All you need to know about The Second Pillar to retire in Switzerland

Retirement, Financial Independence, Investing, SwitzerlandUpdated on

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The Second Pillar of Retirement in Switzerland

We have studied the first pillar in the previous post in the series. Now, it is time to study the second pillar. The second pillar is an occupational pension for people working in Switzerland.

While the first pillar covers everybody’s basic needs, the second pillar is here to cover a larger part of your salary. It is an occupational pension. If you never worked, you will never pay anything for this, and you will never receive anything from this. It is significantly more complicated than the first pillar.

In this article, I am going to give you all the important details on the second pillar. I am also going to help you understand what you can do to improve it.

The Second Pillar

The second pillar is your work pension.

In French, it is called Loi fédérale sur la prévoyance professionnelle vieillesse, survivants et invalidité (LPP). In German, it is Bundesgesetz über die berufliche Alters-, Hinterlassenen- und Invalidenvorsorge (BVG). As you can see, the Swiss government is very good to make short names… But, we will simply call it second pillar in this article.

This second pillar is a pension for every people who worked in Switzerland and paid into the LPP. Every Swiss employee of at least 24 years and with an annual salary of more than 21’150 CHF contributes to the second pillar. It is directly deducted from your salary and transferred to your pension fund. The contribution is a percentage of your salary.

Interestingly, your employer will at least match your contribution. Some employers contribute more than this. If you are an independent, you will have to pay both the employee and employee parts.

How much you pay for the second pillar depends on your age:

  1. 25 to 34 years old: 7%
  2. 35 to 44 years old: 10%
  3. 45 to 54 years old: 15%
  4. 55 to 65 (64 for women) years old: 18%

The percentage deducted from your salary depends on the part your employer is paying. All the contributions to the second pillar are pre-tax. It is an essential fact. You will pay the taxes when you withdraw your second pillar.

As you get older, you put more and more into your second pillar. It means that the last years matter a lot in the calculations of your second pillar pension. It is a bit dumb because the first years are the ones that compound the most and should be contributed higher.

The first pillar was global insurance. You are paying for other people. But the second pillar is a physical account, in your pension fund, with your name. So this is your money.

There is another big difference. Your pension fund is related to your current employer. Each employer chooses its pension fund provider. It means that when you change company, you will likely change pension fund as well.

Some companies will have a better option for the second pillar than others. Most second pillar providers are extremely conservative. But there are a few good ones that allow investing your money in stocks.

Vested Benefits

If you change employer, you will need to transfer your existing contributions to the new pension fund. But if you do not directly switch to a new job, you will transfer the funds into a vested benefits account. 

If you lose or quit your job, you will need to transfer the funds into a vested benefits account. This account will be locked until you get a new job (and a new pension fund) or reach retirement age. Even if it is in your name, there is not a lot you can do with it. In some cases, you can choose how the money is invested. But, you cannot move money in or out.

The same is true if you leave Switzerland. Until the age of retirement, you will have to keep the money in a vested benefits account.

If you retire early, you will also keep the money in a vested benefits account as soon as you quit your job. It will stay there until the official retirement age.

There is one good thing about vested benefits accounts. They are much better than pension funds. For instance, you can take a look at valuepension. They offer an excellent vested benefits account.

Mandatory vs. Extra Mandatory

Now starts the complicated part about the second pillar. We have to distinguish between the mandatory insured salary and the extra-mandatory salary.

We will only be talking about the yearly salary here. The mandatory insured salary is the salary between MIN and MAX.

  • MIN is defined as 7/8 of the maximum of the first pillar, which is 24’675 CHF.
  • MAX is defined as three times the maximum of the first pillar, which is 84’600.

If your salary is between 21’151 CHF and 28’200 CHF, your mandatory insured salary will be 3’525 CHF. Everything higher than MAX is the extra-mandatory salary. So, the maximum mandatory insured salary is 59’925 CHF (MAX-MIN).

