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After more than two decades of working in Switzerland, my pillar 2a retirement savings are substantial. My question is, what would happen to that money if I died before reaching retirement age? Would my savings be paid out to my legal heirs or would the pension fund simply pocket it?
Hi Jerry,
The rules governing inheritance of pillar 2a assets held by occupational pension funds are not as clearly defined as governing pillar 1 and pillar 3 assets.
Pillar 1 (OASI / social security) assets are simply absorbed by the OASI scheme, but your dependents may be eligible to receive a survivor's pension. Pillar 3a assets are included in your estate and inherited by your legal heirs.
Pillar 2 assets, on the other hand, are handled differently by individual pension funds. Some pension funds use a similar approach to that of the OASI and absorb your assets into the fund. Others pass on your assets to your legal heirs.
If you have dependents, the survivor's insurance provided by pension funds pays out a pension to your surviving dependents. This may be insured separately, or your pillar 2 assets may be used to pay this pension. Dependents include your spouse or registered partner and your dependent children.
Other factors, such as whether any of your dependents receive disability pensions or survivors pensions from social security, may also determine who benefits from your pillar 2 assets.
You should carefully review the terms and conditions of your occupational pension fund to find out how it handles assets belonging to members who die.
If you do not plan in advance, it is possible that your assets will simply be absorbed into your pension fund if you die before you can benefit from your pension. This is especially true if you do not have a spouse, registered partner, or children who could benefit from a survivors pension or cash out your assets (if your pension fund permits this).
If your pillar 2 pension fund absorbs assets when you die, or if it limits inheritance of assets to your spouse or children, and you want your savings to go to an entity other than those mentioned above, you have three options:
1. You can become self-employed (if you are employed) or become employed (if you are self-employed). In both cases, you may be able to cash out your second pillar assets.
2. You can invest your 2a retirement savings in a primary residence as per legal allowances.
3. You can relocate outside of Switzerland to a country with which Switzerland does not have a social security agreement (in which case you can normally withdraw your 2a savings).
In all cases, taxes apply to withdrawn assets. I hope this answers your question.
Best regards,
Moneyguru
