Withdrawing pillar 2a leaving Switzerland

Hi everyone,

I read that if your vested benefits are lower than the annual sum of your own contributions, you can apply to have them paid out. How can I find the exact numbers for these to see if I meet the requirements?

Thanks!

Hi jessp

According to my information, this is the case: What is meant is your personal annual contribution under the pension fund, not the employer's contribution. What is meant is also not a Swiss average, but your individual situation.

What does annual contribution mean? If you were only liable to the pension fund for a few months in Switzerland, your salary will be extrapolated to the whole year (= 12 months) on the basis of the monthly contribution. (It gets complicated if you have paid different monthly contributions, then probably an average is multiplied by 12 - but the IT system of your pension fund should automatically calculate this correctly).

So you have to ask your current or last pension fund. They should be able to provide you with information.

Best

Hello,

I just left Switzerland after working there for 4 years and I have questions about how to handle my mandatory and extra-mandatory benefits.

1. What is the best way to cash out my extra-mandatory benefits? Is this paid out in cash or through bank transfer? And how is it taxed?

2. Where is it best to leave my mandatory benefits? I heard that Canton Schwyz has good tax rates, however, I know that vested benefits accounts have low interest rates. As I am quite young (mid-twenties), I am afraid by the time I can take my benefits out in retirement, it won't be worth much. It is possible to invest this amount somewhere e.g. with VIAC (https://viac.ch/en/vested-benefits/)?

Thanks so much for your help!

What is the best way to cash out my extra-mandatory benefits? Is this paid out in cash or through bank transfer? And how is it taxed?

You simply submit a withdrawal request form to your pension fund or vested benefits foundation. You can find this form on their website or, if it isn't available there, you can ask them to send it to you by email or post. On the form, you select leaving Switzerland for an EU or EFTA country as the reason for withdrawal and specify that you would like to withdraw the non-compulsory portion of your benefits.

The foundation will deduct a withholding tax. The size of the withholding tax depends on the canton in which the foundation is based. You can reclaim the Swiss withholding tax by submitting proof that you are tax resident in a country which Switzerland has a double taxation agreement (DTA) with (all EFTA and EU countries have one).

Where is it best to leave my mandatory benefits? I heard that Canton Schwyz has good tax rates, however, I know that vested benefits accounts have low interest rates. As I am quite young (mid-twenties), I am afraid by the time I can take my benefits out in retirement, it won't be worth much. It is possible to invest this amount somewhere e.g. with VIAC

If you live in a country which has a relevant DTA with Switzerland, then the Swiss withholding tax is not very important. You can reclaim it by showing that you have tax residence in a country with a DTA.

If you live in a country without a relevant DTA with Switzerland when you withdraw, then the Swiss withholding tax is relevant because you will not be able to reclaim it. What that means in practice is that you will pay both the Swiss withholding tax, plus any taxes levied by the country you live in. In that case, having your benefits in a foundation in Schwyz can be beneficial because it (currently) has the lowest withholding taxes. But even in this case, withholding tax is only a big concern if you have substantial benefits. If you have less than say, 30,000 francs of benefits, the difference in tax will be minimal.

Regarding the question of whether to use a pillar 3a account or investment solution, the rule of thumb is:

• If you expect to withdraw your benefits in the near future, then keep them in a pillar 3a account. For example, if there is a good chance that you will work in Switzerland again in the next few years, in which case you would have to transfer your benefits to your new employer's pension fund, then investing them is risky because you may be forced to sell your investments at a time when the market is unfavorable. The same holds true if you plan to use the benefits to buy a house in the near future. In this case, just use the pillar 3a account with the best interest rate and ideally no fees.
• If you expect to keep your benefits vested for at least 5-10 years, then investing them is definitely preferable. For long terms, I would recommend a large stock component. If historical data is anything to go by, your assets will have grown by leaps and bounds by the time you hit retirement age. Costs are the most important thing in this case. Viac and Finpension are both affordable investment services for vested benefits. Alternatively, you can also use the cheapest retirement fund.

Dear Sir/Madam, 

I am a Swiss citizen and I recently moved abroad, where I work for an International organization, so I am not linked to any EU social security. It is for this reason that Swiss authorities (sfbvg) have granted me the permission to withdraw the complete second pillar (mandatory and extra mandatory) sum which I accumulated in past 13 years of working in Switzerland and which I intend to transfer to the pension scheme of my current organization. 

