Your second pillar when you stop working in Switzerland

Second pillar when not working

First, it is important to know what happens to your second pillar when you stop working. When you are employed, you are enrolled in your employer’s pension fund (LPP in French and BVG in German). But when you leave employment, you will have to leave this pension fund as well.

If you join a new employer, you will need to transfer your retirement money to the new pension fund. And if you do not directly join another employer, you will need to transfer your funds to a vested benefits account.

It is important to know that when you transfer out of a pension, you can split your second pillar into two vested benefits accounts. This is the only time you can split your second pillar into two accounts, so it is important to keep this in mind.

Without further ado, we can check out the different situations and what to do in each of them.

When you retire officially

If you retire at retirement age or within 5 years of retirement age, you will be able to fully withdraw your second pillar when you stop working. This is what I call official retirement.

In this case, you will have to choose between a lump sum and a pension. You will have to be careful about the specifics of your pension fund provider because many things can vary:

• The ability to retire early is not the same for each provider.
• The capacity to take your money as a lump sum is not the same for each provider either.

Then, you will have to decide based on your life expectancy, your risk capacity, and your ability to invest the money yourself (and not spend it too early). You should be careful about this decision because it will impact the rest of your retirement.

When you retire early

If you are retiring early (before your pension fund allows you to retire), you will have fewer options. You will be forced to transfer money to a vested benefits account. The money will stay in this vested benefits account until you are allowed to withdraw it at retirement age. At this stage, you will not have a choice between a pension and a lump sum. Indeed, each vested benefits account must be withdrawn entirely at once per account.

However, there is one important tip. In Switzerland, we can stagger withdrawals over multiple years. This is the case for the second and third pillars. Many people know you should have up to five third pillar accounts. But few people know that you can split your second pillar into two vested benefits accounts. The important part is that you should split across two different retirement foundations.

Since the second pillar is generally the largest withdrawal, splitting and withdrawing the two vested benefits accounts over two different years can make a significant difference.

If you are retiring early, you may have multiple years before you can withdraw your vested benefits. This means that you can invest your vested benefits accounts more aggressively.

To invest aggressively, it is important to find the best vested benefits account available. For this you want very low custody fees and very high investment in stocks.

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• Invest up to 99% in stocks.
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• Two different foundations to split directly.

You can read our finpension vested benefits review if you want additional information. This is the service I am planning to use when I retire early.

When you lose your job after 58 years old

There is a special situation if you are 58 years old or older and lose your job. If the job was terminated by your employer, you could stay in your current pension fund up to retirement age. This is called external insurance because you are not an employee anymore but still a member of the pension fund.

In this case, you will pay both the employee and the employer contributions.

The advantage of this is that since you are in a pension fund, you will be able to get a pension. And for some people, not having to manage the funds of a vested benefits account could be an advantage as well.

When you are in between jobs

Another situation is when you are in between jobs. You may just have left your current job to find a new one.

In short, if you get a new job within six months of leaving your current job, you can directly transfer your funds from your previous pension fund to the new one. Indeed, pension funds will typically keep your funds for up to 6 months. Six months is the common duration, but it is worth checking if your pension fund is doing something different.

When you join the new pension fund, they will ask you to transfer your old second pillar funds to them. So, as long as you are within this duration, the process is fairly simple.

When you are in a pause

If you are without a job for more than 6 months, the situation is slightly different because most pension funds will not hold your funds for more than six months. Again, 6 months is the general duration; you should check with your pension fund to see if they have a different rule.

Therefore, you will need to temporarily move your second pillar when you stop working to a vested benefits account.

If you do not instruct the pension fund to do it, they will move the money directly to the Substitute Occupational Benefit Institution. This is the default vested benefits foundation for everybody who does not choose an account. However, their conditions are really basic. So, if you want to get some basic interest on your funds while you are looking for a job, it is probably better to find another vested benefits account.

Since you are only in a short pause, it does not make sense to invest aggressively in stocks. Indeed, you will have to transfer back your vested benefits funds to the new pension fund when you start working. Therefore, if you have stocks, they will need to be liquidated, which may happen at a bad time and lead to losses.

Therefore, you want to look for a vested benefits account with three criteria:

• No fees on transferring out (since you will transfer soon)
• No fees on cash
• Some interest on your cash

Options are rather limited since interest rates are low. I have looked at some decent options and only found a few options meeting our criteria (as of September 1st, 2025, rates are subject to change):

• CA next bank has a vested benefits account with a 0.35% interest rate.
• Pilla (also by CA next bank) has a vested benefits account with a 0.25% interest rate (we have a review of their Pilla 3a offer).
• Freiburg Kantonalbank (FKB) has an account with 0.20%.
• WIR Bank has an account with 0.15%.

Then, there are many accounts with a 0.10% interest rate or lower, but at this rate, it makes very little difference. If it is only for a few months, I would not worry too much about the interest rate. Once the duration of the pause is a few years, it becomes more interesting to chase interest rates.

