The lich templates adds 2 equivalent character level.
By the book, the lich becomes an NPC. Therefore, there ain't no rules about level progression (relative to the other players).
Personnaly, I would require the character to get enough XP to be a 14th level wizard (you have to be a 12th level wizard to do the ritual) but keeping him 12th level. In other words, when he has enough XP to become a 13th level character, nothing happens. When he get enough XP to be a 14th level character, nothing happen until he does the ritual. After that, he becomes a 14th level character; 2 equivalent character level of lich template and 12 level of wizard. Afterwards, he would gain XP normaly as a 14th level character. When reaching the XP cap to be a 15th level character, he would become a 13th level wizard.
Doing it the other way around is WAY too unbalancing (I speak from experience !!!) and SHOULD NOT BE DONE !!!
Even the 2 ECL of the lich template are not enough to compensate for the tremendously huge benefits the lich gains.
I do NOT think it's a good idea at all to allow PC to become a lich, or a vampire for that matter UNLESS the character is the only one PC in the "group". It gets unimaginably boring for the rest of the party.
Last word: do not do that !!!