In the Swiss second-pillar system, occupational pension benefits are in principle paid as a lifelong pension.
Federal legislation and the regulations of the pension funds nevertheless provide for specific cases in which the pension assets may be paid as a lump sum, whether on retirement or in advance.
The lump-sum withdrawal on retirement
When retirement age is reached, or on early retirement, the statute guarantees every insured person the possibility of receiving part of his pension assets as a lump-sum benefit:
- The statutory quarter and regulatory extensions: Every insured person may require the lump-sum payment of at least one quarter (25%) of his retirement assets under the mandatory scheme; pension institutions remain free to provide in their regulations for the withdrawal of a higher percentage, or even of the whole of the capital (100%). This withdrawal may now be made in a maximum of three steps in the course of phased retirement.
- The formal conditions and restrictions: The pension fund may validly impose in its regulations a prior notification period for exercising the lump-sum option. In addition, if the insured person is married or bound by a registered partnership, the lump-sum payment imperatively requires the written consent of the spouse or partner. Finally, the lump-sum option is excluded for amounts purchased during the three years preceding the payment, or if the person is already receiving a full invalidity pension at the regulatory retirement age.
Early withdrawal and cash payment
Before retirement age, the statute exceptionally allows the pension funds to be drawn as a lump sum in clearly defined situations:
- Access to home ownership: The insured person may request an early withdrawal of his pension assets no later than three years before entitlement to the retirement benefits, in order to finance the purchase, construction or mortgage repayment of his principal home for his own use, with the written consent of his spouse.
- Cash payment of the termination benefit: If the employment relationship ends before retirement, the vested benefit may be paid in cash if the insured person sets up on his own account as a self-employed person (no longer subject to compulsory occupational pension provision), if the amount is less than one annual contribution, or if he leaves Switzerland permanently (excluding countries of the European Union or of EFTA for the mandatory portion).
Where the insured person is married, the payment requires the spouse’s consent. This pension question also arises in the division of the assets on divorce.
Legal sources
Federal legislation:
- Art. 13a OPA (withdrawal of the retirement benefit as a lump sum in no more than three steps)
- Art. 30c OPA (early withdrawal for home ownership promotion and spousal consent)
- Art. 37 OPA (pension principle, right to a lump-sum payment of one-quarter of assets, and regulatory powers)
- Art. 37a OPA (mandatory written consent of the spouse or registered partner for lump-sum benefit payments)
- Art. 5 VBA (conditions for cash payment of termination benefits: permanent departure, self-employment, or minimal amounts)
- Art. 25f VBA (restrictions on cash payment of the mandatory portion when moving to the EU or EFTA)
Federal case law:
- BGE 141 V 355 (right to a lump sum under Art. 37 para. 2 OPA limited to mandatory assets and excluded if the insured person is entitled to a full disability pension at retirement age)
- Federal Supreme Court judgment 9C_86/2017 (validity of the regulatory notice period imposed by the pension fund for exercising the right to a lump-sum payment)
- BGE 130 V 191 (legal nature of early withdrawal for home ownership as an exception to the principle of maintaining pension assets)
- BGE 148 III 232 (fundamental distinction between a lump-sum retirement benefit paid upon the occurrence of an insured event and the cash payment of a vested benefit)