Currently my vested benefits account is deposited in Raiffeisen Bank Winterthur which is registered in canton SG. Should I proceed with withdrawing the sum with this bank, I will be taxed with SG taxes that apply to withdrawing Vested Benefits account, which are rather high (7.2% for the first 150k and 8.6% for the sum exceeding the 150k of my Vested Benefits). 

I am writing to ask you if there is a legal possibility to move my Vested Benefits account from Raiffeisen Bank Winterthur to a bank located in another Swiss canton that would have lower taxation on withdrawal, which bank and canton would you suggest me to move and what would be the time frame and cost for this operation.  

On this webpage you can find a table showing the Intercantonal comparison of the amount of capital withdrawal tax in % of the capital payment https://finpension.ch/en/capital-withdrawal-tax-compared/ , but I am sure that you might have even more accurate data in this regards.

Many thanks and I will look forward for your reply.

It works like this:

If you withdraw your benefits while you are still living in Switzerland, then you pay the capital withdrawal tax of the canton in which you live. Where the vested benefits foundation is located is not important, in this case. The amount of tax you pay is determined by where you live. Normally, this would only be the case if you withdraw to buy a home or become self-employed. The comparison which you linked in your post compares capital withdrawal taxes.

If you withdraw benefits after you leave Switzerland, then a withholding tax is deducted by your Swiss vested benefits foundation before the money is paid out. Withholding taxes for vested benefits can differ from capital withdrawal taxes for vested benefits. The canton of Schwyz has the lowest withholding tax, with a maximum rate of 4.8%.

If you are moving to a country which has a relevant bilateral social tax agreement with Switzerland, then you can reclaim the Swiss withholding tax by submitting proof that you have tax residence in another country. In that case, the amount of withholding tax you pay is not as important, because you can reclaim it.

On the other hand, if you move to a country which does not have a relevant double-taxation agreement, you cannot reclaim the Swiss withholding tax. In this case, it can be beneficial to transfer your vested benefits to a foundation in a canton with low tax (like Schwyz). You have the right to transfer your vested benefits from one Swiss vested benefits foundation to another at any time, even after you have left Switzerland. So you can transfer to a foundation in Schwyz or any other canton before withdrawing.

But there are a few things to watch out for. Some foundations charge you fees to close your account and transfer the benefits to a different bank. That does not seem to be the case with Raiffeisen, if you give one month's notice, so transferring to a different bank should not cost you anything. You will want to make sure, though, that the Schwyz-based foundation you transfer to does not charge fees when you cash out your account. For example, the Schwyzer Kantonalbank charges you 800 francs if you cash out due to leaving Switzerland. Tellco charges 600 francs. Liberty charges up to 950 francs. Finpension (Valuepension) charges 500 francs if you withdraw after one year with them, and 1500 francs if you withdraw sooner than that. Pensexpert charges 1000 francs (less if your benefits are very high). I believe Sparkasse Schwyz doesn't charge a fee, but they only accept new customers with substantial vested benefits.

Make sure to account for withdrawal fees. Depending on how much money you have in your vested benefits account, you may come off cheaper paying higher taxes but avoiding withdrawal fees.

Also, take a look at other cantons. Nidwalden, for example, also has low withholding taxes (maximum 5.3%), and the Nidwaldner Kantonalbank does not charge fees to withdraw on the basis of leaving Switzerland.

Hello 

I worked in Switzerland for 3 years and am about to leave to my home country in EU. 

Re pillar 2 (which is paid by my employer and myself). I wonder if I can cash it/withdraw it. It seem EU citizens can’t just cash it. But supposedly can use these funds to buy a property in EU. What if I have already a property in my home country for which I pay the mortgage. Does this count? 

Many thanks in advance

J

The Swiss law governing withdrawals of pension benefits to buy property states that pension benefits can be withdrawn to pay off a mortgage. So yes, as long as your property is your main residence, you should be able to use your pension benefits to pay off the mortgage. You can also use benefits to pay for renovations which increase the property's value. The same rules apply to properties in Switzerland and abroad. The main requirement is that it is your main residence.

You can find an outline of the rules here (German, French, Italian only):
https://www.bsv.admin.ch/bsv/de/home/sozialversicherungen/bv/grundlagen-und-gesetze/grundlagen/wohneigentumsfoerderung.html