Let’s see a few examples with different yearly salaries:

  • 20’000 CHF: Not eligible to the second pillar (less than 21’150 CHF)
  • 25’000 CHF: Mandatory insured salary of 3’525 CHF (less than 28’200 CHF)
  • 30’000 CHF: Mandatory insured salary of 5’325 CHF
  • 50’000 CHF: Mandatory insured salary of 25’325 CHF
  • 84’600 CHF: Mandatory insured salary of 59’925 CHF
  • 100’000 CHF: Mandatory insured salary of 59’925 CHF and Extra-mandatory salary of 15’400.

So what is the difference between these two parts?

I mentioned before the contribution rate for the second pillar. These were the contributions to the mandatory part. The contributions for the extra-mandatory part depends on your pension fund and your company.

Another difference is the interest rate. The law sets a minimum interest rate of 1% on your mandatory contributions. But there is no minimum for the extra-mandatory portion. Your pension fund can offer better (or worse) interest on it. It is generally a bit better on the extra-mandatory portion. This interest is the only way your second pillar account money will grow. It is not a great interest rate. But there is nothing you can do about it. It still beats Swiss banks currently.

The last difference is the conversion rate. This rate will define how much pension you can get out of the capital. The law sets a minimum conversion rate of 6.8% for the mandatory portion of your capital. Again, there is no minimum for the extra-mandatory part. Your pension fund will set the conversion rate. Generally, it is significantly worse than the conversion rate on the mandatory part.

Insurance for death and disability

The second pillar also acts as insurance in two cases.

In the case of disability, the insured person will get a disability pension. The basis for the pension is all the assets accumulated and the sum of all the future credits. But they will not take interest into account for the future credits. It is great insurance in case of a serious accident.

In the case of death, the surviving spouse will get 60% of the deceased’s full disability pension. However, there are some conditions for eligibility. There should be either the duty to provide for children or being at least 45 years old, and the marriage lasted at least five years. If these conditions are not met, the surviving spouse will only get three years of pension at once.

In both cases, the government will review the pension every two or three years based on the beneficiary’s cost of living.

How much will I get from the second pillar?

Once you reach retirement age (65 for men, 64 for women), you can get your second pillar. You have three options:

  1. An annuity
  2. A lump sum
  3. A lump and an annuity

Here is where the conversion rate becomes important. The annuity will be computed using the conversion rate. If you convert 200’000 CHF with a conversion rate of 6.8%, you will get a 13’200 CHF pension each year.

If you take a lump sum, you will pay capital taxes, and if you take an annuity, you will pay income tax on top of it. For the extra-mandatory part, the conversion rate will depend on your pension fund.

Whether you should choose between these options is discussed below.

Should I take an annuity or a lump sum?

There no definite answer to this question.

It will depend on the conversion rate at the age of your retirement. And how much you expect to get out of the capital each year if you manage it yourself. Generally, if you were to invest the amount into stocks, you would do, on average, better than the current conversion rates. However, there is a risk with stocks, whereas the conversion rate is guaranteed. In the end, you will have to do the math yourself, depending on your situation.

If you do not invest your money or get lower returns than the conversion rate, you should probably opt for the annuity. It also depends on how much you need that money. Maybe you have planned to use that large sum for something specific. But be careful about considering the taxes.

Inheritance and second pillar

Now, I said that the second pillar was your money. This is true. But there is a case where you could lose this money. Or, at least, your family could lose this money.

If you die, this money can be passed to your spouse or your legal heirs. This is the standard way of inheritance. However, if you do not have heirs or a spouse, this will not be distributed according to the inheritance law. For instance, your parents will not be eligible. And this money will get back to the state.

So, if you have no heir and spouse, you may consider your second pillar a bit differently.

How to optimize your second pillar?

Compared to the first pillar, there are a few things you can do to optimize your second pillar.

Voluntary contributions to the second pillar

You can make voluntary contributions to the second pillar to fill contribution gaps.

