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Old 16.03.2015, 17:49
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Swiss pension question

asking this for a friend. If you have an employer pay into a swiss pension how many years would you need to work for the company for you to benefit from this?
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Old 16.03.2015, 18:11
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Re: Swiss pension question

How long is a piece of string?
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Old 16.03.2015, 18:14
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Re: Swiss pension question

The Swiss state pension (AVS) is obligatory from the first day of employment, if working more than 8 hours per week, until retirement age.

https://www.google.ch/?gws_rd=ssl#q=avs+suisse

All other pension payments are regulated/agreed by the individual employment contract. A reasonable job has a contributory pension scheme.

Swiss pensions consolidated summary
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Old 16.03.2015, 18:17
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Re: Swiss pension question

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How long is a piece of string?

Sorry if my question is that vague.


I just know in some places you must pay in for a number of years before you can benefit. So I am unclear if it is the same in Switzerland and figured I'd ask for the friend.
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Old 16.03.2015, 18:23
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Re: Swiss pension question

It is a bit like getting a company car: some are good, some are not so good. Generally in life you get out, what you pay in.

You need to take friend to a specialist, there are just too many variables.
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Old 16.03.2015, 18:42
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Re: Swiss pension question

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Sorry if my question is that vague.


I just know in some places you must pay in for a number of years before you can benefit. So I am unclear if it is the same in Switzerland and figured I'd ask for the friend.
It depends on what you mean by "benefit"... you can benefit in various ways like using your pension assets to withdraw money to purchase a home, for example. If you mean at what age can you start claiming what you've paid in, that very much depends on your pension fund, salary etc. That's why the question is so vague... perhaps I didn't understand exactly what you wanted to say. You talked about employers so I assumed you meant an occupational pension rather than state pension (I can't understand why Sbrinz mentioned AVS but maybe something's gone over my head).
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Old 16.03.2015, 18:46
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Re: Swiss pension question

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Sorry if my question is that vague.


I just know in some places you must pay in for a number of years before you can benefit. So I am unclear if it is the same in Switzerland and figured I'd ask for the friend.
There is no minimum time.

Tom
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Old 16.03.2015, 18:54
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Re: Swiss pension question

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It depends on what you mean by "benefit"... you can benefit in various ways like using your pension assets to withdraw money to purchase a home, for example. If you mean at what age can you start claiming what you've paid in, that very much depends on your pension fund, salary etc. That's why the question is so vague... perhaps I didn't understand exactly what you wanted to say. You talked about employers so I assumed you meant an occupational pension rather than state pension (I can't understand why Sbrinz mentioned AVS but maybe something's gone over my head).
Perhaps Sbrinz mentioned AVS because the OP didn't specify if they were refering to a private pension or a state one, so he's covered both possibilities.
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Old 16.03.2015, 19:08
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Re: Swiss pension question

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There is no minimum time.

Tom

So if you work for the employer 1 year vs 10 you'd still get a pension when you retire or the option of claiming the money back?

That is what I was meaning by min age. If you work somewhere a long time I can understand it's simple but I know in the UK it's a certain number of years before you could ever claim in future.
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Old 16.03.2015, 19:42
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Re: Swiss pension question

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Perhaps Sbrinz mentioned AVS because the OP didn't specify if they were refering to a private pension or a state one, so he's covered both possibilities.
But OP mentioned an employer paying into a fund, hence me not seeing how a state pension is relevant.

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So if you work for the employer 1 year vs 10 you'd still get a pension when you retire or the option of claiming the money back?

That is what I was meaning by min age. If you work somewhere a long time I can understand it's simple but I know in the UK it's a certain number of years before you could ever claim in future.

Yep, that's right.
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Old 16.03.2015, 19:57
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Re: Swiss pension question

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...but I know in the UK it's a certain number of years before you could ever claim in future.
For state pension (tier 1), yes. I don't know the current minimum in UK, but for those retiring after 2016 I think you will get nothing without paying NI contributions for at least 10 years. Then you will get 1/35th of a full pension for every year you paid - I think (I'm sure FatmanFilms will correct if necessary).

As far as I know the Swiss state pension does not have such a minimum number of years, but I could be wrong. On retirement I believe you get 1/44th of a full pension for every year you paid in.

Regarding company pensions (tier 2) - I think sometimes in the UK there can be a rule that if you are in the scheme less than e.g. 2 years, you will 'cash-out' rather than stay insured if you leave the company. The situation in Switzerland is rather different, in part because you are supposed to transfer your pension to your next employer, rather than have multiple pensions from previous employers. I think there is a rule that if your vested benefit is less than some small amount you can still cash-out.
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Old 16.03.2015, 20:59
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Re: Swiss pension question

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That is what I was meaning by min age. If you work somewhere a long time I can understand it's simple but I know in the UK it's a certain number of years before you could ever claim in future.
So in a nutshell most company pensions work like this - each year you and your employer pay an amount in the fund, if you leave before retirement then all the money (yours + your employers) gets transferred to the pension fund of your new employer and so on until you reach retirement age at which point the total amount is converted to a monthly pension.

