The term vested benefits refers to assets or privileges which are granted to a person or other entity on a guaranteed basis. This term is most commonly used to describe retirement savings which a person becomes eligible to access once they reach retirement age.
In Switzerland, the term vested benefits denotes money which has been contributed to the pillar 2a category of retirement savings and is being held in escrow by a vested benefits foundation. Employees of Swiss companies and their employers jointly contribute to occupational pension funds.
When individuals become unemployed or self-employed, they are no longer entitled to participate in pillar 2a occupation pension funds. Because they are not allowed to cash out their pension fund assets before they reach retirement age, individuals who become unemployed or self-employed must have their former employer’s pension fund transfer their assets to a vested benefits account managed by a vested benefits foundation.
A vested benefits foundation acts as an escrow agent, holding pillar 2a assets until their owner either becomes employed again or reaches legal retirement age. If an individual whose assets are being held by a vested benefits foundation becomes employed, they can instruct the vested benefits foundation to transfer their assets to their new employer’s occupational pension fund.
There are conditions under which vested benefits can be withdrawn ahead of retirement age. In Switzerland, vested benefits can be withdrawn for the specific purpose of purchasing a home as a primary residence. Self-employed individuals can choose to withdraw their vested benefits provided certain conditions are met. Individuals who are leaving Switzerland permanently and moving to a country with which Switzerland does not have a relevant social security agreement can also cash out their vested benefits.
If an individual’s pillar 2a retirement savings are being held by a vested benefits foundation at the time that they retire, they must cash out the assets as a lump sum. If the individual is employed and participating in an occupational pension fund when they reach retirement age, they can choose between receiving a lifelong pension based on the value of their pension fund assets, withdrawing their benefits as a lump sum, or a combination of both – depending on the terms and conditions of the specific pension fund
More on this topic:
Swiss vested benefits account comparison
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