What to pay attention to when choosing a vested benefits account:
- Comparing Swiss vested benefits accounts using the unbiased vested benefits account comparison on moneyland.ch will help you get a clear picture of the differences in interest paid out by different banks.
- A vested benefits account is a limited-access account. That means you can only withdraw money from the account when very specific conditions are met. Vested benefits held in this type of account and interest earned on these benefits are tax deductible for wealth tax, income tax and withholding tax purposes.
- Bank account vs. insurance policy: In addition to vested benefits accounts at Swiss banks, insurance providers also offer vested benefits life insurance policies. Unlike vested benefits accounts, vested benefits insurance policies provide various types of insurance coverage (disability insurance or survivors insurance, for example). However, it is important that you review the exact benefits offered and contemplate whether or not you need the coverage before taking out this type of policy. Interest paid on vested benefits invested in a life insurance policy is minimal.
- Another alternative to regular vested benefits accounts is presented by vested benefits investment accounts. Accounts must meet pillar 2 retirement saving (BVG) requirements. Note that while placing your pension fund savings into this type of account can potentially deliver higher returns, there is also a risk of loss.
- Taxation of withdrawn assets: If you leave Switzerland before you reach the eligible age for pension savings withdrawal, you will normally need to open an account with a vested benefits foundation which manages the withdrawal and transfer of your vested benefits. A tax at source is levied when your vested benefits are paid out. Taxes vary between cantons, so the canton in which the vested benefits foundation you use is domiciled has a direct effect on the amount of taxes you pay.
- Cost comparison: Vested benefits accounts normally do not have monthly or annual account fees. However, a handful of accounts managed by some vested benefits foundations do have recurring account fees. Various fees may apply when you withdraw assets – depending on the vested benefits foundation and account you use and on the circumstances under which your pillar 2 assets are withdrawn. For example, possible fees may apply when you cash out your vested benefits after becoming self-employed, when you withdraw vested benefits to buy a home, when you cash out your vested benefits when leaving Switzerland or when you switch to another vested benefits foundation. Compare fees and charges attached to different accounts to find the account that suits your individual situation.
- You are normally allowed to open up to 2 vested benefits accounts at 2 separate banks or vested benefits foundations. Having more than one account is beneficial because you can cash out the accounts in two separate years to avoid being bumped into a higher tax bracket.
- You can cash out your vested benefits as early as 5 years ahead of legal retirement age and as late as 5 years after you reach legal retirement age. So men can withdraw vested benefits between the ages of 60 and 70, and women can withdraw assets between the ages of 59 and 69. Vested benefits can be withdrawn earlier under certain circumstances (see point 6).
- Withdrawal when leaving Switzerland: You can only withdraw pillar 2 assets when you leave Switzerland and take up residence in a country which is not a European Free Trade Association (EFTA) or European Union (EU) member for an extended period. If you move to an EU or EFTA member country, your pillar 2 assets must remain in a Swiss vested benefits account.
- Costs which apply when withdrawing vested benefits when you leave Switzerland: Various costs may apply when you withdraw your assets, depending on the account and foundation used. Another cost is presented by the withholding taxes of the canton in which the vested benefits foundation is domiciled. Currently, the lowest withholding tax is levied by the canton of Schwyz.
When choosing a vested benefits account, you need to consider: The interest earned over the full savings term until withdrawal (you can use the compound interest calculator to calculate this); the total costs involved with maintaining and cashing out your account; the cost of withholding tax when assets are withdrawn.
Vested benefits accounts