Like for the first pillar, you can have holes in your second pillar. Contribution holes (or gaps) can happen in several cases. For instance, if you started to contribute late due to your studies or were unemployed for some years. If you leave Switzerland, you will stop contributing too. Finally, it generally happens because your salary is higher now than before. Therefore, you could contribute more now because your current salary would have allowed you to contribute more.

You can fill these holes (or contribution gaps) by voluntary contributions (or buy-ins). These contributions are pre-tax, too, so this will reduce your taxes. However, your employer will not match them. Moreover, buy-ins are always extra-mandatory. Finally, these contributions are locked for three years. It means there is no way to withdraw them before. You can ask your pension fund how much you can contribute to filling the gaps. There is an annual limit on how much you can contribute. They will also give you directions on how to perform these voluntary contributions.

If you have the means to do it, I think it is a good way to increase your pension and lower your taxes. However, you need to be sure whether you should contribute to your second pillar or not. Be sure of what you are doing, because this money will be locked for years. It is also money that will not return a lot of interest. But it is a safe investment. You can think of it as a long-term bond investment.

If you compare the second pillar to investing in the stock market, the second pillar will only be interesting in the short-term. It will provide nice tax savings, but the interests are so low, it will not return much after that.

If you want more details on the subject, you can read whether you should contribute to your second pillar or not.

Taxes

When you withdraw the second pillar, you will pay taxes on the withdrawal. This is at a better rate than if you had been taxed in the first place. But this is still a non-negligible part.

One essential thing is where you live when you withdraw your second pillar. This is what will matter for the second pillar. There can be a huge difference between different states. Moreover, you will also pay a wealth tax that can also vary from state to state.

If you want to compare the implications of where you live on your second pillar withdrawal, you can try to take a look at this calculator. It will tell you how much you will pay taxes on your second pillar if you take a lump sum.

When you do the calculation, you need to take taxes into account. This could help you decide between a lump sum and a pension. And you may want to consider this when you move to a new place.

Change employer

Another thing you can do is choose a company with a better pension fund.

Of course, this is not practical, and the pension fund should probably not be the main argument for choosing a company over another. But this could make a significant difference in your retirement. You can also ask your company if there is an option for investing more in the second pillar. Indeed, at some companies, they give you the choice of how much to invest in it. And some companies can even match your extra contributions.

Increase your income

As for the first pillar, increasing your salary will increase your contributions to the second pillar.

Then, it will increase your final pension. Do not forget that contributions to the second pillar are pre-tax. But of course, increasing the salary is not always possible or even what you want. And increasing your salary is an obvious choice if you can do it in good condition.

Withdraw the second pillar before retirement

You can withdraw money from your second pillar before retirement (early withdrawal).

The main reason for early withdrawal is to buy a house. Indeed, you can withdraw your second pillar money to build or buy a house. It will reduce your pension accordingly. But it can help you to have the funds for the downpayment on your house.

However, this will only work for your primary residence and the place where you live! You cannot use your second pillar for a secondary residence. And you can only use it for a house in Switzerland!

The same applies if you want to start your own company. You can also withdraw the money if you are leaving Switzerland. The other reason is early retirement. You can withdraw your second pillar five years before retirement age.

The cast of leaving Switzerland is the most complicated. It will depend on where you are going. If you leave for an EU country, you will only be able to withdraw the extra-mandatory part of your second pillar. But that will depend on exactly the country where you are going.

There are some limitations and rules to these early withdrawals. The minimum withdrawal is 20’000 CHF.  If you sell the house you bought with the second pillar, you must repay what you withdrew.

Voluntary contributions into your second pillar after early withdrawal will not be tax-free. After you have reached the same amount as before the withdrawal, they will be tax-free again.

Be careful that after 50 years old, you are limited in what you can withdraw. After age 50, you can only withdraw the available amount when you were 50 or half of what is available. The limit is the maximum of these two numbers. Finally, withdrawals are only possible every five years.

