What is a vested benefits account? Comparison, Taxes & More!

Vested benefits accounts vary enormously and should therefore be compared carefully. If you want to park your vested benefits assets in an interest-only account, you have a wide choice here, but will earn a negative return due to inflation. In this article, we would therefore like to analyse which providers in the Vested benefits account comparison have really attractive offers and allow investments in securities.

To do this, we first clarify what a vested benefits account is and, for example, how it is reported in the tax return.

If you have any more questions on the topic, we look forward to an exchange in the comments!

What is a vested benefits account?

First of all, let’s clarify the question: what is a vested benefits account? A vested benefits account can be seen as a kind of blocked account for your pension fund assets. If you stop working, become unemployed, take a break between jobs or, for example, no longer earn above the BVG entry threshold (CHF 22,680), a vested benefits account comes into play. Your pension assets are then held in this account until you transfer them to a new pension fund or are entitled to withdraw them.

Vested benefits account withdrawal

As a rule, a vested benefits account is closed when you take up a new job. Your balance is then transferred to your new employer’s pension fund.

Otherwise, you may only close a vested benefits account and withdraw the money in a few exceptional cases. Examples would include

the start of self-employment
a definitive departure from Switzerland
for owner-occupied residential property
in the event of death or disability.

You can withdraw your vested benefits in full no earlier than 5 years before and no later than 5 years after the reference age. The reference age is 65 for both men and women; a transitional arrangement applies to women born between 1961 and 1963. The earliest reference is therefore at the age of 60 possible, the Latest date for withdrawing funds from the vested benefits account lies at the age of 70.

Important: You may only defer claiming your benefits beyond the age of 65 if you are still in employment. A transitional period applies until the end of 2029, during which deferral is possible even if you are not in employment. From 2030 onwards, the vested benefits foundations will require proof of employment.

Vested benefits account comparison

Ein Freizügigkeitskonto Vergleich hängt wie im Intro bereits erwähnt davon ab, welches Ziel du für deine Freizügigkeitsgelder hast. Soll das Geld einfach nur dort «liegen» und ohne Risiko bei möglichst hohem Zins parkiert sein? Dann vergleiche die Zinssätze unterschiedlicher Freizügigkeitsstiftungen und achte auf allfällige Kosten, die etwa beim Bezug oder anderweitig anfallen. Welche Anbieter aktuell am meisten zahlen, zeigt unsere Übersicht der Interest on vested benefits accounts.

Wenn Zinsen von etwa 0,1% bezahlt werden, doch die Inflation etwa 15x so hoch ist, wird dein Geld bei einer Kontolösung jeden Tag weniger. Eine defensive Investition des Vermögens bzw. zumindest eines Teils davon kann gerade bei etwas längerem Anlagehorizont sehr sinnvoll sein. Innovative Anbieter bieten dies unkompliziert an und ermöglichen zu sehr tiefen Gebühren eine Investition der Freizügigkeitsgelder in Wertschriften. Selbstverständlich wird auch mit Expertise und Beratung unterstützt. Renditen von 7% pro Jahr sind so gut möglich, wenn dem auch ein Risiko gegenüber steht.

Some providers even offer sustainable investments (such as ESG) of vested funds, responding to a growing demand among investors.

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Vested benefits account Taxes on withdrawal

When you leave the pension scheme, you are entitled to your Divide pension savings between a maximum of two vested benefits institutions. The two balances can be drawn down in stages, thereby spreading the tax liability over two years. As tax is payable on withdrawals from a vested benefits account and these are subject to capital gains tax, staggering the withdrawals is worthwhile due to the progressive tax scale.

For example, anyone drawing funds from Pillar 3a can spread these payments over several years. To minimise your tax liability when withdrawing funds from your vested benefits account, you can do so up to five years before the reference age. A deferral of up to five years is also possible, but from 2030 onwards this will only be permitted if you remain in employment. Spreading out all amounts that count towards the tax progression as evenly as possible results in a lower tax burden. Tax rates on lump-sum withdrawals vary from canton to canton, and in extreme cases, even moving to another canton may be worthwhile. Here some examples are listed.

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Vested benefits account tax return

In the tax return, the handling of the vested benefits account is simple. As long as the pension assets are invested in a vested benefits account or in a vested benefits policy, there is no taxation on income or assets.

The vested benefits account therefore does not have to be declared in the tax return.

Vested benefits only become taxable upon withdrawal, and, of course, thereafter, once the amounts form part of your private assets. Interest earned on vested benefits is also tax-free until withdrawal. Anyone who is permitted to defer withdrawal beyond the reference age benefits from tax-free capital growth for a longer period.

Conclusion

The vested benefits account is much more than just a blocked account for your pension fund assets. Modern providers offer investment opportunities with different strategies and a high degree of flexibility. With the right investment strategy, you can not only preserve your pension savings over the long term, but also multiply. This is offset by the risk of price fluctuations.

The distribution to two vested benefits accounts also enables a Tax-optimised payout through staggered payments. Through the Flexible reference date (from 5 years before the reference age, whilst in employment for up to 5 years afterwards) not only allows you to optimise your tax burden, but also to benefit for longer from the tax-free capital growth benefit.

For the best possible result, it may be worthwhile to consult a high quality supplier and to split your balance between two different vested benefits foundations as soon as you leave the pension fund. You can find out more about tax-optimised pension provision in our Article on pillar 3a.

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Sustainable (ESG compliant)
Transparent fees
Up to 80% shares

Transparency Note: This article was created in collaboration with Descartes Finance. Nevertheless, content and presentation have been created freely and independently by Schwiizerfranke.

5 responses

Manuela Liechti says:

8. November 2023 at 7:15

Thanks for the interesting article.
What happens after a short career break?
Let's say I quit my job to travel for a year, but then get re-employed.
Do I then have to transfer all the money from the vested benefits foundations to my new employer's pension fund?
A high investment risk would not be recommended.

Reply
1. Eric says:
  
  13. November 2023 at 9:14
  
  If all the money will be transferred back, I see it the same way. In this case, an interest account would probably be the better choice 🙂
  
  (If splitting is done, this would be a different consideration)
  
  Reply
Mike says:

15. November 2022 at 22:36

Helpful article, it should become part of new arrivals learnings!

http://www.viac.ch still remains personally the one platform for investing my vested benefits. Its simplicity of the product (desktop and mobile), customer service has been top so far and fees are still in the lower end of the market.

As the end of the year is approaching I'm sharing additional VIAC codes you can use to save 500CHF on admin fees by using one of these codes when signing up:

5JrSGKa
NJGMR1V
sJpghMw
2JsWbAf
HJ8G2TC

Enjoy!

Reply
Simon says:

26. January 2022 at 10:08

I didn't know that investing with a vested benefits account was possible. Does it make sense? I think so because in a pension fund is also invested. Thanks for the contribution. The link to the provider does not work?

Reply
1. Eric says:
  
  27. January 2022 at 7:28
  
  The link works again in the meantime, thanks for your hint 🙂
  
  Reply

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