The vested benefits account is used if you leave a job before retirement without immediately starting a new one. When you leave, your pension fund will ask you where it can transfer your retirement assets. As you are not (temporarily) affiliated with a new pension fund, the retirement assets must be “temporarily parked” somewhere. You must therefore open a vested benefits account to which the money can be transferred by the pension fund.
Which free movement offers are available and which are the best?
Banks are only moderately interested in vested benefits assets. Although the amounts involved in vested benefits are often higher than in the 3rd pillar, the funds are often only held in a vested benefit account for a short time. This is why the interest on vested benefits accounts is lower than on 3a accounts. In addition, there are sometimes fees for account management and balancing. It is therefore worth comparing the current interest rates and costs of vested benefits accounts:
| 28.08.2024 | Ø last 4 years | Account fees Account management per year | Fees WEF reference | Charges Balancing | |
|---|---|---|---|---|---|
| Clientis Bank Thur | 1.500% | 0.309% | – | 400.00 | 25.00 |
| Clientis Bank Toggenburg | 1.500% | 0.490% | – | 400.00 | 25.00 |
| Hypo Vorarlberg (Switzerland) | 1.150% | 1.217% | – | 400.00 | 25.00 |
| … |
Simply open a vested benefits account online
As vested benefits accounts are often only held for a short time, it is particularly interesting if you can simply open them online. Two different methods have been established in this respect:
- You first open an account with the vested benefits foundation of your choice. Once the account has been opened, you will usually receive a transfer form containing your details and the details of the account you have opened, which you can submit to your previous pension fund. Examples of simple online openings: VIAC (digital offering in co-operation with WIR Bank) and Frankly (digital offering from Zürcher Kantonalbank), although VIAC pays better interest than Frankly.
- You fill in the vested benefits foundation form, which contains all your details, and send it directly to your previous pension fund. In this case, the account is only opened after your money has been received by the vested benefits foundation, which may take some getting used to. Examples: UBS or the BVG Substitute Occupational Benefit Institution.
Of course, you can also physically go to a local bank and have a vested benefits account opened there.
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.
In addition to Frankly and VIAC, finpension in particular has made a name for itself as a provider of a securities solution for vested benefits. The finpension offering is characterized by the following economic 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.
Continue to the finpension offer.
Vested benefits policy from insurance companies
You can also use the vested benefits capital to take out an insurance policy that provides cover in the event of death or disability. However, this insurance coverage is not free of charge. You pay a premium, which also includes the costs of the insurance. Due to a lack of transparency, we do not recommend combined insurance in the form of vested benefits policies (savings & risk cover). If you have sufficient financial resources, it is better to insure your potential insurance needs separately from your vested benefits.
For the sake of understanding: money “lies” with a vested benefits foundation
The majority of offers to invest in vested benefits assets are marketed by banks. However, the legal entity behind the offers is not the bank itself, but a vested benefits foundation. This is because the law stipulates that vested benefits assets must be managed by a vested benefits foundation, regardless of whether it is an account or securities solution.
In many cases, the foundation has strong ties to the relevant bank. However, there are also independent vested benefits foundations, most of which specialize in investing vested benefits assets in securities.
When do you need a vested benefits account?
In principle, you always need a vested benefits account if you have second pillar pension fund assets that can no longer be in a pension fund. As vested benefits accounts cannot be withdrawn without further ado, this ensures that the money does not lose its purpose of providing for old age.
The following cases are referred to as vested benefits:
- Time out: You are temporarily without a job (traveling the world, unemployed, further training, childcare, etc.).
- Moving abroad: You move abroad or work abroad for a certain time.
- Falling below the BVG entry threshold: You have reduced your workload and now earn less than the BVG entry threshold.
- Self-employment: You become self-employed and waive the right to withdraw your vested benefits.
- Divorce settlement: You have divorced and received part of your former partner’s pension assets.
From now on, you decide what happens with the money from the pension fund. Hence the term “vested benefits”. You decide for yourself which provider you want to deposit the money with and how you want to invest it (account, custody account or policy).
What if you already have a new employer?
If you already have a new employer, your pension fund assets will be transferred directly to your new pension fund, unless you instruct a payout to one vested benefits account (or two in the case of splitting) or two vested benefits accounts in the case of splitting. As a rule, the pension fund does not know whether you have a new employer or not. It therefore depends on what instructions you give your old pension fund.
How many vested benefits accounts can you have?
By law, the number of vested benefits accounts you can have at the same time is unlimited. However, when paying out from the pension fund, you can only have a maximum of two accounts.
You can ask your previous pension fund to transfer the vested benefits assets to two vested benefits foundations at the time of leaving the pension fund (splitting). This allows you to combine the various vested benefits solutions:
- Vested benefits account
- Investment in securities / vested benefits custody account
- Vested benefits policy with risk protection
We recommend that you make use of the option of splitting your vested benefits. This gives you more flexibility when investing your vested benefits. If necessary, you can also withdraw the various pots in stages at the time of retirement, which results in lower taxes (capital withdrawal tax) in many cantons.
What happens if I conceal vested benefits assets from the new pension fund?
The new pension fund cannot know whether and how many vested benefits accounts you have. Although you are obliged by law to transfer all vested benefits to the new employer’s pension fund (up to the maximum regulatory benefits), no one can check whether you are actually doing so. If you do not transfer vested benefits to the pension fund as prescribed, this can also lead to the following disadvantages:
- You may be less protected against the risks of death and disability. There are pension fund models in which the amount of retirement assets influences the amount of disability, widow’s, and orphan’s pensions. However, there are also models in which there is no connection between retirement assets and pensions.
- The capital not contributed cannot be withdrawn later as a pension. As a rule, vested benefits foundations do not offer pensions, and if they do, then they are relatively worse than pension funds.
- If you wish to pay in the vested benefits at a later date, it is not certain that the pension fund will accept them.
Where the money is held in the 2nd pillar does not influence the potential for voluntary purchases. Vested benefits assets must also be added to the retirement assets in the pension fund. This means that you cannot increase the purchase potential by not contributing everything to the pension fund.
Who “inherits” the vested benefits account in the event of death?
An interesting question is who receives the money in a vested benefits account in the event of death. Unlike pension funds, vested benefits accounts do not offer protection against the risks of death and disability. If you are dependent on such protection because you have a family, for example, you should consider taking out insurance.
But now back to the actual topic and the question of who receives the vested benefits account when the account holder dies. Contrary to the general expectation, the vested benefits account does not form part of the estate but is distributed separately from the estate. Vested benefits accounts are primarily intended to benefit those persons who were financially dependent on the deceased account holder.
The pension purpose of the second pillar therefore takes precedence over inheritance law, although it must of course be relativised that in certain cases the pension law beneficiaries of vested benefits are in line with inheritance law, but not always.
When can the vested benefits account be paid out?
In principle, the vested benefits account can only be withdrawn upon retirement. However, there are exceptions. In the following cases, vested benefits can be withdrawn in advance:
- If you wish to purchase owner-occupied residential property (WEF).
- Becoming self-employed (must be recognized by the compensation office).
- Emigrate.
As an alternative to a WEF advance withdrawal, a pledge is an option, especially if vested benefits invested in securities are to remain invested.