Vested benefits custody account: Make more of your money

Upon termination of your employment relationship, you take your pension assets from the 2nd pillar with you. These are usually paid into the new employer's pension fund. If there is a break between the two jobs, the funds must be paid into a vested benefits account or a vested benefits custody account. This means you can continue to invest your pension assets on a tax-privileged basis.

These are common reasons why someone would choose to open a vested benefits account or vested benefits custody account:

Change of job: If you change your job and the new employer cannot take over your pension assets immediately, you can transfer them to a vested benefits account.

Unemployment: If you quit your job or are made redundant, it may take some time before you start a new job. In the meantime, you can pay your pension assets into a vested benefits account.

Self-employment: If you become self-employed, you are no longer compulsorily insured under the occupational benefit scheme, depending on your legal status. Accordingly, you can transfer your pension assets to a vested benefits account.

Staying abroad: If you go abroad to work temporarily, you can park your pension assets in a vested benefits account in Switzerland for the duration of your absence.

Permanent departure from Switzerland: If you move away from Switzerland permanently, you may – depending on the country – be able to transfer your pension assets to a vested benefits account or have them paid out. You should also consider tax issues. Let us give you expert advice.

You can usually dispose of the money deposited in a bank account relatively freely. With a vested benefits account or vested benefits custody account, the money is used specifically for pension provision and you can either transfer it to a new pension fund or withdraw it when you retire. A payout is normally only possible if you are permanently leaving Switzerland.

Vested benefits accounts and vested benefits custody accounts differ in terms of investment: With a vested benefits account, you receive a fixed interest rate. With a vested benefits custody account, on the other hand, you can invest the money in securities. With Zurich Invest Ltd, for example, your deposits are invested worldwide in selected equities, bonds and money market securities of first-class companies and institutions.

In short, a vested benefits custody account offers you more opportunities compared to a vested benefits account, but it also carries more risks.

An important advantage is that you can choose your individual investment strategy. You invest in securities according to your financial goals and risk appetite and thus benefit from potentially higher returns. You can also diversify your investment and spread your risk by buying different securities or funds. Finally, you can take advantage of market opportunities and adjust your portfolio depending on the market situation.

One possible disadvantage of a vested benefits custody account is that, as with all securities investments, your funds are exposed to market fluctuations. This can lead not only to increases in value, but also to losses in value. You can reduce this risk by adjusting your risk strategy in the final years of your investment. It also requires specialized expertise to make the right decisions when it comes to investments. This makes it all the more important to choose a competent partner.

If you leave your employer, your previous pension fund or employer will normally contact you and inform you that you must transfer the pension capital you have saved. There is no fixed transition period for this. The money should normally be transferred within one year of leaving the company. Many pension funds transfer the vested benefits within 30 days of leaving the company.

It is important that you as the insured person take action and have the money transferred either to the new employer's pension fund or to a vested benefits account. This ensures that your pension capital earns optimum interest and that you benefit from all the advantages of occupational benefits insurance.

If you do nothing, your pension fund exit benefit or vested benefit will generally be deposited with the BVG Contingency Fund Foundation. This foundation manages the funds of individuals who do not specify a new pension institution. To find out if you are entitled to pension assets from previous employment, you should make an inquiry with the BVG Contingency Fund Foundation.

We recommend that you seek advice from a specialist at an early stage. They can help you to make the right decisions – for example, whether it is worth splitting your assets between two custody accounts. This is because there are situations in which it may make sense to keep several vested benefits custody accounts, for example, for investment or tax reasons.

In these situations, you can or must close your vested benefits account/vested benefits custody account:

• New employment
  If you start working for a new employer and join their pension fund, the vested benefits must be transferred to the new pension fund.
• Self-employment
  If you become self-employed and are no longer subject to mandatory occupational benefits insurance, you can have your vested benefits paid out.
  Important to know: Proof of self-employment is often required for this.
• Permanent departure from Switzerland
  If you leave Switzerland permanently and move to a country outside the European Economic Area, you can have your vested benefits paid out. If you move within the European Economic Area (with the exception of Liechtenstein), you can only have the extra-mandatory balance paid out. The mandatory pension capital must remain in the vested benefits account until you reach retirement age.
  The only exception: You acquire residential property.
• Acquisition of residential property
  You may use your vested benefits to purchase or finance owner-occupied residential property and to pay off your mortgage.
• Early or ordinary retirement
  If you wish to retire early, you may be able to withdraw your vested benefits. The exact conditions vary depending on the foundation. And, of course, the money will be paid out upon normal retirement.
• Total disability
  If you become completely unable to work due to disability, you may also be able to have the balance of your account paid out.
• Expiry of the maximum retention period
  If you do not transfer the pension capital to a vested benefits account with a foundation within a certain period (e.g., 2 years) after the end of your employment relationship, your previous pension fund can transfer the capital to the BVG Substitute Occupational Benefit Institution, a statutory vested benefits foundation.

Seek advice before you close your vested benefits account. This can have tax implications, among others

A vested benefits foundation temporarily manages pension assets from the 2nd pillar for persons who leave an employment relationship and do not immediately start a new one. The Vested Benefits Foundation ensures that the pension assets continue to be invested securely and with an appropriate return. The funds are exempt from income tax until they are withdrawn. And in the event of the insured person's death, the vested benefits foundation pays benefits to the surviving dependents.