Why SMEs must plan for vested benefits and partial retirement
In Switzerland, occupational pension provision (LPP) is an integral part of the employment relationship. When an employee changes employer, partially retires, or reduces their working hours towards the end of their career, legal obligations and financial impacts are triggered that SMEs cannot afford to underestimate. Vested benefits allow accrued pension capital to be transferred; partial retirement makes it possible to work fewer hours while already receiving a pension or capital payout from the LPP, within the limits set by the pension fund regulations.
For business owners and administrative managers, the stakes involve personnel costs, cash flow, obligations towards the pension fund, and consistency of accounting data. Poorly structured partial retirement can increase insurance premiums, generate unexpected liabilities, or create friction with senior staff who hold critical know-how. Conversely, orderly management supports operational continuity and retention of know-how.
This guide outlines the federal legal framework, typical employer costs, accounting for accruals, and financial planning levers, with references updated to 2026 and a practical focus for SMEs using accounting tools such as Accountex.
Legal framework: LPP, vested benefits and partial retirement
The main rules derive from the Federal Act on Occupational Old Age, Survivors' and Invalidity Pension Provision (LPP) and the company's pension fund regulations, which may not provide benefits below the statutory minimum.
Vested benefits
Upon leaving employment, the employee is entitled to transfer accrued occupational pension capital (vested benefits) to the new pension fund or to a vested benefits account with an authorised pension institution. The employer and the outgoing pension fund must provide the required documentation within the deadlines set by the Vested Benefits Act (LFLP).
If the new employer does not have an LPP pension fund (e.g. a structure below the entry threshold), the capital remains locked in a vested benefits account until re-entry into the second pillar or until retirement.
Partial retirement
Partial retirement allows working hours to be reduced while simultaneously receiving an LPP benefit (pension or capital, according to the regulations). The minimum age is set at 58 (Art. 1i OPP 2); staggered withdrawals are governed by Art. 13a LPP. The pension fund regulations may provide more favourable conditions, subject to the statutory minima.
The agreement must clearly specify the remaining employment rate, cost allocation and duration. The remaining annual salary must stay above the LPP entry threshold (currently CHF 22,680); the first partial withdrawal must amount to at least 20% of the old-age benefit (Art. 13a para. 3 LPP). Many pension funds also require a minimum reduction in the employment rate. After partial retirement, increases in the employment rate can generally no longer be insured on the previous full salary, except where voluntary maintenance is provided for under Art. 33a LPP.
Comparison of the main pension scenarios
To guide HR and accounting decisions, it is useful to distinguish three scenarios that often overlap over time in SMEs:
| Aspect | Vested benefits (employer change) | Partial retirement | Full retirement |
|---|---|---|---|
| Employment relationship | Ends with the previous employer | Continues with reduced hours | Ends (unless a consulting assignment is agreed) |
| Destination of LPP capital | Transfer to new fund or vested benefits account | Partial withdrawal; remainder in active fund | Pension or capital according to regulations |
| Employer contributions | Cease upon exit | Proportional to remaining coordinated salary (statutory minimum) | Not due after exit |
| Risk insurance costs | Borne by new employer / new fund | Premiums on reduced salary; possible age-related surcharge | Not applicable to active employment |
| SME accounting impact | Contribution settlement, vested benefits certificate | Recalculation of accruals and personnel budget | Removal from headcount, possible termination costs |
| Employee planning | Verify continuity of cover and vested benefits account costs | Optimise income, taxation and OASI | Define pension vs. capital strategy |
Employer costs in partial retirement
Contrary to common belief, partial retirement does not automatically halve personnel costs. The employer remains obliged to pay LPP contributions on the actual coordinated salary and, under many regulations, to maintain risk cover shares (disability, death) calculated on the remaining employment rate.
LPP contributions and coordination. On a salary reduced to 60%, mandatory contributions are calculated on the new coordinated salary, but the pension fund may apply higher age-dependent rates for employees over 55. Some funds provide for a minimum contribution regardless of working hours, which must be checked in the regulations.
Risk premiums and administrative costs. Disability and death cover remains in place as long as the employment relationship is active. SMEs with few insured members may face an increase in the conversion rate or surcharges to maintain fund equilibrium. The pension fund's administrative charges for processing partial retirement and any actuarial consulting costs must also be taken into account.
