(Temporary) vested benefits account strategy

What would be the consequences of this?

Thank you guys for all your answers. I’ll probably go with the no risk / no benefit option just to be free of mind.

More than that, thank you for the good laugh :wink:


Well, to state the obvious, the difference is tax sheltered versus not. These funds in that foreign bank account are taxable wealth in Switzerland. Not declaring them would be committing tax fraud.

My … ahem, friend’s funds in the Freizügigkeitsstiftung are not taxable wealth. Neither would they be if moved to a new employer.

So … this analogy is not really an analogy?

(maybe I misunderstood)

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This would be an interesting scenario:

  • Imagine you fully pay up your pillar 2 to 1.5M
  • This gets transferred to a VB
  • You get another job but don’t transfer VB
  • You contribute yet another 1.5M getting 1.5M of tax deductions you shouldn’t be entitled to as well as shielding income and wealth from tax when you shouldn’t
  • Upon retirement, you take the 1.5M as annuity and cash in the VB account paying capital taxes

Question is whether anybody will catch this and force you to pay the back taxes and penalties if not jail time? Arguably this is pre-meditated fraud and subject to extended statute of limitations.

This is not allowed and would probably get caught by the tax administration. Probably, when you want to deduct your voluntary purchases, or later, when you want to cash out.

The relevant regulation seems to be Art. 60a BVV (German). The maximum voluntary purchase is reduced by capital in vested benefit accounts, money in other 2nd pillar pension funds and 3a in excess of the maximum possible 3a credit balance. Finpension has a rather complete article.

Also, we should not discuss ways to commit tax fraud, even if it was difficult to get caught.


We are not discussing ways to commit fraud, rather ways to avoid committing fraud.

But what if the purchase is not a voluntary purchase but standard contribution?

Standard contributions are defined by pension fund on basis of insured salary and doesn’t take into account the actual capital in the fund. So whatever contribution one makes via salary deductions will not cause any issues. Basically VB has no role to play in standard contributions, so there is no way to over contribute than allowed amount.

Having vested benefits account in addition to a regular pension fund account is not illegal. It actually doesn’t result in any tax advantage for anyone during the contribution years in my opinion. The main reason why employers want all VB to move is generally to have a higher pool in their fund to cover the payments to retirees.

The point I do not know very well is what happens at the time of retirement. Having a VB separate than 2nd pillar would result in a tax advantage because people can spread the withdrawal into two years and hence pay lower lump sum tax. Right? . Is this legal, illegal or grey zone?

However making voluntary purchases to boost up the pension capital without declaring the VB account will be misrepresenting the facts because it is a standard question while making voluntary contributions. This will result in higher voluntary contributions than one is allowed to which would lead to higher tax deductions and hence a tax fraud

Bottom line -:

  • not moving VB to new company falls under grey zone. It might or might not lead to problems.
  • not declaring VB while making voluntary purchases is definitely not allowed. It will lead to problems.

One would think tax authorities may tap into relevant information being already centralized:

Art. 24 d Zentralstelle 2. Säule

1 Die Zentralstelle 2. Säule ist die Verbindungsstelle zwischen den Vorsorgeeinrichtungen, den Einrichtungen, welche Freizügigkeitskonten oder ‑policen führen, und den Versicherten.

That said, the ceiling for voluntary purchases is somewhat malleable in any case. My employer changed pension provider a while back and through administrative glitch they put me into the ‚staff‘ rather than ‚management‘ plan initially. Once they corrected that my purchase potential on the Vorsorgeausweis shot up from chf 50k to chf 1.5m. Or in other words, if you come close to hitting the ceiling, it may be a good idea to talk to your employer.

Sometimes when 1e plans are introduced, the pension plans get split. Base plan and 1E plan. These two plans cannot talk to each other. So if one wants to make voluntary contributions , the responsibility stays with the person on ensuring they don’t exceed the total allowance.

For example let’s say Base plan is +200 K above maximum (due to move of money from other VB or previous employers) and 1E is 500K below maximum, then the person should ensure the total allowance of 300K is respected.

At least this is what finpension 1E guys explained to me.

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Absolutely. Government can find this out. If not at time of contribution, most likely at time of withdrawal . It makes no sense to lie about this and to be honest, I don’t even think anyone on this forum is even suggesting that while making Voluntary payments.

However I think the ceiling is not defined by government . It is defined by the pension plan itself.

Normal rule for voluntary payments is -:
Voluntary contribution potential = (Max 2nd pillar capital allowed based on plan conditions - current capital in 2nd pillar - other Vested benefits)

*max is defined by fund rules
*VB is disclosed by employee

Someone pursuing that strategy might avoid this question by withdrawing both accounts at the same time to ensure that there is no tax advantage.

So, even my … ahem, friend’s financial planning adviser at the time suggested that it would be an option to split my former pillar 2 into two Freizügigkeitskonto and then take one to a new employer. I mean he didn’t directly suggest to do that as it’s a gray area and he doesn’t want to be liable, but he hinted at it as best as he could.
I trust he has experience with people near their retirement and how to best deal with taxes - it’s basically his job.

If my “friend” became nervous about things, he could always quit before the official retirement age and move his pillar 2 again to a Freizügigkeitsstiftung. Withdrawing the two buckets in two tranches would entirely not be an issue in that scenario.

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As a side note, the examples I know of state the standard buy-in limits explicitly, but not the retire-early limits.

Those give additional few years’ salaries to top-up. By the time this is maxed-out, you can retire anyway :smiley:

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Last year, I did a big purchase in my pension fund.
The tax office requested to fill a specifc form. In this form, one part is filled by the pension fund.
The pension fund needs to justify what was the amount available to do a purchase and confirm that they have asked me about vested benefits account and deducted the amounts.
On the other part, I need to declare the vested benefits accounts and the amount on it.

Unless you are moving often, the canton has your purchase history from the previous tax declarations.
So if you are buying each year a big amount, they will ask how it is possible.


Ok, the “joke” is getting a bit old by now. :slight_smile:

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3 posts were merged into an existing topic: Voluntary payments into your 2nd pillar

Interesting topic I must say.

“A friend of mine” will also be taking a short break between jobs this year. He’s thinking of doing a 50/50 or mandatory/extra-mandatory split and let the magic happen with one half (finpension with VT like strategy). However, he’s unsure about the death benefits/disability benefits which may be linked to the amount of capital saved.
Any thoughts about that?

Btw: Even finpension has an how to split your pension fund arcticle.

Consult the new pension fund‘s terms and regulations.
They may be impacted by having less savings in the pension fund - but more often aren’t.

To the general discussion above:

  • Splitting pension fund benefits upon leaving a fund (employment) is perfectly OK.
  • „Forgetting“ about transferring them to your new employer’s pension fund? Not legal, but not really enforced either. I mean, I can kind of „get“ the intention, if you’re not happy with the pension fund (that you couldn’t choose) and its investment strategy. And it‘s not as if you‘d „harm“ or short-change anyone with that.
  • But making voluntary buy-ins on top of that? That‘s like outright lying in writing (you will have to confirm the existence of 2nd and even pillar 3a benefits) and will arise suspicion for a tax authority (though of course you could still stay within the maximum limits for buy-in if you declared everything properly).

Exactly, if you were to follow the undeclared split strategy, I’d forgoe any additional voluntary payments and stick to just the standard contributions.

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