBG). It is assessed for the tax year in which the benefit is received. Cantonal and municipal taxes come on top and differ considerably. Several lump sums in the same year are added together to determine the rate, and for jointly taxed spouses across both of them.

Frequently asked questions about Vested Benefits

01 What happens to my pension fund assets when I change jobs?

If a pension fund applies at your new workplace, your previous fund transfers the retirement capital there. If there is no new fund, for example during a career break or unemployment, the vested benefits flow to a vested benefits account or securities deposit and remain locked until you rejoin a pension fund or draw the capital.

02 What is the difference between a vested benefits account and a vested benefits securities deposit?

A vested benefits account pays interest on the balance like a savings account. A vested benefits securities deposit invests the capital in securities, for example funds with a chosen equity allocation. Over longer horizons the deposit opens up additional opportunities, but it is subject to market fluctuations. Which option fits depends on your investment horizon and personal risk capacity.

03 Can I have my vested benefits paid out in cash?

A cash payment is only possible in specific cases: permanently leaving Switzerland, taking up self-employment, or when the vested benefits amount is minimal (art. 5 FZG). When moving to the EU or EFTA, the mandatory portion generally remains locked. Tax treatment may change.

04 Is it worth splitting the balance across two vested benefits institutions?

Vested benefits can be distributed across no more than two institutions. A staggered withdrawal over different years can break tax progression, because lump-sum benefits are taxed separately from other income. How strong the effect is varies by canton. Tax treatment may change, and reviewing your individual situation is advisable.