When you do not know

Sometimes, people are between jobs and simply do not know when (or whether) they will get a new one. This could be sadly because they lost their job and are struggling to find a new one, for instance. Or it could be because they simply do not know what they want to do next.

In this case, it is more difficult to know what to do with your second pillar when you stop working. Since this situation is likely to last for more than 6 months, it will be necessary to transfer the second pillar to a vested benefits account.

Since you do not know for how long you will keep the money, I would recommend using a safe bet to get started, exactly as if you were in a pause (previous section). After a few months (or even years), you may have a better idea about the future, and then it may be time to transfer to an investing vested benefits.

However, there is one twist. If you think there is a chance you will not work again, you should probably try to split your pension fund already into two vested benefits accounts. This may complicate things since there is no great option in cash with two foundations.

Therefore, you should pick two decent cash vested benefits accounts and then split these two. If later you do not join any new pension fund, you can move each of them to a great invested vested benefits account (like if you were retiring early, as seen above).

When you become self-employed

When you are becoming self-employed, you do not stop working. However, you stop having an employer. And most self-employed people do not have a pension since it is not mandatory. Therefore, they are in the same situation and must decide what to do with their second pillar when they stop working an employed job.

Again, the question is mostly about timing. If they plan to do it until retirement age and have a significant amount of time in front of them, a good invested vested benefits account makes a lot of sense. If they are not sure if they will stay self-employed for many years, a vested benefits account in cash makes more sense. In both cases, since this could last for a while, splitting into two vested benefits accounts is important.

The long-term self-employed person can use the same strategy as an early retiree. On the other hand, the short-term self-employed can use the same strategy as someone in a pause.

When you leave Switzerland permanently

If you leave Switzerland permanently, the options for your second pillar when you stop working in Switzerland depend on where you leave to and whether you are subject to the compulsory occupational pension insurance there.

1. If you leave for a country outside the EU and EFTA, you should be able to withdraw the entire amount from your second pillar. This is a real withdrawal; you do not have to keep this money in a retirement account. This withdrawal is similar to a lump-sum withdrawal at retirement, but if you leave Switzerland, you can do it regardless of your age.
2. If you leave for a country that belongs to the EU and EFTA and are subject to the compulsory occupational pension insurance there (i.e., you work there), you can only withdraw the extra-mandatory part of your second pillar. The mandatory part will stay in a vested benefits account until you retire. You can know how much you have in each part in your pension fund statements.
3. If you leave for a country that belongs to the EU and EFTA but are not subject to the compulsory occupational pension insurance there (if you retire early there), you may withdraw the full second pillar amount. You will have to prove that you are not subject to the pension insurance before you can do the withdrawal.

Therefore, in short, what matters most is the country you are moving to. If you want official details, you can read this article on SFBVG.

When you become disabled

If you unfortunately become disabled and unable to work, different rules come into play. In this case, you cannot use a vested benefits account.

Indeed, disability is part of the second pillar as an insurance. So, you should be entitled to a disability pension from your second pillar when you stop working. The pension and its conditions will vary a lot based on your pension fund. Some pension funds have great conditions, while others are much more limited. So, it is essential that you check with your pension fund if you want to know your precise coverage.

If you would like to know more, read our article about disability insurance in Switzerland.

When you die

For completeness, we should also cover the subject of what happens to your second pillar when you die before retirement.

Your second pillar is not lost and will go to survivors.

• The spouse or registered partner is entitled to a widow’s pension under some conditions.
• The children below 18 or in education below 25 are also entitled to an orphan’s pension.
• Divorced spouses and partners are also entitled to a widow’s pension under some conditions.

It is important to note that the law sets some minimums, but each pension fund is free to offer better advantages. And some pension funds have really generous packages. Some pension funds also allow withdrawing some part as a lump sum. And it is also important to check out the conditions for each case.

These are the rules for your second pillar. If you already transferred your second pillar to a vested benefits account, this account will follow a more complex logic with four different inheritance groups. If you want all the details, you can read our article on retirement benefits and death.

Summary

Conclusion

Depending on the situation, you have multiple options for your second pillar when you stop working. In some cases, the option you choose can make a significant difference in your retirement. Therefore, it is important to think properly about these decisions.

For instance, if you are retiring early, you should not forget to split your second pillar into two vested benefits accounts since this will be the last time you can do it. Or, if you are in a pause, you should make sure to pick a vested benefits account that has no fees and does not invest aggressively.

Since I plan to retire early, my strategy will be to split my pension fund into two vested benefits accounts (at finpension vested benefits) once I retire. And then, I will withdraw them at retirement age, over two different years. Since few people retire early, most readers will fall into one of the other situations.

If you are interested in optimizing your retirement, you may be interested in voluntary contributions to the second pillar.

What about you? Do you have a different strategy for your second pillar when you stop working?