Vested benefits account or 2nd pillar – what's the difference?
Let's start out by getting things straight: The vested benefits account is your 2nd pillar, but which has been cashed out from your (previous) employer's pension fund – that’s it!
How come?
Let's start out by getting things straight: The vested benefits account is your 2nd pillar, but which has been cashed out from your (previous) employer's pension fund – that’s it!
How come?
Well, for whatever reason, you’re simply no longer working for them. As soon as you step down from your job, the pension fund of your ex-boss is not permitted to keep your 2nd pillar assets and will either transfer them directly to the pension fund of your new employer, at your request, or in case of voluntary or involuntary forgetfulness (or if you do not have a new employer), it will transfer them to the Substitute Occupational Benefit Institution (LOB) LPP. When it leaves the pension fund of your former employer, it’s no longer called 2nd pillar, but vested benefits or account. These are just two words to name the same thing, basically.
What are the different investment options regarding the vested benefits account?
There are two types of investment options for retirement provision, no matter if you choose to invest the totality of your OPA assets or just a part of them.
There are two types of investment options for retirement provision, no matter if you choose to invest the totality of your OPA assets or just a part of them.
1. Investing your 2nd pillar into your new pension fund.
If you were to change employer, the rule would be to transfer all your previously acquired assets into the new pension fund. However, strange as it may sound, this does not happen automatically. You should therefore make sure that you fill in the transfer request form that you receive by post at the termination of your employment. After the transfer was done, the pension fund of your new employer will be investing and managing your LPP assets.
2. Investing your vested benefits account into an insurance company, a bank, or a wealth management company.
There are companies, other than pension funds, that can take charge of your 2nd pillar so as to invest into it and make it grow in anticipation of your coming retirement – many of these are investment products specifically designed for pension assets. It can be very beneficial to resort to an insurance if you know what you want! Investing this part of your retirement assets through the intermediary of a company (either a bank, an insurance company, or a wealth management company) that is not your pension fund also allows you to diversify your investments – and not put all your eggs in one basket!
When can one invest their 2nd pillar?
We hear about 2nd pillar investments, but it's not worth it if you don't know in which specific situations it can be done. Indeed, it is sadly not a choice that can be made whenever you want – so under which circumstances can vested benefit accounts be created? ?
We hear about 2nd pillar investments, but it's not worth it if you don't know in which specific situations it can be done. Indeed, it is sadly not a choice that can be made whenever you want – so under which circumstances can vested benefit accounts be created?
- Leaving Switzerland: Depending on your destination, you can withdraw part or all your 2nd pillar and invest it.
- Change of professional situation: Changing jobs means changing pension funds. At this point, there is an opportunity to invest your 2nd pillar either in the new pension fund or in another institution.
- Divorce: Despite the hassle that a divorce can cause, you will have to split all your 2nd pillar savings equally between the two former spouses in the absence of a bilateral agreement. This means that one of the two former spouses will always be given a portion of the other's 2nd pillar assets (unless otherwise agreed). This amount will become a vested benefit and may be invested.
- Inability to transfer one’s 2nd pillar: This can happen when you change employer. It can happen that your former pension fund had implemented a more generous pension plan than the one offered by your new company. In such a case, not all your 2nd pillar will be transferred, but only the part equivalent to the one you’d have today if you’d always had the pension plan offered by your new pension fund. The balance is the amount that cannot be transferred and thus can be invested.
How should I invest my vested benefits account? Follow these steps as advised by FBKConseils
1. The first date!
The goal is to meet each other either in person or by videoconference to find out what your needs are, and how we can help you invest your 2nd pillar or vested benefits account.
2. Searching for the right amount!
Two scenarios are offered to you: either you already know exactly how much money you have in your vested benefits account, or you don’t – then, we can start doing the right research to gather your 2nd pillar assets.
3. Investment solutions!
Once we know the exact amount you need to invest, we can compare investment options and select the best one for your investor profile (we’ll establish it together).
4. Let’s set it all up together!
Ok, so, we already know the total amount, as well as the way to invest it, we just must put it in practice. Hence, we contact the different parties, and we transfer the assets.
5. Peace of mind!
And that’s it! We’ll invest your money – no need to care about it anymore.
6. A regular monitoring!
Depending on your needs and general market evolution, we’ll take the time to review your situation and make any necessary changes.
How long does this procedure take and how much does it cost ?
Setting up an investment is relatively quick if the location of the funds is clear. Within one or two weeks the funds can be invested with a service provider.
The steps to set up this investment are also relatively quick, they should not require more than 2 hours, except for very particular and more complex cases. In all cases, we will provide a detailed offer and a customized quote.
- It is the sum of assets saved in the 2nd pillar not managed by your current pension fund.
- Once you know that you have a vested benefits account, you can request early withdrawal under 4 different conditions, or upon reaching the legal retirement age.
- Your 2nd pillar is stored with your employer’s pension fund. If you think the latter is not complete, you simply need to do a OPA credit search to check whether there are any vested assets in the Substitute Occupational Benefit Institution in your name to collect them.
- As an employee, the good news is that you are directly affiliated to your employer’s pension fund. It’s in fact your employer who has chosen a pension fund according to the services he wants to grant his employees.
- If you’re a freelance worker and wish to join voluntarily, or if you are an entrepreneur, you will have to make a choice among dozens of possibilities.
- All you have to do is take your last LOB certificate annually provided by your employer – the one which shows the amount of LOB capital paid out according to the age at which you wish to retire. To find out the amount of the pension to which you will be entitled, simply multiply the capital by its associated conversion rate shown next to it. The result is the 2nd pillar pension for the selected retirement age.
- On the OPA certificate provided by your employer at the end of each year, you’ll find the various OPA capital amounts you can receive depending on the age at which you want to retire.