Reporting

Every year, you should receive a report from your pension fund telling you a lot of things. It will give you information about how much you contributed, the mandatory part, the extra-mandatory part… It also predicts how much you will have by retirement. You should not bother too much about the predictions. But it is interesting, nonetheless.

This report is different from each pension fund, but most of the information will be the same. For instance, here is my redacted report from last year:

Page 1 of the report from my second pillar
Page 1 of the report from my second pillar
Page 2 of the report from my second pillar
Page 2 of the report from my second pillar

As you can see, there are tons of numbers here. It will also cover things like death or pension in case of handicaps. If you are married or divorced, you will have more information than me.

If you are lucky, you will receive reports more often. And if you are fortunate, your pension fund will have a web portal where you can see this information online. It will depend on your pension fund. My new second pillar company updates its online portal monthly. I can track it much better now.

You should always keep these reports if you receive them in the mail (I scan them). They contain important information for your financial future.

Accounting for your Second Pillar

If you are tracking your net worth (and you should!), you may consider the second pillar inside it.

I integrate my second pillar in my net worth and count it as bonds. Since it is a very safe and conservative investment, counting as bonds in my net worth makes sense. Adding your second pillar to your net worth will give you a better picture of your entire assets.

FAQ

What is the second pillar in Switzerland?

The second pillar is an occupational pension. Every people that worked in Switzerland and received a salary are eligible for this pension.

How much will I receive from the second pillar?

How much you will receive will depend on how much you contributed. It will also depend on your last salary.

How can I optimize my second pillar?

You can do some voluntary contributions to your second pillar. You can also increase your salary to increase your second pillar contributions.

Conclusion

The second pillar is the second part of the retirement system in Switzerland. It will cover a larger portion of your salary in retirement than the first pillar. While the first pillar was for everybody, the second pillar is only for employed people.

How much you get at retirement will mostly depend on your salary. Under normal circumstances, with your first and second pillars together, you should gain a pension of about 70 to 80 percent of your salary. If you want to complete this, you will have to use the third pillar. I will cover the third pillar in the next post of this series. It is an optional part of the retirement system but has many advantages.

To continue learning about the retirement system in Switzerland, read about The Third and Final Pillar.

What do you think about the second pillar? Do you have tips to optimize it? Do you have any questions regarding the second pillar?

Mr. The Poor Swiss

Mr. The Poor Swiss is the author behind thepoorswiss.com. In 2017, he realized that he was falling into the trap of lifestyle inflation. He decided to cut on his expenses and increase his income. This blog is relating his story and findings. In 2019, he is saving more than 50% of his income. He made it a goal to reach Financial Independence. You can send Mr. The Poor Swiss a message here.

40 thoughts on “All you need to know about The Second Pillar to retire in Switzerland”

  1. Hello again,

    I have 2 questions about withdrawing money from 2nd pillar when leaving for an EU country:
    1. Is withdrawal mandatory or the money could stay in CH?
    2. What happens with extra-mandatory part – is it lost or stays in CH and waits for your retirement?

    In the meantime I saw that you’ve already replied to my questions from 1st post in this series. Many thanks!

    1. Hello again :)

      1) It is a very good question. I am not sure. I never considered that case. I would say that it is not mandatory. You can probably let your money stay in Switzerland until the official retirement. Now, you may still have an issue. If you are not working in Switzerland, your second pillar will be in a vested benefits account. And some Swiss banks do not like to keep accounts for foreigners. So they may force you to withdraw the money after some time. I have a colleague that had to withdraw it after a few years of living in the U.S.
      2) Sorry, my article was incorrect. You can take the extra-mandatory part but not the mandatory one. It is exactly the contrary of what I wrote :( This is fixed in the article now. As for whether you can get back the mandatory, I think you cannot in most cases. Since you will be legally insured as well for the new country, you will not get it. But from what I read, there are ways to get it back if you are not working and are not receiving unemployment benefits, but it seems complicated.

      For these questions, I would advise you to see directly with your pension fund.

