What is a vested benefits account?
A vested benefits account is used to receive assets from the 2nd pillar (LPP) when a person leaves a pension institution — for example, due to a job change, departure from Switzerland, or transition to self-employment. This account can be opened with a bank, an insurance company, or a vested benefits foundation.
In which cases can you withdraw your vested benefits account?
Early withdrawal is strictly regulated by law. It is only allowed in certain exceptional situations, which are almost identical to the conditions for withdrawing occupational pension assets.
1. Permanent departure from Switzerland
If you leave Switzerland on a permanent basis, you can withdraw the entire balance of your vested benefits account. However, if you move to an EU/EFTA country and become affiliated with a local social security system, only the extra-mandatory portion can be withdrawn. The legal minimum under the LPP must remain in Switzerland until retirement or the occurrence of a pension event (disability/death).
2. Start of self-employment
If you become self-employed and are no longer subject to the LPP, you can request a withdrawal of your vested benefits. You will need to provide proof of your self-employed status (commercial register extract, AVS confirmation, etc.).
3. Purchase of a primary residence
You can use your vested benefits to purchase, build, or repay a mortgage on your primary residence. Up to the age of 50, you may withdraw the full amount. After that, the withdrawal is partially limited to the vested benefits entitlement at age 50, or to half of the entitlement at the time of the withdrawal — whichever is higher.
4. Receipt of a full disability pension (IV)
If you are recognized as 100 % disabled by the disability insurance, you can receive your vested benefits account in the form of capital. Some service providers (e.g. insurance companies) also offer annuities until retirement age.
5. Withdrawal in case of a low account balance
If your vested benefits amount is less than one year of contributions, you can request a cash payout.
How do I withdraw my vested benefits?
- 1. Fill out a withdrawal request provided by your vested benefits institution.
- 2. Attach the supporting documents (certificate of residence abroad, proof of self-employment, property purchase contract, etc.).
- 3. Get your spouse or registered partner to sign if you are married or in a registered partnership.
- 4. Send it to your vested benefits foundation or pension fund.
What is the tax treatment of withdrawals from vested benefit accounts?
The withdrawn capital is subject to a separate taxation at a reduced rate, which varies depending on the canton of residence or withdrawal. In the event of departure abroad, the canton where the vested benefits foundation is located will apply a withholding tax. It is advisable to compare tax rates before choosing your provider.
When can the account be withdrawn at retirement age?
When you reach statutory retirement age (65 for men, 64 for women), you can apply for vested benefits:
- Up to 5 years before retirement
- Up to 5 years later
What happens in the event of death?
In the event of death, the assets in a vested benefits account are not paid into the estate, but directly to the designated beneficiaries according to the legal order. This mechanism is designed to protect those who were financially dependent on the deceased.
The policyholder may, however, influence this distribution by specifying the shares allocated within the same group, or by "promoting" a beneficiary from the second group to the first. On the other hand, he or she may not exclude a person from the scheme completely.
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