Vested benefits - BVG/LPP : What should I do with my pension provision when I take a career break or move abroad?
If you want to take a sabbatical, carry out a project, simply change your life or move abroad, we strongly advise you to prepare in advance. You'll need to do some financial planning before you leave Switzerland, particularly for your pension provision.
To do this, you need to be aware of the options available under the Swiss Federal Law on Occupational Retirement, Survivors and Disability Pension Plans (BVG/LPP) and the Swiss Federal Law on Vesting in Pension Plans, as well as the use of vested benefits.
Are you wondering what to do with your pension provision in the event of a career break or expatriation ? Our experts have the answers.
What must the BVG/LPP and LFLP say in such situations ?
The law on occupational pension provision states that compulsory insurance ceases if the employment relationship is terminated. However, it should be noted that your disability and death cover continues for one month after the end of the employment contract.
Without your notification, the LFLP stipulates that the pension fund must retain your assets for 6 months and 2 years before transferring them to the Berne supplementary institution.
A cash withdrawal is not possible in the event of a career break, except in certain exceptional cases :
- The cumulative amount is less than the insured's annual contribution
- When leaving Switzerland permanently (withdrawal restrictions may apply for expatriation to an EFTA member country)
- As part of a withdrawal to encourage home ownership
- From the age of 60
- In the event of payment of a full IV disability pension
- Starting a self-employed activity (during the first 12 months following AVS registration)
If you are not planning to withdraw your pension assets, it is up to you to find a vested benefits foundation willing to accept your savings.
Putting all your eggs in one basket ?
When you instruct your former pension fund, you can split your capital into 2 separate pension funds. This has the advantage of spreading the risks, applying two different investment strategies, withdrawing part of the capital when necessary and smoothing out the tax increase on withdrawal.
What about your vested benefits ?
The various pension funds can offer you several types of investment strategies.
A "savings account" solution that allows you to benefit from a savings rate without being affected by stock market volatility. This rate will generally depend on the SNB reference rate. Policyholders prefer this option with a short investment horizon and do not wish to take any risk with their assets.
An investment solution that offers higher returns over the medium to long term. Several investment profiles can be envisaged, with a greater or lesser proportion of equity. Some foundations that benefit from a derogation can even obtain more than 50% equity component. This option is preferred by policyholders with the financial and psychological capacity to withstand the volatility of the stock markets. We recommend that you regularly monitor the development of your assets to ensure that management is in line with your life plans. Most foundations provide ebanking access, so you can quickly find out how your investments are doing.
What do you do when the big comeback comes ?
If you return to work, you must transfer your assets to your new pension fund. Before doing so, however, we encourage you to find out all you can about the quality of your recent pension fund and consider all possible courses of action. The help of an expert is preferable.
If you become self-employed, you can choose to join a pension fund. This choice will determine whether you need to maintain your vested benefits accounts. The decision will depend on the income generated by your new activity and whether you wish to make substantial savings contributions to your pension fund. Of course, the various solutions available to you when you move abroad or take a career break are numerous and complex to assimilate. That's why preparing for your departure with a financial consultant is advisable to ensure you don't miss anything.
Our wealth and pension solutions experts are with you every step of the way. Make an appointment now.
