If someone who has a vested benefits account dies, the obvious conclusion is that this money will be distributed to the inheritors. But this is not the case. In this article, we explain why and how vested benefits are distributed.

Protection of surviving relatives from the financial consequences of death

Vested pension assets do not form part of the estate of the deceased. The reason for the special treatment lies in the purpose of pension assets.

The three pillars of the Swiss pension system primarily provide for old age. However, the pension plan is also intended to provide protection against the financial consequences of death and disability. Therefore, pension assets primarily benefit those who are financially affected by a death. These may be the same people who are entitled to inherit. However, there may also be beneficiaries who are not legal inheritors, such as the divorced spouse (see Group 1).

Since there may be different persons who were supported by the deceased person during his or her lifetime, the legislature has defined a cascade that shows who is a beneficiary and when.

Change of the order of beneficiaries possible

In the next chapter, we will show you how the legislator has defined the order of beneficiaries. But first, let’s take a look at the leeway it gives the pension beneficiary.

This is because the distribution prescribed by law can be adjusted by the insured person. The following two options are available to the insured:

  1. You can say who should get how much within a group (naming percentages, e.g. 50% for the surviving spouse, 25% each for the two children).
  2. You can «promote» people who belong to group 2 to group 1. Or, to put it more formally, you can supplement Group 1 with persons from Group 2.

What is not possible is a complete exclusion of a person from a group. However, the point at which a reduction is considered as an exclusion is not regulated by law.

Order of beneficiaries in the case of death

The beneficiaries in the vested benefits area are governed by Article 15 of the Vested Benefits Ordinance (only in DE, IT and FR). In the event of survival, the beneficiary is the insured person. In the event of death, there are four groups of beneficiaries:

Group 1
  • The surviving spouse /
    The surviving registered partner
  • The divorced spouse
  • The children
Group 2
  • Substantially supported persons
  • Life partners
  • Person who is responsible for the support of one or more joint children
Group 3
  • «Independent» children
  • Parents
  • Siblings
Group 4
  • The other legal inheritors excluding the commonwealth
According to Article 15 of the Vested Benefits Ordinance

Group 1:
The surviving spouse, the surviving registered partner, the divorced spouse or the children

The surviving spouse/partner:
If the deceased was married at the time of death, then the spouse who is still living is defined as the surviving spouse. The same applies to partners in a registered partnership.

The surviving spouse and the surviving registered partner are beneficiaries in group 1.

The divorced spouse/partner:
The divorced spouse is also a beneficiary in the first group, provided the following two conditions are met:

  1. the marriage has lasted at least ten years and
  2. the divorced spouse was awarded a pension under Art. 124, para. 1 or Art. 126, para. 1 at the time of divorce

The same applies, of course, to former partners in a registered partnership.

The divorced partner’s entitlement may still be reduced if it is higher than the entitlement awarded to him/her in the divorce judgment together with the OASI survivors’ benefits.

Children of the deceased fall into the first group if they were entitled to an orphan’s pension at the time of death.

You are entitled to an orphan’s pension:

  1. if you are not yet of legal age, i.e. you are not yet 18 years old, or
  2. if you are not yet 25 years old but still in education or receiving a full IV pension.

Foster children are also beneficiaries if the deceased provided for their care.

Allocation according to heads
If there are several beneficiaries in a group, the vested benefit assets are distributed according to heads. If there are three people, each receives one third.


Group 2:
Substantially supported persons, life partners or the person who has to pay for the care of one or more joint children

If beneficiaries in group 1 are missing, then persons according to group 2 are eligible for a benefit in the vested benefits accounts.

Substantially supported persons:
Persons who were substantially supported by the deceased are beneficiaries in the second group.

It is difficult to say when support is substantial. Therefore, this question is the subject of many court cases. In one federal court ruling, substantial support was denied if it was less than 20% of the cost of living.

In terms of time, support is considered significant if it occurred over a period of at least two years.

Life partners:
Unmarried or registered life partners are beneficiaries if he or she cohabited with the deceased continuously for the past five years until death.

Note: The pension fund must be notified of the beneficiary life partner. The reason: According to the law, the pension fund can provide for the life partners as beneficiaries, but it does not have to. For this reason, many pension funds have defined in their regulations that they do favor life partners, but only if they are reported as such before death. In the case of vested benefits foundations, life partners are beneficiaries by law (even without notification).

Person who is responsible for the support of one or more joint children:

The maintenance of a child must be paid until the child reaches the legal age of majority or until the completion of an education. Until when this education must be completed is not defined by law.

Beneficiaries in this group are excluded under the Occupational Pensions Act (BVG) from survivors’ benefits if they draw widowers’ or widowers’ pensions (Art. 20a (2) BVG). However, this exclusion does not apply to vested benefit assets.

Allocation by heads
Group 2 is also divided by heads if there are several beneficiaries in this group.


Group 3:
“Independent” children, parents and siblings

If beneficiaries according to group 1 and 2 are missing, then persons according to group 3 are beneficiaries.

«Independent» children:
All children fall under this title,

  • who do not belong to group 1 because they were not receiving an orphan’s pension at the time of death, and
  • who also do not belong in group 2 because they were no longer financially supported by the deceased parent.

So these are primarily the adult children who are no longer in education.

Parents and siblings:
Parents and siblings do not need to be explained in detail. Half-siblings are equal to siblings. Step-siblings, on the other hand, receive nothing because they are not related.

Allocation according to heads
This group is also divided by heads if there are several beneficiaries.


Group 4:
The other legal inheritors excluding the commonwealth

All other legal inheritors follow in the last group 4.

The reason why the community is excluded here is the following: The community is also one of the legal inheritors. If the community were not excluded here, possible other legal inheritors would have to share with the community. This is because in Group 4, too, the principle applies that if there are several beneficiaries, they are divided according to heads.


Payout formalities and taxes

Submit form and documents

You must submit a form to the Vested Benefits Foundation to report the death of the deceased and to notify the beneficiaries. In addition to the form, various documents are required that are necessary to clarify the beneficiaries in detail. Examples:

  • Official identity card
  • Civil status certificate
  • Divorce decree of divorced marriages/dissolved partnerships
  • Certificate of executorship
  • Certificate of inheritance
  • In case of rejection of the inheritance, the corresponding protocol
  • etc.

No annuity, only capital

As a rule, vested benefits are paid out in the form of a lump sum, in other words settled with a single payment.

Capital gains tax

The beneficiaries of the vested benefit assets must pay tax on the payout as a lump-sum benefit from the pension plan. Accordingly, the beneficiaries pay a capital withdrawal tax if they are liable to pay tax in Switzerland.

However, you do not have to worry about the tax invoice yourself, because the vested benefits foundation reports the payment to the tax authorities. The responsible cantonal tax authority will send the beneficiaries an invoice relatively quickly.

Beneficiaries domiciled abroad pay the tax at source, which means that the tax is deducted from the amount before it is paid out and transferred to the state by the vested benefits institution; only the net amount is paid out.