The Federal Act on vested benefits (LFLP): what you need to know

The LFLP: ensuring continuity of your pension savings

The Federal Act on vested benefits in occupational pension provision (LFLP) is designed to ensure the continuity of second‑pillar pension rights when an individual leaves a pension fund without a retirement, disability or death event occurring.

In practical terms, this law ensures that pension assets accumulated throughout your career are preserved, even in the event of a change of employer or a temporary career transition.

When does vested benefits law apply?

The LFLP applies in particular in the following situations:

• a change of employer,

• a temporary interruption of professional activity,

• unemployment,

• relocation abroad,

• transition to self‑employment,

• early retirement without immediate withdrawal of pension benefits.

In all these cases, your second‑pillar pension assets are not lost: they must be transferred in accordance with the vested‑benefits regulations.

The vested benefit: the core principle

When you leave a pension fund before a pension event occurs, you are entitled to a vested benefit, which corresponds to the full amount of pension rights you have acquired under the second pillar.

This vested benefit represents your vested capital, which must be transferred to:

• the pension fund of your new employer,

• or a vested‑benefits solution (account or policy), if no new pension affiliation is immediately available.

This mechanism ensures that your retirement savings remain protected and invested during periods of transition.

Vested‑benefits solutions

In the absence of a new pension fund, vested pension assets may be held in:

• a vested‑benefits account,

• or a vested‑benefits insurance policy.

These solutions allow your second‑pillar assets to be preserved, while offering a degree of flexibility in how they are managed, depending on your personal situation, retirement horizon and risk tolerance.

Supporting professional mobility

The LFLP was designed to promote professional mobility by removing the fear of losing pension rights when changing professional situations. It offers individuals greater freedom in shaping their careers, while maintaining a secure and structured framework for retirement savings.

The LFLP within a holistic wealth‑planning approach

Vested benefits should not be considered in isolation. They form part of a broader pension‑ and wealth‑planning strategy, closely linked to:

• occupational pension provision (LPP),

• individual pension planning (3^rd pillar),

• retirement objectives (early or standard retirement),

• career or geographic transitions.

A clear understanding of the LFLP is essential to structuring a coherent professional and financial trajectory.