Thaw your Swiss pension

If you’ve contributed to a Swiss pension and you now live outside Switzerland this blog is for you.

When most people think of the word frozen in relation to Switzerland, they generally think of the stunning Alpine region, which for half the year is covered in snow and ice. At deVere however, we think of frozen Swiss pensions and with good reason.

The Current Situation

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.

The Opportunity

When a Swiss pension is paid out to a person living outside Switzerland, it is taxed based on the location/Canton of the pension plan, usually in the higher 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 the cash working for you with a genuine investment strategy and enjoy greater control in terms of 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 found 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.

 

Photo by eberhard grossgasteiger on Unsplash

Photo by Peter Wormstetter on Unsplash

About us

deVere Insights is a proud component of the deVere Group. Our company has always prided itself on leading the way in the sphere of wealth management. This website is in place to share information and expertise.