      I hope that helps a bit :)

      1. 1. You can transfer it to a vested benefit account, but cannot leave it with your current pension fund (automatic transfer after 6 months to the “institution supplétive”).
        2. You may always transfer the extra-mandatory part on your departure from Switzerland. The mandatory part will be transferred to a vested benefit account.
        Yet, if you leave to a country other than EU, Liechtenstein, Iceland or Norway, you can transfer it as well. (art. 25f LFLP)

        1. Hi LaKiks,

          Thanks for the added information!

          I did not know that there was a 6-month automatic transfer.
          Thanks a lot for the list of countries with the treaty! That is very useful.

          Thanks for stopping by :)

          1. Yes it is useful as the money you have forgotten about will be “regrouped” at the Institution Supplétive, you don’t have to remember and/or write the pension funds of all your previous works to make sure you have it all… Yet it is best if you transfer it to an other vested benefit account as the fees are very high there.
            And as it seems to truely interest you I might as well give the full details. The 6 month period is the most often used delay, yet legally the pension fund may keep the money up to 2 years at most (art.4 LFLP).

  2. Hello and thank you for the much needed info! It is very difficult as an American living in Switzerland to understand this system; it has not been easy to say the least! And we are so confused as to whether we would be better off financially to contribute to 2nd pillar and reduce tax burden or invest in stocks, our tax burden is really high and were desperate to get that down….Is it worth it in the long run or is it just tying up capital that could be a much better investment elsewhere? Thanks for your wisdom!

    1. Hi Natalie,

      Yes, I guess that the system is a bit complicated coming from the U.S.

      I have written an article about whether you should invest in the second pillar. Basically, it comes down to whether you want a short-term investment or a long-term one.
      It also depends on what else you have in your net worth. In Switzerland, your second pillar is your bonds allocation. If you want more bonds, you can invest in the second pillar.

      I hope this helps :)

  3. Hi,

    Thank you for another great article!

    I got a question regarding mandatory and extra-mandatory contributions.

    In the case of someone who makes more than 84’600 CHF a year: is the company still obliged to at least match your contribution? How can I know how much the company is contributing?

    Thank you!

    1. Hi V,

      Your employer will always match your contribution regardless of your income.
      If you decide to invest more every month (some second pillar offer some possibilities), your employer will not have to match.

      Most companies simply match the minimum and most employees simply pay the minimum.

      Now, some companies have a much better second pillar and they match more and they give you options to put more as well.
      You will have to ask your company regarding the details of the second pillar.

      Thanks for stopping by!

  4. Hi everyone,

    I browsed around for information regarding the concept of tax at source and would like to check my understanding.

    I was taxed on monthly gross salary so I’ve paid taxes on 1st and 2nd pillar contributions. I didn’t have additional contributions to 2nd pillar and no 3rd pillar.

    So at first I thought I would need to get a refund on taxes from those contributions. But since tax-at-source uses a lower tax rate to adjust for taxes on contributions, I shouldn’t get a refund?

    Just want to confirm that everything’s ok and I don’t need to file for refunds.

    Thanks in advance

    1. Hi lacasitos,

      I have never been taxed at the source, so I may not be the best person to answer your question.
      However, from what I know, when you are taxed at source, you are taxed on the net income, so contributions to the first and second pillar should have been taken into account.

      I would recommend you contact your local tax office to get more information. They are the authority for this matter.

      Thanks for stopping by!

  5. Hello,

    According the post, second pilar is pre-tax, however on my payroll I can see I have been taxed on my monthly gross income (meaning they did not deduct my first and second pilar contributions).

    In my case as a foreigner it applies the tax-at-source system. How should I proceed to get a refund of my contributions?

    Thanks in advance

    1. Hi lacasitos,

      You are right, it’s pre-tax. You should be taxed on your net income, not on your gross income.
      If you think they made a mistake, you should contact your local tax office and discuss it with them. They will know what to do :)

      Thanks for stopping by!

