Unemployment and 2a options

Hi All,

I wonder what is the best way to handle 2a pension fund savings/ what options are available, if becoming unemployed in Switzerland without having a new employer immediately?

My understanding is that the vested benefit can stay up to 6 months with the last employers pension fund parked on some kind of ‘waiting account’ (but not in the actual fund anymore), or can be transferred to a vested benefit account at a bank, or voluntary occupational pension plan (2b), offered for example by the Substitute Occupational Benefit Institution.

Are these voluntary occupational pension plans providing similar returns as the occupational pension plans, and what happens when a person has again an employer in Switzerland, i.e. do 2b need to be sold the moment there is a new employer which may make it risky to invest then? Are there other benefits / downsides to subscribing to a 2b Pension plan whilst unemployed vs vested benefit account at a bank? 

Many thanks.

You have a couple of options. Which is better depends on your personal situation:

• Pension plan for unemployed person. It is technically possible to use a pension plan from the Substitute Occupational Benefit Institution for as long as you receive unemployment insurance benefits. But you have to cover the full cost of contributions yourself. This plan uses the minimum legally required interest rate, which is better than what you get with a vested benefits saving account these days. The benefits are not invested. They simply earn interest based on how long they are parked there. When you become employed again, you can have the benefits transferred to your new employer's pension fund. All in all, this seems to be a decent option for mid-term unemployment, if you can afford to pay the full contributions (both the employee and employer portions) while you are unemployed. You can keep making tax-deductible contributions to your pension fund benefits, and you earn reasonable interest. I have not used this personally, so you will have to contact the Substitute Occupational Benefit Institution directly to find out if you are eligible for a plan.
• Vested benefits savings account. If you expect to find another job within a few months, then vested benefits savings accounts are the most straightforward option. You simply park your benefits there. You cannot make any tax-deductible contributions to your pension benefits while you are unemployed, but you do earn some interest and there is no risk of losing money.
• Vested benefits retirement fund or asset manager. If you will be unemployed for several years or longer (for parenthood, leaving Switzerland, or becoming self-employed, for example), then investing your vested benefits in a retirement fund or through an asset manager makes sense. Take a look at Viac and Valuepension for affordable vested benefits asset management. Investing your benefits if you plan to be employed in Switzerland again in the near future does not make sense because when you get a job, you will have to close your investment positions and transfer the benefits to your new employer's pension fund. You could lose money if you have to sell at a bad time. Only invest if you will not work in Switzerland again for a few years, at least.
• Vested benefits cash value life insurance. Swiss insurance companies offer whole life insurance for saving and investing vested benefits. I don't recommend these because they are very inflexible. If you have to quit the insurance before the insurance term ends (because you find a job or want to make an early withdrawal to buy a home, etc.) then you could end up getting back just a fraction of the benefits you paid in. All in all, these are complicated and are not the best saving or investment tool. As a general rule, if a vested benefits product has something to do with insurance, leave it alone. That advice holds true for insurance-based solutions marketed as 2b as well.

For as long as you are getting unemployment insurance benefits, the Substitute Occupational Benefit Institution seems like the best option to me, if you are eligible. Otherwise take a look at the vested benefits account comparison here on moneyland (or retirement fund comparison if you won't be employed again in Switzerland for many years).