Vested benefits account or policy: which should you choose?

When do you need a vested benefits account or policy?

As soon as you leave a pension fund without joining another: a break between two jobs, unemployment, leave, moving abroad with assets that stay in Switzerland, or becoming self-employed without withdrawing the capital. Your money then stays within occupational pension provision, in your name, until you next join a pension fund or until you retire.

The choice is yours. If you do not make one, the money goes to the Substitute Occupational Benefit Institution: read our guide on the Substitute Institution.

The vested benefits account

It is offered by banks’ vested benefits foundations, in two forms that can often be combined:

• Savings account: the capital is guaranteed and earns interest, currently at a modest rate. Suitable if you will soon be joining a pension fund or if retirement is approaching.
• Securities solution: the capital is invested in funds according to a strategy you choose, with a higher or lower proportion of equities. The expected return is higher over the long term, but the value fluctuates and is not guaranteed.

A vested benefits account generally does not include risk cover: in the event of death, the capital is paid to your beneficiaries in line with the regulations; in the event of disability, you can ask for it to be paid out.

The vested benefits policy

It is offered by insurance companies. Your capital is generally guaranteed, and you can add cover in the event of death or disability, in the form of a lump sum or a pension.

This protection comes at a cost: part of the money pays for the risk cover and the insurer’s costs. It can be useful if you have no other cover, for example during a long break. Read the terms carefully, especially the fees and the share that pays for the risk cover.

How to compare

1. Your time horizon: if you are joining a pension fund in a few months, a savings account is enough. If you are ten years or more from retirement, a securities solution may make sense, depending on your risk tolerance.
2. Fees: management fees, fund fees (TER), entry or exit fees. Ask for them in writing and compare them over a full year.
3. Risk cover: do you already have protection in the event of death or disability, through your employer or a private insurance policy? If so, a policy with cover duplicates it.
4. Simplicity: one well-chosen account is better than several forgotten ones.

No more than two institutions

The law allows you to split your termination benefit between no more than two vested benefits institutions (Art. 12 FZV). Some people use this to withdraw their capital in two different years at retirement, which can reduce the tax. Your cantonal tax administration can advise you.

You can also switch institution along the way, for example to consolidate scattered accounts or move to a securities solution. The transfer is made directly from one institution to the other: the money never passes through your personal bank account.

When can you get the money?

Your vested benefits are paid out at the AHV reference age. You can withdraw them no earlier than five years before, and keep them no later than five years after if you continue working (Art. 16 FZV).

Before then, they can only be paid out in the cases provided for by law: buying a home you live in, leaving Switzerland for good, self-employment, disability, or a very small amount.