What is a vested benefits account ?

It serves as a secure "parking spot" for your retirement savings when you leave your job without immediately starting a new one. While the average interest rate on these accounts is currently close to zero, they offer several benefits, including protection of up to CHF 100,000 in case of bank insolvency and specific provisions for inheritance to your loved ones.
This guide will help you understand everything about vested benefits accounts, from their basic functionality to tax implications, ensuring you make informed decisions about your retirement savings.

Definition and role in the swiss pension system

The vested benefits account plays a critical role in preserving your pension capital, particularly during interruptions in your professional activity. It also ensures the continuity of your professional pension coverage until you resume employment.

Differences from a traditional pension fund

The main difference compared to a traditional pension fund lies in two key aspects:

• Vested benefits foundations are not required to apply a minimum interest rate.
• The account does not provide protection against risks such as death or disability.

Types of vested benefits accounts available

You have two main options to manage your assets:

1. The classic vested benefits account: Similar to a savings account, it offers capital security with a more advantageous interest rate than standard accounts.
2. The vested benefits deposit: This option allows you to invest your assets in financial markets within legal limits.

It is important to note that you can hold a maximum of two vested benefits accounts with different foundations. Thus, when transferring your pension fund assets, you can split them between these two accounts, a practice known as "splitting."

Tax and regulatory aspects

The taxation of your vested benefits account requires careful attention, as it can significantly impact your retirement assets.

Taxation of capital withdrawals

Capital withdrawals are subject to taxation separate from ordinary income. Key points to consider:

• Withdrawals made in the same year are added together for tax calculation purposes.
• Partner withdrawals are generally taxed jointly.
• Cantons apply different tax rates proportional to the withdrawn capital.

Conditions for early withdrawal

You can request an early withdrawal from your vested benefits account in specific circumstances, provided the following conditions are met:

• The minimum amount for an early withdrawal is CHF 20,000.
• An early withdrawal is only possible every 5 years.
• After age 50, the amount is limited to the vested benefits available at age 50 or half of the current benefits.

Legal protection of assets

Your vested benefits account enjoys robust legal protection. The assets are not part of the estate in the event of death. The law precisely defines the order of beneficiaries, prioritizing those financially dependent on the deceased.

In the case of divorce, the assets accumulated during the marriage are divided between the spouses. If you reside abroad at the time of withdrawal, a withholding tax is applied based on the location of the vested benefits foundation, with potential refunds under double taxation agreements.

FAQs

Question 1: What is a vested benefits account, and what is it used for ?

A vested benefits account is a financial instrument within the Swiss pension system that allows you to preserve your pension fund assets when you leave your job without immediately starting a new one. It ensures the continuity of your professional pension during transitional periods.

Question 2: What are the main differences between a vested benefits account and a traditional pension fund ?

Unlike a traditional pension fund, vested benefits foundations are not required to apply a minimum interest rate. Additionally, a vested benefits account does not provide protection against risks such as death or disability.

Question 3: When should you open a vested benefits account ?

A vested benefits account is necessary during periods of professional inactivity, such as when resuming education, experiencing unemployment, taking time off to care for children, or starting independent work. It is also useful when moving abroad or in the event of a divorce.

Question 4: What investment options are available for a vested benefits account ?

You mainly have two options: a classic savings account offering security but with a low-interest rate, or a vested benefits deposit allowing you to invest in financial markets for potentially higher returns but with greater risks.

Question 5: How are withdrawals from a vested benefits account taxed ?

Capital withdrawals from a vested benefits account are subject to taxation separate from ordinary income. Withdrawals made in the same year are aggregated for tax purposes. Tax calculation methods vary by canton – some use a fixed rate, while others apply a proportional system.