Beneficiaries: Pension capital in the event of death: who inherits what?

Vested benefits accounts

The beneficiaries of vested benefits plans are defined in the Vested Benefits Ordinance. In the event of the death of the pension plan holder, the cascades determine who is entitled to the assets. For example, if there are no survivors in the first group of people, then group 2 comes into play, and so on. In the vested benefits area, the groups of beneficiaries are classified as follows:

In certain situations, it is possible to modify the order or specify in greater detail the distribution of shares received by beneficiaries in the same group.

Unequal treatment of children

In certain situations, it is possible to modify the order or specify in greater detail the distribution of shares received by beneficiaries in the same group.

For example, a cohabiting partner may be placed in the same position as children under the age of 18 or 25. Nor is there an exact definition of when a person in group 2 has received “significant support”. In a Federal Supreme Court ruling, support amounting to less than 20% of a person’s living costs was not considered to meet the threshold. In terms of time, support is considered significant if it is provided for at least two years.

However, there are some cases that have given rise to debate. One of these issues is disadvantaging adult children over 25 who are no longer in education.

Suppose one parent dies and leaves behind a family consisting of a surviving spouse, a dependent child under the age of 25 and a non-dependent child over the age of 25. Under the current rules, the surviving spouse and the dependent child under the age of 25 are entitled to assets from the vested benefits account. However, the child who is no longer dependent on maintenance and is already financially independent would have no entitlement to the assets. This means that in this case, the older child would have to make do without financial support even though he or she is also a child of the deceased parent.

More freedom with pillar 3a accounts

When the policyholder reaches normal OASI retirement age, the lump sum is paid out to the policyholder. In the event of the death of the policyholder of tied pillar 3a, the capital is paid out to the beneficiaries in accordance with the statutory provisions. The order of beneficiaries is laid down in the Ordinance on Tax Relief on Contributions to Recognised Pension Schemes (OPO 3).

It is possible to change the predetermined order in the third pillar in certain circumstances. For example, groups of 3 to 5 can be placed on the same level. If the policyholder does not specify the entitlements of the beneficiaries in detail, the assets are divided equally among all beneficiaries within the same group.

This can occur if the deceased person leaves only a small amount of assets in addition to the 3a assets.

The payment of pension assets from the second and third pillar is taxed separately from the remaining income in the event of death and is subject to a reduced tax rate. In contrast to inheritance tax, the degree of kinship does not play a role here.

We recommend that you contact the pension fund at an early stage to complete a beneficiary order. This will ensure that your pension wishes and entitlements are correctly documented.