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Vested benefits assets can be invested in securities. In contrast to the “normal” securities custody account, however, there are certain restrictions for the vested benefits custody account. For example, the account holder cannot buy individual shares.
Investments for the vested benefits custody account
The following investments are permitted under the Vested Benefits Act:
1. securities funds
Vested benefits can be invested in funds. The funds must be authorised for distribution in Switzerland or be set up by a Swiss investment foundation.
Pension funds that are subject to an investor group control are recommended. If the fund provider controls the group of investors, it can ensure that only pension assets flow into the fund. Unit holders benefit from this because such funds can reclaim more withholding tax on foreign income such as dividends or interest.
In Switzerland, this tax on dividends and interest is known as withholding tax. It amounts to 35 per cent. It is often similarly high abroad.
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2. asset management agreement (AMA)
Asset management contracts are an alternative to funds, whereby a distinction must be made between two variants:
a) AMA with investment in individual securities
- AMs with investments in individual securities are only permitted through fund managers that are subject to supervision by Finma.
b) AMA with investment in funds:
- All asset managers are permitted to manage AMs with investments in funds in accordance with section 1.
The investment guidelines of BVV 2 must also be complied with for asset management mandates.
3. risk-free investments in Swiss francs
The third theoretical option is to invest directly in bonds guaranteed by the Confederation or the cantons, in Swiss mortgage bonds and in medium-term notes and time deposits from Swiss banks.
This category is not very attractive, even compared to the vested benefits account, which is why it has been labelled “theoretical”. Many of these investments have a negative return. Vested benefits accounts in the form of a pure savings solution, on the other hand, may not earn negative interest.
Reason for the restriction of investment opportunities
The legislator wants to prevent the speculation of pension fund assets that are managed by the pension fund member within the framework of vested benefits. The rules are intended to protect the purpose of the pension scheme.