How to manage my 2nd pillar when leaving Switzerland?
Leaving Switzerland to live abroad can raise many questions, particularly regarding the management of your 2nd pillar. This detailed guide will help you understand the options available to you.
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What is the 2nd pillar?
The 2nd pillar, also known as occupational providence, is part of the social security system in Switzerland. It aims to provide employees with a certain level of financial comfort in retirement. Contributions are generally shared between the employer and the employee.
Leaving Switzerland: general considerations
When you leave Switzerland, several factors can influence the management of your 2nd pillar:
- Age at the time of departure
- The destination country
- Tax consequences
Age at the time of departure
Leaving before age 58
If you leave Switzerland before the age of 58, your affiliation with your pension fund ceases on the date of your resignation. You will then need to decide how to manage your 2nd pillar.
You can choose to maintain your providence in Switzerland by transferring your leaving benefit to a vested benefits account or policy. Alternatively, you can request a cash payment of your leaving benefit.
Leaving after age 58
If you leave Switzerland after the age of 58, you are considered retired. You will therefore receive a monthly pension from your pension fund, possibly supplemented by a capital, if you wish. It is not possible to receive the entire 2nd pillar as a leaving benefit.
The destination country
Leaving for an EU or EFTA Country
If you leave Switzerland to permanently settle in a country of the European Union (EU) or the European Free Trade Association (EFTA), the Agreements on the Free Movement of Persons come into effect.
Under these agreements, your minimum LPP old-age assets (mandatory part of your leaving benefit) are kept in Switzerland until your retirement. You can only withdraw these funds in cash if you prove to your Swiss pension fund that you will not be subject to the providence system of the country where you are settling.
The super-mandatory part of your leaving benefit, i.e., the benefits paid beyond the legal LPP contribution share, can be directly received.
Leaving for a Country Outside the EU or EFTA
If you permanently leave Switzerland to settle in a country outside the EU or EFTA, there are no restrictions regarding the withdrawal of your minimum LPP old-age assets.
Taxation of the lump-sum payment
If you choose to withdraw your 2nd pillar in the form of capital, a unique source tax will be retained by your pension fund. The amount of this tax is calculated based on the tax rate of the reference canton.
Taxation of the monthly pension
If you opt for a monthly pension, it will generally be subject to a source tax of 11%. However, if Switzerland has concluded a double taxation agreement with the country in which you are settling, your pension may be exempt from this tax.
Steps to Undertake
When you plan to leave Switzerland, it is essential to inform your pension fund of your new address. Depending on your situation, additional steps may be necessary.
It might be wise to consult a professional to help you navigate these complex questions and optimize your tax situation. Careful planning and a clear understanding of your options can help you maximize your benefits and minimize your tax obligations when leaving Switzerland.
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Brevet fédéral de planificateur financier
Économiste d’entreprise HES
22nd Dec 2023
1st Dec 2023