Unemployment can affect anyone. In times of economic uncertainty in particular, it is important to be prepared for the changed situation in terms of finances and pension protection. With the right management of your pension fund assets, you are protected even in difficult situations.
With the following information on the consequences of unemployment, how to handle your pension fund assets, and how to continue your insurance, you can make the right decisions for you.
Contents
- 1 The most important facts in brief
- 2 Unemployment in Switzerland: Anyone can be affected at some point in their working life
- 3 You can expect these financial effects
- 4 The basic security: Unemployment benefit
- 5 BVG payments: What happens if I become unemployed?
- 6 Check option: Continuation of BVG payments
- 7 Check another option: Advance withdrawal of pension fund assets
- 8 What else you should bear in mind
The most important facts in brief
- Almost half of today’s professions will disappear in the next twenty years.
- Digitization and robotics are the key issues in the future world of work.
- Unemployment can affect anyone – pension fund options should be used wisely.
- Optimal handling of the pension fund in the event of unemployment secures retirement provisions.
Unemployment in Switzerland: Anyone can be affected at some point in their working life
In Switzerland, a total of 92,755 people were unemployed in March 2023, which corresponds to an unemployment rate of two percent. In the individual cantons, the figures vary widely, ranging from 0.6 percent in Obwalden to 3.7 percent in Geneva.
For many people, technological development has increased the likelihood of becoming unemployed at least once in their working lives. According to a study by the University of Oxford, nearly half of the professions will become redundant in the next two decades, as they are largely taken over by robots. Many of the remaining jobs will also be automated.
The positive perspective: Wherever new technologies emerge, skilled workers will be needed in new fields of activity. In addition, there will be an increased demand on the labor market in the next few years as the baby boomers of the 1950s and 1960s retire.
Mit dem Laden des Videos akzeptieren Sie die Datenschutzerklärung von YouTube.
Mehr erfahren
You can expect these financial effects
When wages are eliminated, the financial losses are enormous. After all, unemployment insurance only provides temporary basic security. When looking to the future, you should also keep an eye on your pension fund if you are unemployed. After all, saving for retirement with the pension fund is an essential building block.
The basic security: Unemployment benefit
Unemployment benefits are applied for at the local municipal administration or at the responsible unemployment placement center (RAV). While receiving benefits, specified obligations must be fulfilled. These include applying for jobs and participating in programs that improve employability.
The essential conditions for receiving unemployment benefits in Switzerland are:
- You were employed at a gross wage of at least 500 francs before becoming unemployed.
- Contributions have been paid to the unemployment insurance fund for at least the period of one year in the past two years. If children under the age of ten were raised, it is sufficient to have paid contributions for one year within a four-year period.
In some special cases, you are also insured against the consequences of unemployment for up to one year without having paid contributions:
- You cannot work during pregnancy.
- Work is not possible because of an accident, illness or psychiatric treatment.
- A course of study prevents you from taking up work (provided that you have been resident in Switzerland for at least ten years).
- As a Swiss citizen, you are temporarily living in a country outside EFTA or EU.
In principle, unemployment benefits amount to 70 percent of your last salary. However, it is important to note that the maximum salary of 12,350 francs per month is taken as a basis.
In the following cases, you can receive unemployment benefits of up to 80 percent of your last salary:
- There are dependent children.
- In case of disability (from a degree of disability of 40 percent).
- If the last monthly wage was below 3,797 francs.
The following table shows the period of entitlement to unemployment benefits:
| Contribution payments | Age and maintenance obligation | Other conditions | Unemployment insurance Daily allowances |
| 12 to 24 months | up to 25 (no maintenance obligation) | 200 months | |
| 12 to 18 months | from 25 | 260 months | |
| 12 to 18 months | from 25 (with maintenance obligation) | 260 months | |
| 18 to 24 months | from 25 (no maintenance obligation) | 400 months | |
| 18 to 24 months | from 25 (with maintenance obligation) | 400 months | |
| 22 to 24 months | from 55 | 520 months | |
| 22 to 24 months | from 25 | for invalidity pension, from degree of invalidity of 40 percent | 520 months |
| 22 to 24 months | from 25 (with maintenance obligation) | with disability pension, degree of disability at least 40 percent | 520 months |
If you become unemployed within four years before reaching retirement age, you will receive unemployment benefits again for 120 working days.
BVG payments: What happens if I become unemployed?
If you become unemployed, this means, to a certain extent, a withdrawal from the pension fund. This means that your retirement assets with the pension fund must usually be transferred to a vested benefits institution.
The following options are available for investing your vested benefits:
- Vested benefits policy: the capital is well protected and the insurance claims are guaranteed. Often, a lump-sum death benefit is also insured in addition to the endowment capital. However, costs are incurred for the insurance benefit. Depending on the personal situation, insurance may not always make sense, and the solution is often not worthwhile, especially for short terms.
- Vested benefits foundation: Here, the money is invested with a bank. The interest rate is not particularly high. Nevertheless, a comparison is worthwhile, and attention should also be paid to the fees.
