A vested benefits account is a savings account for your pension funds. In Switzerland you are required to transfer your occupational provisions into a vested benefits account if you leave a company but do not have a new employer. At which point your vested benefits account balance is held in trust by a vested benefits foundation until certain conditions are met.
A vested benefits account tends to offer a preferential interest rate, compared to that offered by a typical savings account. This type of account affords you greater investment choice, low fees and the ability to grow your wealth in a tax efficient manner. However, once you leave Switzerland, you cannot make any additional contributions.
The rate of income tax that you pay when drawing money from your second pillar is determined by the canton in which your pension fund is held rather than your location when you contributed to it. By opening a vested benefits account in a pension tax friendly canton such as Schwyz or Zug, you can significantly improve your tax efficiency, and in turn reduce how much of your second pillar falls into the hands of the tax man.
If you leave a company, therefore leaving your current pension fund, you are required by Swiss law to transfer your pension fund assets into a vested benefits account. Whether it’s because you become unemployed, take a career break, an extended stay abroad, under take further training or take maternity leave.
If you start working again after a break, the money deposited in the vested benefits account must be paid into the new employer’s pension fund and the vested benefits account is closed.
In the event of the account holder’s death, their vested benefits go to the people listed below in the specified order. If there are multiple beneficiaries in a category, the capital is divided equally and only if there is no person in a group does a person(s) in the following group become entitled.
You can transfer your vested benefit to a maximum of two vested benefit foundations, but you can not have more than one account with a foundation. Splitting your vested benefit assets reduces the risk of loss in the event of the bank going bankrupt. You can not split your vested benefits retroactively.
There are a few exceptional cases whereby your vested benefits can be paid out earlier than your normal retirement age. Such as:
For more information on Vested Benefit Accounts contact us today.
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