Investing vested benefits in Switzerland: options, rules and what to watch

As of October 2026. This article is general information and no substitute for personal advice.

Vested benefits arise when you leave your pension fund without immediately joining a new one: a gap between jobs, unemployment, a longer break, or a move into self-employment. The money remains pension money, but within clear rules you decide where and how it is invested. With larger sums, that choice deserves some thought.

What happens if you do nothing

If you are not joining a new pension fund, you must tell your old fund how you want to keep your pension cover (Art. 4 para. 1 FZG). If you do not, the fund transfers your assets to the Substitute Occupational Benefit Institution (Stiftung Auffangeinrichtung BVG) no earlier than six months and no later than two years after you leave (Art. 4 para. 2 FZG). Your money is safe there, but you have made no investment choice.

If you later join a pension fund again, your vested benefits must be transferred to it (Art. 4 para. 2bis FZG; FSIO). For many people, vested benefits are therefore a temporary arrangement. That matters for how you invest, as explained below.

Account or policy

The law provides two forms (Art. 10 FZV):

• Vested benefits account with a vested benefits foundation, usually one set up by a bank. It can be supplemented with insurance for death or disability.
• Vested benefits policy with an insurance company. It is a capital or annuity insurance, with optional cover for death or disability.

A policy mainly makes sense if you specifically want to keep death and disability cover after leaving your pension fund. An account is more flexible and offers more investment choice.

Savings or securities

With a vested benefits account, there are two options.

Pure savings solution

The money is held as a savings deposit at a FINMA-supervised bank (Art. 19 para. 1 FZV) and earns interest. The capital does not fluctuate. If the bank fails, balances held by vested benefits foundations enjoy priority of up to CHF 100,000 per insured person, separately from your other deposits at the same bank (Art. 37a para. 5 BankG). If interest is lower than inflation, you lose purchasing power in real terms.

Securities solution

With a securities solution, your balance is invested in funds or similar instruments. The rules are tight (Art. 19a FZV):

• The institution must expressly inform you of the risks.
• The BVV 2 investment rules apply by analogy. They cap equities at 50 percent, for example (Art. 55 BVV 2); extensions are possible under certain conditions (Art. 50 para. 4 BVV 2), and some providers use them for strategies with a higher equity share.
• Only specific investments are allowed: mainly collective investment schemes supervised or approved by FINMA, products of Swiss investment foundations, franc-denominated federal and cantonal bonds, Swiss mortgage bonds, medium-term notes and fixed-term deposits, and asset management mandates the foundation concludes with supervised institutions. Direct holdings of individual shares are not among them.
• The securities are held at a FINMA-supervised bank or securities firm.

Securities are not deposits under the Banking Act. They are therefore not covered by depositor priority, but they are segregated if the bank fails (Federal Council report, 2019). You bear market fluctuations and costs, including the running costs (TER) of the funds used.

Two institutions, no more

Your vested benefits may be spread across at most two vested benefits institutions (Art. 12 para. 1 FZV). You can change institution or form at any time later (Art. 12 para. 2 FZV).

Two accounts offer two advantages. You can combine a savings solution with a securities solution. And you can withdraw the accounts in different years. That matters for tax, because pension capital paid out in the same year is added together for tax purposes, at least at federal level and in cantons such as Aargau. Cantonal rules differ in the details.

When you can withdraw

Regular withdrawal

Retirement benefits from vested benefits accounts and policies may be paid out at the earliest five years before the reference age and fall due at the reference age. If you can show that you are still working, you can defer by up to five years (Art. 16 para. 1 FZV). If you are married or in a registered partnership, a lump-sum payout needs your partner's written consent (Art. 16 para. 3 FZV).

Early cash withdrawal

Before that window, a cash payout is only possible in specific cases (Art. 5 FZG):

• You leave Switzerland for good. If you move to an EU or EFTA state and are compulsorily insured there, the mandatory BVG portion stays blocked (Art. 25f FZG).
• You become self-employed and are no longer subject to mandatory occupational pension cover.
• Your vested benefit is smaller than your annual contribution.

Tax

As long as the money stays in the pension system, the entitlements are exempt from direct taxes (Art. 84 BVG): you pay no wealth tax on the balance and no income tax on returns. On payout, the capital is taxed once and separately from your other income (Art. 38 DBG, Art. 11 para. 3 StHG). The amount depends on your canton of residence.

Example: two accounts, two strategies

Illustration with round, assumed figures.

Mr K., 57, leaves his job and does not plan to take up another job with pension cover. His vested benefits amount to CHF 600,000. He splits them between two foundations:

• Account 1, CHF 250,000, savings solution. He plans to withdraw this at 61 to bridge the years until his AHV pension starts, so he cannot afford market swings on it.
• Account 2, CHF 350,000, securities solution with 40 percent in equities. He will need this money at 65 at the earliest, a horizon of eight years.

Because he withdraws the two accounts in different years, the payouts are not added together in one tax year. How much tax this saves depends on his canton.

The picture would be quite different if Mr K. took up a job with a pension fund again a year later. His balance would have to be transferred, and a securities solution might have to be sold after a market fall. With short or uncertain horizons, the savings solution is often the calmer choice.

What to watch

• Horizon: how long is the money likely to stay in vested benefits? Choose the strategy after answering that.
• Costs: compare management and custody fees and fund TERs. Over long periods, small differences add up.
• Overall wealth: look at vested benefits together with the rest of your assets. If you already hold many equities privately, you may need fewer here.
• Withdrawal planning: decide early which account you will draw in which year, in line with your pension fund and pillar 3a.
• Forgotten balances: if you no longer know where an old balance sits, the Central Office 2nd Pillar can help trace it.

Vested benefits are often part of a larger portfolio. If you are looking for a private bank or independent wealth manager for it, Thinking Steps helps with the choice from investable assets of CHF 500,000.

Key points

• Without instructions, your balance goes to the Substitute Occupational Benefit Institution after six months to two years.
• You can choose a vested benefits account or policy; with an account, a savings or securities solution.
• Securities solutions follow the BVV 2 investment rules; individual shares are not allowed.
• At most two vested benefits institutions; two accounts allow staggered withdrawals.
• Withdrawal from five years before the reference age, deferral of up to five years if you keep working.
• Tax-free before payout, taxed separately on payout.