Creation and closure of (undeliverable) vested benefits accounts
All persons aged 18 or over (calendar year) who are employed by a company and earn an annual salary of at least CHF 22'050 are compulsorily insured in the occupational benefits scheme BVG/LPP. In the event of a change of job, it must be ensured that the capital is transferred from the previous pension fund to the pension fund of the new employer. If you become unemployed, the pension assets from the occupational benefits scheme are “converted” into what are known as vested benefits. These vested benefits can be invested in the form of an account or securities savings.
If someone, when leaving an employer, fails to transfer their vested benefits to the new pension fund or to a vested benefit account, the previous occupational benefits institution must forward the vested termination benefit to the Substitute Occupational Benefit Institution. This takes place after six months at the earliest and after two years at the latest.
The two main reasons are:
- The Substitute Occupational Benefit Institution is required by law to accept vested benefits and manages these in the form of accounts. These vested benefits are usually transferred to the Substitute Occupational Benefit Institution, as an employee has not given any instructions from the previous occupational benefits institution as to where the money should be transferred to (see How are vested benefits accrued?).
- Insured persons transfer their vested benefits to the Substitute Occupational Benefit Institution so it can manage their assets.
There are also other reasons why vested benefits accounts are created with the Substitute Occupational Benefit Institution:
- Depending on how the plan is structured, it is not possible to transfer your entire BVG/LPP retirement credit balance to a new pension fund. The excess amount must be converted into vested benefits.
- In the event of the liquidation of a pension fund, assets only accrue after several years. In such cases, the beneficiary’s current addresses are often no longer available and the money is transferred to the Substitute Occupational Benefit Institution.
- As a rule, people from the EU may only withdraw their extra-mandatory BVG/LPP assets when leaving Switzerland.
- Persons with foreign nationality (e.g. USA) are not (or no longer) admitted to many financial institutions due to regulatory requirements. The Substitute Occupational Benefit Institution accepts the pension fund assets of such clients.
- Some small vested benefits are not accepted by financial institutions and transferred to the Substitute Occupational Benefit Institution.
- In the event of divorce, the occupational pension assets are divided up. Anyone who receives pension assets but is not affiliated to an occupational benefits institution can transfer them to the Substitute Occupational Benefit Institution and later have them converted into an annuity.
The Board of Trustees of the Substitute Occupational Benefit Institution decides on the amount of interest payable on the vested benefits accounts on a quarterly basis. It is based on the funded status of the vested benefits business area and the prevailing market environment. It should be noted that, unlike other market participants, the Substitute Occupational Benefit Institution does not charge any account maintenance fees.
Unlike most other vested benefits institutions, the Substitute Occupational Benefit Institution does not charge any account maintenance fees. Fees are only charged for early withdrawals for home ownership and pledges (see Cost regulations).
The Substitute Occupational Benefit Institution has the statutory mandate of guaranteeing and paying interest on the pension assets transferred to it. All vested benefits held with the Substitute Occupational Benefit Institution are invested on the capital market with little risk. In times of unstable capital markets or negative money market interest rates, the legislator has given the Substitute Occupational Benefit Institution the option, subject to certain requirements, of depositing up to CHF 10 billion with the Federal Treasury to preserve assets. The assets are therefore invested very securely with the Substitute Occupational Benefit Institution.
Often the Substitute Occupational Benefit Institution receives no address at all or no current address (see How are vested benefits accrued?). If the Substitute Occupational Benefit Institution has a current address of the person, they will receive an account statement annually. As soon as the person moves and does not provide a new address, the account becomes undeliverable. However, your social insurance number, name and date of birth are always known.
As a result, the accounts remain clearly assignable.
The Substitute Occupational Benefit Institution manages around 900'000 so-called undeliverable accounts (as of the end of December 2023). This corresponds to 61% of all vested benefits accounts held by the Substitute Occupational Benefit Institution (see How many vested benefits accounts does the Substitute Occupational Benefit Institution manage?). This percentage has remained largely stable over the years.
No. For years, the proportion of undeliverable accounts in relation to the total portfolio has always been in a range between 60 and 65 per cent.
This amounts to around CHF 6 billion (total vested benefits at the Substitute Occupational Benefit Institution: just under CHF 18 billion). Overall, these accounts have a significantly lower average savings balance than the other vested benefits accounts. 75% of undeliverable accounts have savings of less than CHF 5'000 (as of the end of December 2023). In Switzerland, the total capital of the second pillar amounts to CHF 1.2 trillion (source: Swiss social insurance system 2023, FSIO). The share of undeliverable accounts at the Substitute Occupational Benefit Institution therefore corresponds to around 0.5% of the total capital.
The credit balance is administered by the Substitute Occupational Benefit Institution and earns interest until the account holder contacts us. If this does not happen by the time of retirement, the money remains with the Substitute Occupational Benefit Institution and continues to earn interest. If the person applies for an AHV/AVS pension, they will notify the AHV/AVS Compensation Fund of their existing vested benefits accounts. The majority of the funds can thus be returned to the rightful owners or their descendants. The Substitute Occupational Benefit Institution manages the remaining accounts for no longer than ten years after the person has taken ordinary retirement. The credit balance is then transferred to the LOB Guarantee Fund (pursuant to Art. 41(3) BVG/LPP). Here it is possible to withdraw the credit balance up to (what would have been) the insured person’s 100th birthday.
Every year, the Substitute Occupational Benefit Institution transfers the vested benefits of people who have reached the age of 75. Around 2'400 accounts were transferred in 2023. For more information, please contact the LOB Guarantee Fund.
Over the past ten years, the Substitute Occupational Benefit Institution has transferred around CHF 9 million per year. The average balance per account amounts to CHF 6'700. For more information, please contact the LOB Guarantee Fund.
There are around 110'000 accounts or a savings balance of CHF 550 million, i.e. around CHF 5'000 per account on average (as at the end of 2023). Three quarters of all accounts can be transferred to their rightful owners upon retirement and therefore do not have to be transferred to the LOB Guarantee Fund.