  6. Thanks for the article. Some info i cam across recently, I changed jobs last year, and as a result transferred my pension to the new provider. A little later in the year i spoke with my tax accountant who explained there is a grey area in this period where you could transfer your second pillar to a BVV provider of your choosing. The advantage being, some of these offer the benefit of investing up to 50% in stocks as opposed to it being fixed interest.

    It was to late for me, but something to consider for next time.

    1. Hi FrancInvesting,

      Yes, this gray area has been existing for a long time. But I do not really like grey areas, I’d rather not mention this in my article.
      But it’s true that the second pillars outside of pillar fund providers are much better!

      Thanks for stopping by!

  7. Hi nice article, thank you! I have read extensively on this, thinking if I should contribute more or not. I have huge gaps, because I came to Switzerland when I was over 40… So I read some. Maybe you find this info useful or could also add this:

    1/ 2nd pillar is not 100 % your money. Technically yes, but there is “communist” element to it. In case you die without wife or legal heir, this money is lost for your family (parents, etc). 3rd pillar will be 100 % passed as inheritance without any restrictions, 2nd pilar only if you were married, had children etc. So, if you plan to contribute a lot, it is worth to marry :)

    2/ Buying in annual gaps (rachat de cotisations) – you said “It means there is no way to withdraw them before” – no, you can withdraw it, but it will be taxed as normal income (so you will lose your all saved tax gain from the year you contributed). I am not 100 % how it works, but reading Geneva tax office explanation, it should affect only that specific year contribution/tax, .

    For example (my understanding): You have 100 k in the pool from regular employee-emploer contributions, you the decide to contribute 50 k additional money (rachat de cot.). You save tax as if you were taxed 50 k less that year. If you withdraw now all 150 k to buy a house (before 3 year passes from 50 k contribution), they will tax you back with full % of your income tax only on that 50 k, not on 150 k. 100 k should be taxed at preferential rate. I hope it is so. Otherwise they would penalise people taxing whole lump sum with maximum rate (and the regular contributions have preferential rate). I would love to clarify that, but I have no nerve to talk to tax office, maybe one day. For now I am contributing a little to my gaps, but in case I would contribute more, I must know that.

    – info about 2 versions of the 2nd pillar “product” – primauté de cotisations vs primauté de prestations. While this is difficult to understand for non-native speaker, I understand that 1st (cotisations) will impact your retirement based on all the contributions, interest gain, investment during product life. In second case, p. d. prestations, your retirement will be based on certain % of your last or your 5 last year salaries. There is also difference between the two in terms of benefit for your family in case you die or accident. 92 % people will have the first version of the fund. My understanding is that version 2, primauté de prestations is much better, but I have read that only 6-8 % of all employees benefit from it.

    – Also, withdrawal to buy a house applies only to
    a) your PRIMARY house, the place where you will live and
    b) your current domicile.

    So you cannot buy with 2nd pillar money an appartment for investment or cozy chalet in Alps and if you already own a house. Also, you cannot use that money to build fancy marble pool in your house, but you should use it for “real” housing needs, building stairs, painting, renovation, etc.

    Point b is important. . Many foreigners think : I will contribute more voluntarily, save on tax and after 3 years take that to buy my house in external country, Serbia, China, etc. NO, you cannot do that with 2nd pillar money. You can buy a house only in Switzerland, basically.

    1. Hi Hubert,

      1) You are entirely right. This is a very good point, I did not think of that. I will mention this in the article.
      2) That’s interesting, I did not know it was working like that. What you describe makes more sense than simply blocking the money. I will have to read more on the subject and update the post.
      3) That’s another very good point! I knew there was this difference, but I honestly did not think it was such a big difference. I will have to integrate this into the article. I just have to find a way to translate that!
      I am not sure version 2 is significantly better. It will highly depend on how many years you plan to work. For early retirement, the second version would be bad I think but I did not do the math.
      4) That’s correct, this is only for the primary house. I forgot to mention it! I will update the article.

