What does my former pension fund do If I don't fill out the exit notification form?
Exiting the 2nd pillar is a key moment in an individual's professional life.
On average, each citizen between 25 and 65 years old has
CHF 12’838 in vested benefits!
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It's the moment when they leave a professional pension institution for various reasons such as a job change, retirement, or even cessation of activity to start entrepreneurship. This process is often complex and requires a good understanding to avoid costly mistakes.
1. Understanding the 2nd pillar
The 2nd pillar, or occupational pension, is an essential element of the Swiss pension system. It aims to enable insured persons to maintain their usual standard of living after retirement. It is a mandatory insurance for all employees in Switzerland, and contributions are shared between the employer and the employee.
1.1. Contributions and benefits
Contributions are calculated based on the insured salary and increase with the age of the insured. In return, the 2nd pillar offers benefits in case of disability, death, and old age.
2. Exiting the 2nd pillar: possible scenarios
Exiting the 2nd pillar can occur in different scenarios, the most common being a change of job, retirement, permanent departure from Switzerland, and starting a business.
2.1. Job change
When an insured person changes jobs, they leave their former employer's pension fund. The vested benefits (the amount accumulated in the 2nd pillar) are then generally transferred to the pension institution of the new employer.
Upon retirement, the insured person is entitled to the vested benefits they have accumulated throughout their career. They can choose to receive this benefit as a pension, a lump sum, or a combination of both.
3. Vested benefits: what you need to know
The vested benefit is the amount accumulated in the 2nd pillar upon the insured person's exit. It is a crucial element of exiting the 2nd pillar, and it is important to understand how it is calculated and managed.
3.1. Calculation of the vested benefit
Several factors come into play in calculating the vested benefit. These factors include the insured salary, the number of years of insurance, and the conversion rate provided by the pension plan.
3.2. Management of the vested benefit
In case of a job change, the vested benefit is usually transferred to the pension institution of the new employer. If the insured person does not find new employment, the vested benefit is transferred to a vested benefits foundation until they find a new job or reach retirement age.
4. Exiting the 2nd pillar: mistakes to avoid
Exiting the 2nd pillar can be a complex process, and it is easy to make mistakes. Here are some common mistakes to avoid.
4.1. Not informing the pension fund of your departure
It is crucial to inform your pension fund of your departure. If you don't, the pension fund may transfer your vested benefits to the Substitute Occupational Benefit Institution, which can complicate the transfer process of your vested benefits to your new employer or to your vested benefits account.
4.2. Forgetting to fill out the exit form
The exit form is an important document that tells the pension fund how you wish your vested benefit to be managed. If you do not fill out this form, the pension fund may transfer the due benefit to the Substitute Occupational Benefit Institution. This institution manages the vested benefit until its legal owner claims it and the money is then transferred to their new pension plan.
5. Pros and cons of exiting the 2nd pillar
Exiting the 2nd pillar has both advantages and disadvantages. It is important to understand them to make an informed decision.
One of the main advantages of exiting the 2nd pillar is that you have the opportunity to recover part or all of your vested benefit. This can be particularly advantageous if you plan to become self-employed or if you need capital for a significant project such as buying your own home.
However, exiting the 2nd pillar also has disadvantages. For example, if you withdraw your vested benefit in cash, you lose the occupational pension coverage. Additionally, withdrawing the vested benefit can have tax implications.
Exiting the 2nd pillar is a complex process that requires a good understanding of the various aspects involved. It is important to plan your exit from the 2nd pillar well and consider all factors, including tax implications and transfer options for your vested benefit. Do not forget to consult a professional pension advisor or a tax consultant to help you navigate this process.
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Brevet fédéral de planificateur financier
Économiste d’entreprise HES
3rd Nov 2023