Whether you are a married couple moving to Switzerland, or a pair of residents thinking of tying the knot, it is important that you understand exactly how marriage affects your financial life. From responsibility for shared debt to old-age pensions and insurance, marriage and money are intertwined in countless ways. Here, moneyland.ch lists the most important financial considerations for married couples and those considering marriage.
1. Social security
Marriage affects almost every aspect of social security, and thus impacts your financial independence. Here are the main pros and cons:
Being married or in a registered partnership entitles you to receive a lifelong widow’s pension (as a woman) based on your spouse’s social security contributions if they pass away. Men may receive a widower’s pension based on their spouse’s social security contributions for as long as they care for children from the marriage aged 18 or younger.
Marriage is also beneficial if only one of you earn an income in Switzerland because as long as the employed spouse’s annual social security pension contributions double the minimum annual contribution. That means that if one of you is not employed, you will not have to pay the minimum annual social security contribution for that person out of their own pocket.
As two individuals living together without getting married (or registering your partnership), you are entitled to receive two “full” Swiss social security pensions. As long as you both contribute to social security throughout your working life, you each receive at least the minimum state pension. If you both earn a decent income, you may each receive the “maximum” full pension.
That all changes when you get married. As a married couple, your combined pensions are limited to 150% of a single maximum pension. If you both earn well throughout your working life, you will receive just one-and-a-half maximum pensions instead of two full pensions. In other words, getting married can cut each of your old-age pension by 25% - or 50% between the two of you.
Switzerland uses a progressive income tax system so the higher your income, the higher the applicable tax rate. As a married couple, both of your incomes are combined to determine which tax bracket you are placed in. This arrangement can be either beneficial or costly – depending on your incomes and which canton you reside in.
If only one of you earns an income, or if one of you earns a much lower income than the other, then marriage can be advantageous. Because your income tax bracket is determined by both or your incomes, a person which may fall into a high tax bracket may be placed in a lower tax bracket if their spouse earns little or no income. In this case, the low income balances the higher income so you pay less tax.
If both of you earn good incomes, then the combination principle works against you because both of your incomes will be combined to determine which tax bracket you fall into. Two individuals who may both be placed in low tax brackets if they were not married will be placed into higher tax brackets after getting married. So if you are both decent earners, getting married directly translates into paying more income tax.
Switzerland has strict rules dictating who get what when somebody passes away. Your spouse is always first in line, followed by your children, as you can see in this guide to Swiss inheritance law. These rules can work to your advantage or disadvantage, depending on your situation.
You have the security of knowing that your spouse will receive a large part of your assets if you pass away. Another benefit is that, depending on your canton of residence, you pay little or no taxes on inheritances or gifts made to your spouse.
You have less flexibility in choosing who should get your money and property because a compulsory share will go to your spouse or registered partner. Even if you write a will, you are still required to leave a large share of your estate to your legal heirs.
4. Pension fund
The exact rules governing occupational pension funds (pillar 2) vary between individual funds. However, there are certain general rules which apply to marriage.
Your spouse or registered partner receives a survivor’s pension from your occupational pension fund after you die. To be entitled to this pension, you and your spouse will have to have been married at least 5 years. Additionally, they must be at least 45 years old or have dependent children to care for. The pension your spouse receives from your pension fund if you die is equal to 60 percent of the old-age pension which you would receive when you retire (some pension funds may offer higher pensions).
If, in the worst case scenario, you end up divorcing, your pension fund will be divided between your pension savings and those of your ex-spouse. Depending on how much your spouse has contributed to their pension fund, the effects of this splitting may range from negligible (if your spouse’s savings are similar to yours) to devastating (if your spouse has little or no pension fund savings). As an unmarried couple without a registered partnership, your pension fund savings normally remain in your possession.
As a general rule, both individuals in a marriage are responsible to repay debts which you take on as a couple. This includes most debt used to finance shared property. Business debts and certain other debts may be considered separate estates, but not in every case.
There are no real advantages to bringing debt into a marriage.
Aside from the financial stress which often accompanies debt, you risk placing part of the burden of your debts on your special someone by getting married when you have debts. Although you can choose to keep your estates separate by way of a marital agreement, your spouse may still ultimately be held responsible to help repay your debts as part of their marital duty to mutual support. It may be preferable to get out of debt before you marry. You can find tips on how to get out of debt fast here.
There are many different reasons why individuals get married, and money often does not play a major role in the decision. However, understanding how getting married affects your finances is an important step in deciding whether marriage is right for you.