      Thanks a lot for commenting! This is extremely helpful!

      1. Happy to contribute and I hope it was not too mundane to read. By the way – if you are native, then maybe you can double check with sources or even tax office point no 2. That withdrawal before 3 years is for sure possible but I cannot figure out how they calculate tax, especially if you have more money paid in before (from regular contributions by yourself and employer). I am pretty sure they should tax retroactively only that amount you put in last 3 years and not the whole package, but before taking any money out, I would doube check with tax administration. Thanks again and happy new 2020.

          1. Hello, guys. Thanks for the info and the following additional thoughts. I am still learning how the system actually works.

            1. Just one point: so when you leave the country or retire and claim the money back, do you guys have any idea about how much is taxed after all? What will be my penalty rate if I have, let’s say, 100k CHF? I live in Vaud now (if that helps since every Canton has its own laws) and I’m not considering the situations when you need to buy a house or start a company.

            2. It would be nice, Mr. Poor Swiss, if possible, to write a little bit about the differences in tax in different Cantons. I heard and read a few stories about how changing where you live can actually save you a lot of money in the long term (if that’s an option to you, of course)

  8. Hi
    If a pension fund performs bad like 5% down a year, does it mean employee pension goes down by 5%? Which is the best performing pension fund ?

    Thanks
    Mike

    1. Hi Mike,

      It will largely depend on your second pillar fund. Most of the funds have a fixed interest rate. It means that you will get 1% interest regardless of the performance of the fund.
      But some have shared risk, so if the fund loses 5%, you may lose 2% or 3%.
      No, I do not know about the best performing one. They are generally very conservative and not performing really well but are quite safe.

      Thanks for stopping by!

  9. Hi there, do you know if the 3-year lock-in rule after making voluntary additional buy-ins apply to cashing out on grounds of self-employment and/or departing Switzerland permanently too? If no hard lock-in applies, are there any requirements to pay back the tax savings achieved in the previous 3 years?

    Also, does your statement “Contributions into your second pillar after early withdrawal will not be tax-free.” apply to only the case of early withdrawal for purchasing property? Or does it apply in self-employment and/or leaving Switzerland too?

    Thanks!

    1. Hi Alan,

      I know that they apply to self-employment withdrawal as well as property. I am not entirely sure they apply to leaving Switzerland, but I would think it does. You can check that with your local retirement office.
      I think it’s a hard lock-in, no way to pay back the tax savings and get the money.

      For the second part, I would say it applies to both property and self-employment at least. And it probably applies to leaving Switzerland too but again I am not sure about that.

      Thanks for stopping by!

      1. Just to be sure, the 3y lock-in only applies to the amount of the extra buy-ins right? You are still free to withdraw the other parts of your pot (i.e. regular employer & employee monthly contributions and buy-ins that were made 4 or more years ago), right?

        So for example, when you wish to cash out the Pillar 2 pot upon starting self-employment, you can still cash out the portion of the port that is “free from lock-in” even if you had extra buy-ins in the most recent 3 previous years. And for the portion that is still “locked”, you can transfer it to a vested benefits account of your choice. But not sure if you can still cash out the vested benefits account once the 3y lock-in expires as I understood cashing out of Pillar 2 must occur within 1 year of becoming self-employed…

        And regarding the “hard lock”, I found this article which actually states that violating the 3 year rule would lead to back taxes being due (which then suggests the lock is not absolutely hard).
        https://www.steueramt.zh.ch/internet/finanzdirektion/ksta/de/aktuell/mitteilungen/amtsmitteilungen_2015/einkaeufe_bvg_2015.html

        1. Hi Alan,

          Yes, you are right, it only applies to the extra buy-ins. It does not lock everything before and does not mandatory contributions by you and your employer. It only locks voluntary contributions.
          I do not think you will be able to cash the extra buy-ins for the same self-employment, 3 years later, no.