- Fund investments: For investment periods of more than ten years, experience has shown that investing in the stock market is a more effective option. Here, digital investment advisors offer interesting investment opportunities even for manageable sums.
Those who do not give their pension fund instructions on the whereabouts of their pension assets when they become unemployed will automatically receive their vested benefits account from the BVG-Auffangeinrichtung. This foundation was established by the federal government to ensure that pension assets are preserved in any case.
The compulsory disability insurance and survivors’ insurance of the pension fund is continued in the event of unemployment via the BVG-Auffangeinrichtung. This insurance automatically continues as long as unemployment benefits are drawn. The premiums are paid in equal parts by the policyholder and the compensation fund.
Tip: More about vested benefits at Everon
Check option: Continuation of BVG payments
In the event of unemployment, the options with the pension fund should be considered and used depending on the personal situation. The aim is to maintain the standard of living in retirement.
The paths described below can be taken.
Voluntary continued insurance with the Stiftung Auffangeinrichtung BVG (BVG Contingency Fund Foundation)
As long as unemployment benefits are being drawn, the mandatory insurance against disability and death continues with the Auffangeinrichtung, as described above. Note that coverage is maintained for only one month after the last daily allow ance has been paid.
There is also the option of voluntary insurance for up to three months after leaving the previous pension plan. This allows both risk protection to be maintained and additional savings contributions to be made for old age.
Since budgets are tight when people are unemployed, voluntary insurance is out of the question for many unemployed people, since they have to make the contributions on their own. In addition, vested benefits accounts with the supplementary institution offer only a modest return. On the other hand, it is interesting to have the option of buying into the new pension fund in the event of temporary unemployment when taking up a new job, thus closing the gaps due to missing contribution periods.
Voluntary continued insurance with the previous pension fund
If you are at least 55 years old and your employer terminates your employment, you have the option of continuing to be insured with the employer’s pension fund. The prerequisite for this is that you do not belong to a new pension fund. It is important to observe the 90-day deadline for registration.
If the contribution based on the previous salary is too high, the relevant salary can be reduced in consultation with the pension fund. Only the BVG entry threshold must be observed. This gives you the option of flexibly adapting your pension provision to your financial possibilities. The contributions are also tax-deductible.
Reading tip: Change of employer: How to secure your pension fund entitlements
Check another option: Advance withdrawal of pension fund assets
In some cases, early withdrawal of retirement assets from the pension fund can also be an alternative.
This is possible in the following situations:
- Financing of residential property: in addition to the purchase, this also includes the repayment of mortgage loans. The prerequisite is that it is the main residence. However, the full capital can only be withdrawn up to the age of 50, after which the amount is limited.
- Taking up self-employment: This can be the basis for setting up a business if you are unemployed.
- Leaving Switzerland for good: However, drawing the obligatory amount is only possible when emigrating to countries outside the EU and EFTA.
- Early retirement: This is usually possible at the age of 58. However, some pension schemes provide for retirement at the age of 60 at the earliest. The early withdrawal creates an income gap, the amount of which depends on the conditions of the pension fund. In most cases, you can expect five to eight percent per year of early withdrawal.
Reading tip: Pillar 3a payout: What you should bear in mind when making a withdrawal
What else you should bear in mind
The topic of unemployment and pension funds is very complex, and your personal situation determines which measures make sense in each case.
Depending on your initial situation, you should therefore consider the following points:
Starting a new job
When you start a new job after an interruption, you are obliged to transfer all existing vested benefits to the new pension fund. Any surplus can only remain in a vested benefits account if the capital exceeds the complete regulatory benefits.
Self-employed persons
Self-employed persons have no coverage against unemployment and therefore do not receive unemployment benefits. However, the possibilities of early withdrawal in the case of business start-up, as described above, must be taken into account.
Optimal investment of vested benefits: investment horizon is decisive
The pension fund assets can be transferred to up to two accounts of different providers. In this way, you not only spread the risk, but also have the advantage of possibly being able to withdraw the assets at different dates.
Although most providers pay interest on the money in vested benefits accounts at a preferential rate, interest accounts are hardly recommended for long-term investment. Currently, the funds there earn between 0.01 and 1.25 percent interest, depending on the provider. At 0. 01 percent, the interest on the vested benefits account of the Auffangeinrichtung is one of the lowest-interest accounts.
In addition to conventional interest-bearing accounts, banks and vested benefits foundations also offer securities solutions with different proportions of shares and bonds. Experience has shown that, over the longer term, the return is significantly higher than with interest-only accounts. However, if share prices fall during the investment period, the vested benefits balance may also be reduced. In order to compensate for price fluctuations, an investment in securities is therefore particularly advisable for a longer investment horizon. Today, digital investment advisors already offer sound asset management for manageable sums. Here, professionals take care of the optimal mix of securities funds.
Reading tip: Vested benefits for occupational retirement provision: Tips & FAQ
