Many people are familiar with vested benefits accounts, especially when changing jobs or leaving the Swiss pension system. However, few understand how the money in these accounts is actually managed. That responsibility lies with what’s known as a vested benefits foundation. In this article, we’ll break down what a vested benefits foundation is, when it comes into play, and why finpension operates with two separate foundations.
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What is a vested benefits foundation?
Vested benefits foundations manage funds from the second pillar when there is no affiliation with a pension fund. These foundations receive the capital and invest it in interest-bearing accounts or securities.
Vested benefits foundations are often unnoticed by customers. They open a vested benefits account with a provider. The foundation holds the legal responsibility for ensuring that the assets are managed in compliance with Swiss pension regulations, even if customers primarily interact with the provider’s platform or app.
Some providers, such as finpension, operate their own vested benefits foundations, while others collaborate with external foundations. This does not affect the account opening process.
Is a vested benefits foundation like a pension fund?
Both vested benefits foundations and pension funds manage the accumulated retirement assets from the second pillar of retirement savings. The main difference between them is the level of freedom you have in choosing where your money goes.
With a pension fund, you are typically tied to your employer. If you leave your job and do not find a new employer right away, you can transfer your funds to a vested benefits foundation of your choice. At that point, you can decide whether you want your money to be invested in a savings account or in securities.
The pension fund only offers comparable flexibility in the context of the 1e plan.
When can I open an account with a vested benefits foundation?
You can open a vested benefits account if you leave your pension fund before retirement, such as after terminating your employment without immediately starting a new job. In this situation, you will receive your termination benefit from the pension fund, which consists of the savings accumulated in your second pillar assets up to that point.
It is important to transfer these assets to a vested benefits foundation, and you need to actively manage this process. If you do not make the transfer, the pension fund is required to transfer your assets to the Substitute Occupational Benefit Institution LOB after a maximum of two years. However, some pension funds have much shorter deadlines and may transfer the funds after just six months.
Why does finpension have its own vested benefits foundations?
finpension established its own vested benefits foundations in 2017 and 2022. This ensures that the management of pension assets remains independent of banks.
finpension is responsible for the pension assets, offering everything from a single source. Customers benefit from having a central point of contact without detours through third-party providers.
The advantage of 2 vested benefits foundations
When you leave the pension fund, you have the option to split the termination benefit between two vested benefits foundations. This process, known as splitting, provides you with greater flexibility in managing your investments and can help you save on taxes when you withdraw capital.
Since finpension manages two vested benefits foundations, you can oversee both portions within a single app. For each foundation, you can choose between an account-based solution or a securities investment option.
