The 2nd pillar when you change job or leave Switzerland

The 2nd pillar — occupational pension (BVG) — is an important part of the retirement savings of anyone working in Switzerland. As long as you stay with the same employer, the pension fund handles everything automatically. Problems arise at the moments of transition: when you change job, remain temporarily without employment or leave Switzerland. Knowing what happens to your capital avoids costly mistakes.

How the 2nd pillar works

The BVG is the second of the three pillars of the Swiss pension system. It is mandatory for employees who exceed a minimum annual salary threshold and is financed by parity contributions: one part borne by the employee (deducted from the payslip) and one part borne by the employer. The accumulated contributions form the personal retirement assets, which flow into the retirement benefit. Unlike the AVS (1st pillar, state pension), the 2nd pillar is funded and individual savings.

When you change employer

When you change job, the accumulated assets are not lost and not paid out: they constitute the so-called vested benefits. The rule is simple:

• the capital must be transferred from the previous employer’s pension fund to that of the new employer;
• the transfer takes place between institutions; the employee must communicate the details of the new fund to the previous one.

It is often an automatic step, but responsibility for getting the capital to the right place also rests with the insured. It should not be neglected.

When you are temporarily without employment

If there is a period without an employer between one job and the next, the capital cannot stay in the old fund nor be cashed in freely. It must be parked in a vested-benefits solution:

• a vested-benefits account with a dedicated foundation, or
• a vested-benefits policy with an insurer.

The capital thus remains tied to its pension purpose until the new job or until the withdrawal conditions are met. Be careful not to “forget” vested benefits held with old funds: it happens more often than one thinks, and there are central offices precisely to trace forgotten capital.

When you leave Switzerland

Anyone leaving Switzerland for good wonders whether they can cash in the 2nd pillar. The answer depends on the destination:

• if you move to an EU/EFTA country, the mandatory portion of the assets can normally not be withdrawn in cash, because it remains tied to the pension (subject to mandatory insurance in the destination country); it can, however, still be transferred to a vested-benefits account or policy in Switzerland;
• the extra-mandatory portion may, under certain conditions, be paid out;
• if you move to a country outside the EU/EFTA, withdrawal of the entire capital is generally possible.

The cash withdrawal is subject to a withholding tax on capital benefits, applied in the canton where the foundation is based. The rules are technical and linked to the personal situation: they must be checked before deciding.

Other cases of early withdrawal

Besides retirement, the law allows the (total or partial) withdrawal of the 2nd-pillar capital in specific situations, including:

• the purchase of a home for your own use (promotion of home ownership);
• starting a self-employed activity;
• disability or other conditions provided for by the regulations.

Each case has its own requirements and tax consequences: a withdrawal reduces future pension coverage and must be weighed carefully.

Mistakes to avoid

• Losing track of vested benefits left with an old pension fund.
• Believing you can always cash in everything when leaving Switzerland, without distinguishing EU/EFTA and the mandatory portion.
• Ignoring the taxation of capital benefits at the time of withdrawal.
• Not planning the transitions, treating the 2nd pillar as a formality rather than as important capital.

How we work at SIH ONE

We assist employees and employers in managing occupational pensions at moments of change: coordination of vested benefits between funds, opening of dedicated accounts or policies, analysis of the options for those leaving Switzerland and assessment of the tax aspects of withdrawals, in coordination with payroll and social insurance.

Are you changing job or planning to leave Switzerland and want to understand what to do with your 2nd pillar? Discover our payroll services and manage the transition without losing value.