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Switzerland is a popular choice for expatriates to live and work for a number of years. Following a period of employment, many expats choose to move either back home or onto another country. In doing so, they leave behind their job, friends, and in certain cases an overindulgence in cheese and chocolate. One consideration which expatriates leaving Switzerland often forego is planning for what happens to the pension which they have built up in Switzerland. This blog explores various reasons why it is essential for anyone who has worked in Switzerland previously to undertake a complementary pension review.
If you previously worked in Switzerland you will have been paying into a Pillar 1 (state) & 2 (workplace) pension, potentially you will have also funded Pillar 3 (private) pension. Since you’ve left Switzerland, unless you took direct action, it is likely your Pillar 2 & 3 pensions are invested in a parked account (called a vested benefits account) with no investment strategy and no growth opportunity.
If you did not choose the vested benefits account option when you left Switzerland, your company pension will have been transferred to a Substitute Occupational Benefit Institution 6 months after you left Switzerland. Your pension will now sit in a cash account much like a bank account generating no appreciable return.
When it comes to drawdown, it is typically paid out in a single lump sum at retirement age after being taxed at source in Switzerland based on the tax rate of the Canton, where your pension company is based. Depending on where you are tax resident at the time, this can have significant tax consequences. You do not have the option to take this pension as a regular income in retirement. Meaning at the point of drawdown you will have to take a one-off lump sum which depending on your location could lead to a significant tax bill.
When a Swiss pension is paid out to a person living out Switzerland, it is taxed based on the location/Canton of the pension plan, usually the higher the tax Cantons of Zurich, Basel, Geneva or Vaud. However, you have the right to transfer it to a newly established pension account in a lower tax Canton such as Canton Schwyz and transfer it out from there at a much-reduced rate of tax. See illustrated examples in the tables below.
deVere Switzerland in conjunction with your own deVere consultant can arrange for this process to happen in a simple and straightforward way.
You can then opt to re-invest the pot locally under your deVere consultant’s guidance. This way you have the option to transfer out your pension at a lower tax level than will be the case if you leave it where it is now, get it working for you with a genuine investment strategy and have greater control over access and drawdown to better suit your own personal circumstances.
The Next Steps
The first step is to establish what you have left behind. This can be seen in a recent statement. If you don’t have one or don’t know what happened to the pension after you left Switzerland, we can help you get a current statement through the 2nd Pillar Office in Switzerland.
deVere Group has partnered with Liberty Pension in Switzerland to facilitate all of the above steps.