          It seems interesting. But my English translator is not good enough for law. So, if you really want the correct answer, I am sure your local AVS office will help you better than I could :)

          Thanks for stopping by!

  10. My UK 2020 (Self-Invested) Pension performance: +96%

    Swiss pillar 2 performance: +1%

    I think I’ll take the withdrawal every 5 years and then massage the money into my Degiro … How many years before we are allowed to invest pillar 2 as we want?

    In every way apart from pensions and Sunday shopping this is a much better country though!

    1. Hi Joe,

      Indeed, the performance on the second pillar is absolutely terrible.
      I do not think we are going to see good second pillar accounts (except for vested benefits) for many years…

      Regarding Sunday shopping, I actually love it! No point in going shopping every day for me.

      Thanks for stopping by!

  11. Hi Mr. TPS. Great article!

    A quick question about the second pillar. My employer pays for me an annual fixed pension contribution rate of 8.5%. I can choose a pension contribution rate of 4.5%, 6.5% or 8.5% and I need to make this choice at the beginning of each year.

    Though, I have no clue about what a wise choice would be in this case for me :)

    Do you have any suggestion?

    Thanks a lot in advance!

    Roberto

    1. Hi Roberto,

      It will depend on your goals. If your goals are really long-term, it’s difficult to justify investing money in the second pillar since the returns are extremely low.
      If you do not invest yourself, then it changes again since the second pillar is better than cash.
      So, it depends on many factors.

  12. Dear Mr TPS,

    Thank you for this very useful info.

    I am planning to return to the UK this year (virus permitting!) having worked in Geneva for the last 15 years as a transfrontalier worker and was wondering if it is now possible to withdraw the 2nd Pillar now that the UK is no longer a member of the EU or EFTA. Do you have any news on that?

    Also, I heard that there are organisations which help with the bureaucracy for a fee? Is that a good idea and where would I have to pay the tax at source?

    Grateful for any advice,
    Best wishes
    Rich

    1. Hi Rich,

      Unfortunately, I have no idea. I have not researched the content of the Brexit deal.

      You mean the bureaucracy to withdraw the second pillar? I am not sure you need it. I would expect this to be possible directly by talking to your vested benefits (maybe even second pillar) foundation.
      You will pay the tax based on the domicile of your second pillar. This is where it gets interesting because some states are much more interesting than others. So, you could save money by transferring your second pillar money into a vested benefits account at valuepension and then a few years later cash it.

      Thanks for stopping by!

  13. Hello!
    Thanks a lot for your valuable information.
    I have a small question concerning the calculation of the 2nd pillar.
    I recently changed jobs and thus changed the pension fund.
    I was surprised with the small amount that was transferred to my new pension fund…
    I did a quick calculation.
    300CHF (my monthly contribution/deductions (LPP) – mentioned on my salary slip)
    36 months (working time)
    The amount that should have been transferred is:
    300*36*2= 21600 CHF.
    However, only ~16500CHF were transferred.

    Does the min/max insured salary play a role?
    Is there anything I’m missing here or is it a mistake from the pension fund?

    Thank you in advance!
    AJ

    1. Hi AJ,

      Are you sure the 300 CHF per month is only for the second pillar? There are other deductions on your salary.
      Are you sure that your employer is contributing the same as you? There are some cases where employees are allowed to contribute more but this extra contribution is not matched by the employer.
      Did your salary change over time? If 3 years ago your salary was lower, you would have contributed less per month. The same would happen if you just crossed into the next age group (25-34, 35-44, 45-54, 55-65) where the contribution is increasing.

      Now, if you take your 36 monthly salary slips and sum the contribution, you should have a number close to what is transferred. If the amount transferred is significantly lower, you could contact the previous pension fund to know where did the difference comes from.

  14. Hello,
    I live in the United States and I am thinking about withdrawing my second pillar from Rendita in Winterthur. Will I have to pay the tax in Canton Zurich or in Fribourg, my native Hometown ? Thank you very much

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