What is a vested benefits account, and when do I need one? What are the rules for withdrawing from a vested benefits account – do I have to pay taxes? In this article, we answer all your questions about vested benefits accounts in detail.
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What is a vested benefits account?
A vested benefits account is an account where you can park the money you’ve accumulated in your pension fund. In Switzerland, you can only open this account if a vested benefits case applies. We’ll explain this in more detail in the next section.
When do I need a vested benefits account in Switzerland?
The most common reason for opening a vested benefits account is if you are temporarily unemployed. In such a case, you automatically leave your previous pension fund and are entitled to a vested benefits payout – essentially, your accumulated savings. Since you are not affiliated with a new pension fund, your retirement assets need to be “parked” somewhere.
In technical terms, this situation is referred to as a vested benefits case. Once a vested benefits case arises, you gain the freedom to decide what happens to your pension fund assets. This is why it’s called “vested benefits.” You can not only choose the provider but also decide how you want to park your money (account, portfolio, or policy).
All vested benefits cases with the pension fund
- Career break: You are temporarily unemployed (e.g., traveling the world, unemployed, pursuing further education, or providing childcare).
- Moving abroad: You relocate to another country, opting not to withdraw the funds or working abroad for a period of time.
- Falling below the BVG entry threshold: You reduce your working hours and your salary no longer meets the BVG entry threshold.
- Self-employment: You become self-employed and choose not to withdraw your vested benefits.
- Divorce settlement: You’ve divorced and received part of your former partner’s pension fund savings. (If you are not affiliated with a pension fund, the money is transferred to a vested benefits account.)
How many vested benefits accounts can you have?
There are no legal restrictions on the number of vested benefits accounts you can hold. In theory, you can have an unlimited number of vested benefits accounts simultaneously. However, when withdrawing funds from your pension fund, splitting is only allowed across a maximum of two accounts.
How can you open two vested benefits accounts at the same time?
Are you leaving your pension fund? If so, you can request your previous pension institution to transfer the vested benefits to two different vested benefits foundations. This process is called splitting.
At finpension, splitting is simple and convenient. You can learn more about splitting and its benefits in our article “How to split your pension fund.”
Invest vested benefits assets and invest in funds
If you do not just want to deposit your vested benefits assets in an account for the short term, but assume that they will remain in vested benefits for the longer term, it is advisable to invest your vested benefits assets in securities. This gives you the chance of an additional return and protects your assets against inflation.
As already mentioned at the beginning of this chapter, there are also non-bank providers in addition to banks when it comes to investing vested benefits assets. As banks often charge high recurring fees of more than one percent for pension funds, digital providers are also preferable here.
finpension has made a name for itself as a cost-effective provider of a securities solution for vested benefits. Here are some of our advantages:
- finpension has two vested benefits foundations. If you wish to split your pension fund termination benefits, you can manage both parts in the same app.
- With finpension, you can invest up to 100 % in equities because other vested benefits can also be taken into account. With Frankly, the equity component is limited to 75 %. VIAC distinguishes between the mandatory (max. 80 % equities) and the extra-mandatory (max. 100 % equities).
- finpension offers funds from all three Swiss fund houses (Credit Suisse, Swisscanto and UBS), VIAC only from Credit Suisse and Swisscanto, Frankly of course only from Swisscanto (because Frankly, like Swisscanto, belongs to Zürcher Kantonalbank).
- finpension now offers an investment solution for free assets. It is, therefore, possible to transfer the vested benefits into free assets upon retirement.
Which option is right for me?
The best vested benefits option for you depends on your individual needs and goals:
- Security and stability, short-term horizon: If you prefer or need to avoid risk, such as in the case of a short holding period, a traditional vested benefits account is a good choice. Compare interest rates and fees across providers, and check if the account can be easily and digitally opened.
- Higher return potential, long-term horizon: If you can invest your vested benefits for the long term and are willing to take on some risk, a vested benefits portfolio offers the chance to achieve higher returns than a traditional account.
Which providers are available for vested benefits funds?
In Switzerland, the following types of providers offer solutions for managing vested benefits funds:
- Banks: e.g., UBS, Raiffeisen, or Zürcher Kantonalbank
- Insurance companies: e.g., SwissLife, Baloise
- Digital providers: e.g., VIAC, frankly, or finpension
Vested benefits accounts at banks
Interest rates on vested benefits accounts are often lower than those on 3a accounts. The reason: funds are typically parked in vested benefits accounts for a short period. As a result, banks tend to show limited interest in vested benefits funds, even though these accounts often hold larger amounts than those in the 3rd pillar.
It’s worth comparing current interest rates and fees for vested benefits accounts. Some accounts may also charge fees for account management or closures, which should be factored into your comparison. Below is a snapshot from our vested benefits account interest rate comparison:
| December 2024 | Account management per year | Fees WEF reference | Charges Balancing | |
|---|---|---|---|---|
| Crédit Agricole next bank (Suisse) | 1.00% | – | 400.00 | – |
| Clientis Bank Thur | 1.00% | – | 400.00 | 25.00 |
| Clientis Bank Toggenburg | 1.00% | – | 400.00 | 25.00 |
| Hypo Vorarlberg (Switzerland) | 1.00% | – | 400.00 | 25.00 |
| … |
Vested benefits policies from insurance companies
You can also use your vested benefits capital to take out an insurance policy that provides coverage in the event of death or disability. However, this insurance protection is not free. You pay a premium that includes the insurance costs.
Our recommendation: Separate insurance from saving. These offerings tend to lack transparency and are therefore expensive. As a rule, any insurance needs should be addressed separately from your vested benefits capital.
Digital providers of vested benefits accounts
Digital providers of vested benefits accounts stand out by offering a much simpler account setup process compared to banks. The account can be opened online in just a few minutes. Some of the best digital providers of vested benefits accounts include VIAC, Frankly, and finpension.
At the finpension vested benefits foundation, you can easily choose between two options, depending on whether you want to keep the money in a traditional account or invest it in securities. This makes registration with finpension particularly straightforward.
When can I withdraw from my vested benefits account?
Generally, you can only withdraw from your vested benefits account upon retirement. However, there are exceptions. You can access the funds earlier in the following cases:
- If you want to purchase owner-occupied property (real estate),
- If you become self-employed (must be recognized by the compensation office),
- Or if you emigrate.
As an alternative to withdrawing for real estate, you can opt for a pledge, especially if you want to keep the vested benefits funds invested in securities.
Are taxes due when withdrawing from a vested benefits account?
When you withdraw funds from a vested benefits account, you must pay the so-called capital withdrawal tax. You can find more information on how this tax is calculated and its rates in the linked article.
Who inherits the vested benefits account in case of death?
Many believe that a vested benefits account is part of the deceased person’s estate. However, this is not the case. The vested benefits account is distributed separately from the estate.
Vested benefits accounts are primarily intended to benefit those who were financially dependent on the deceased account holder. For detailed information on how the funds are distributed, please refer to our article on vested benefits accounts in the event of death.