Indirect costs. Reduced hours with ongoing responsibilities may require additional support (backup, training), affecting productivity. From a social tax perspective, the employer continues to withhold OASI/AI/EO, ALV and LPP on the actual salary; any cantonal contributions to the family compensation fund remain due.
Simplified numerical example
Employee aged 60, annual salary CHF 120,000, partial retirement at 50% (CHF 60,000). Partial LPP benefit: CHF 18,000 per year (indicative amount). Total minimum statutory LPP contribution of 18% on remaining coordinated salary (approx. CHF 33,540): approx. CHF 6,040 (CHF 3,020 employer + CHF 3,020 employee), plus estimated risk premiums of CHF 2,000–4,000 depending on the pension fund.
Remaining gross employer cost: salary CHF 60,000 + LPP share CHF 3,020 + risk share and social charges. Savings compared with full-time work are significant but less than 50% if premiums do not decrease linearly. Advance simulation with the pension fund is essential.
Accruals, accounting and reporting
For most Swiss SMEs affiliated with an external pension fund, LPP accruals are recorded as periodic personnel costs, not as actuarial liabilities on the balance sheet. However, correct accounting is essential for budgeting, cost analysis and business decisions.
Standard SME accounting
- Employer LPP contributions: account 57xx (personnel costs) or equivalent in the chart of accounts
- Employee contributions: salary adjustment, recorded as liability to the pension fund
- Annual settlement: adjustment based on pension fund certificate
- Partial retirement: update cost centres and budget with new employment rate
Vested benefits on exit
- Verify full payment of contributions up to the last day of work
- Request vested benefits certificate with exact capital amount
- Record any retroactive settlements communicated by the pension fund
- Archive documentation for audit and any OASI/LPP inspections
Companies subject to audit requirements or applying Swiss GAAP FER/RPC may need to disclose additional pension obligations on the balance sheet if defined benefit plans or extra-fund promises exist. For structures with only mandatory LPP in a collective fund, the balance sheet impact remains limited, but the notes to the financial statements may mention commitments to senior staff in partial retirement if relevant to business continuity.
Financial planning: employee, company and timing
Well-planned partial retirement aligns the employee's interests with the SME's economic sustainability. Planning should begin at least 12–24 months in advance, involving the pension fund, tax adviser and HR manager.
For the employee
Assess the tax impact of the partial withdrawal (cantonal income tax), the possible reduction in future OASI benefits in the event of a prolonged decrease in earned income, and the choice between capital and pension. Check whether a vested benefits account from a previous employer can be consolidated before partial retirement, to avoid multiple management fees.
For the SME
Integrate the transition into the internal succession plan: who takes on partial duties, how responsibilities and clients are redistributed. Simulate the effect on personnel costs over the next 3–5 years and assess the impact on the pension fund (reserve funds, average age of insured members). Negotiate duration, annual review and termination clauses clearly.
Taxation and third pillar
Partial LPP withdrawals are generally taxed separately at a reduced rate, which varies by canton. A coordinated plan with pillar 3a (contributions up to the statutory limit) can partially offset the reduction in employment income. The employer is not directly involved, but may offer pension advisory services as a non-salary benefit.
Operational checklist for HR and accounting
Follow this checklist to coordinate HR, payroll and accounting in the event of partial retirement or vested benefits transfer:
| Phase | Action | Responsible |
|---|---|---|
| Preparation | Request simulation from pension fund (costs, benefits, constraints) | HR / Management |
| Preparation | Verify compatibility with LPP regulations and employment contract | HR / Legal |
| Contractualisation | Sign written agreement on hours, salary, duration and review | HR / Employee |
| Implementation | Notify pension fund, OASI, accident insurer of the change | Payroll |
| Implementation | Update personnel cost budget and cost centres in accounting | Accounting |
| Exit / transfer | Issue vested benefits certificate and settle contributions | Pension fund / HR |
| Follow-up | Reconcile annual LPP certificate with accounting records | Accounting |
How Accountex supports management
With Accountex, SMEs can keep personnel costs linked to partial retirement and LPP exits under control: recording contributions by cost centre, an annual budget that can be updated as working hours change, reconciliation with pension fund statements and reporting on social costs. Document traceability (agreements, vested benefits certificates, settlements) simplifies internal audit and preparation of data for the tax adviser.
Anticipating the financial impact of partial retirement — rather than treating it as a mere HR procedure — helps preserve liquidity, plan replacements and maintain transparent dialogue with senior employees, an element that is often decisive for the operational stability of Swiss SMEs.