If for some reason you stop working before retirement age, then the total amount is transferred to a blocked account where interest is added each year until you reach retirement age and can access it.

That is the usual situation for a person who is permanently resident here. If you are an expat and leave the country there are some options for transferring it to another pension in a EU state or having the money paid out to you after a tax deduction. Or you can simply leave the money here in a blocked account until you retire.
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Old 16.03.2015, 21:05
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Re: Swiss pension question

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So if you work for the employer 1 year vs 10 you'd still get a pension when you retire or the option of claiming the money back?
Yes, but the amount depends on what you've paid in.

AVS may have a minimum, but 2p doesn't.

Tom
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Old 25.03.2015, 08:33
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Re: Swiss pension question

This is not intended as a threadjack; the original question was answered in the usual accuracy.

But I have just been confronted with a disturbing bit of information. My certified US tax specialist (and who dares to not have one these days) told me that when I transfer my 2nd column pension to a blocked account (Freizügigkeitskonto) or if I transfer it to the state 2nd column pension (Auffangseinrichtung) it is recognized as a distribution and will be taxable. Has anyone had that experience?

Apparently it has to do with Uncle IRS's interpretation of a nonqualified pension plan.
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Old 25.03.2015, 09:25
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Re: Swiss pension question

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But I have just been confronted with a disturbing bit of information. My certified US tax specialist (and who dares to not have one these days) told me that when I transfer my 2nd column pension to a blocked account (Freizügigkeitskonto) or if I transfer it to the state 2nd column pension (Auffangseinrichtung) it is recognized as a distribution and will be taxable. Has anyone had that experience?

Apparently it has to do with Uncle IRS's interpretation of a nonqualified pension plan.
Interesting interpretation. I know an American who first transferred her Säule 2 pension to a Freizügigkeitskonto and then later to the Auffangeinrichtung. The CPA did not consider these two transfers to be a distribution.
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Old 25.03.2015, 10:19
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Re: Swiss pension question

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This is not intended as a threadjack; the original question was answered in the usual accuracy.

But I have just been confronted with a disturbing bit of information. My certified US tax specialist (and who dares to not have one these days) told me that when I transfer my 2nd column pension to a blocked account (Freizügigkeitskonto) or if I transfer it to the state 2nd column pension (Auffangseinrichtung) it is recognized as a distribution and will be taxable. Has anyone had that experience?

Apparently it has to do with Uncle IRS's interpretation of a nonqualified pension plan.
Swiss second pillar is already taxable as it is already nonqualified. You should have already been paying tax on your AND your employers contributions. As such it would then not be taxed twice. What I am not 100% sure, not yet there myself, if the earnings are taxed at distribution, but your basis no, as already taxed. Get a new "certified" tax specialist and read some of the threads here on EF on IRS taxation of swiss retirement accounts.
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Old 25.03.2015, 11:13
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Re: Swiss pension question

Many thanks for the two replies above.

I have been avidly reading the threads and am grateful that so many people post their experiences. One hears so many different scenarios it is nearly impossible to choose one. Inevitably one ends up learning the hard (and expensive) way.

I will pursue this further.
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Old 25.03.2015, 15:17
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Re: Swiss pension question

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Many thanks for the two replies above.

I have been avidly reading the threads and am grateful that so many people post their experiences. One hears so many different scenarios it is nearly impossible to choose one. Inevitably one ends up learning the hard (and expensive) way.

I will pursue this further.
Coming back to this...

I've read alot of the existing posts and they have been very helpful. I've spend some time on the IRS website and printed various instructions and forms.

I haven't had a great deal of time to sit down with these, but my initail impression is:

a) I reported my full salary (as it appeared on my Lohnausweis) and my tax should be (and was) calculated accordingly. Hence, my contributions to the Column 2 pension plan were taxed as required.
b) My company's contribution to my Column 2 pension plan should be reported on the Form 8938. These do not appear to be taxed yet since this is only an attachment.

There is no FATCA reporting obligation for pension funds in Switzerland since the IRS considers them to be of low risk for tax evasion.
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Old 25.03.2015, 17:59
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Re: Swiss pension question

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I haven't had a great deal of time to sit down with these, but my initail impression is:

a) I reported my full salary (as it appeared on my Lohnausweis) and my tax should be (and was) calculated accordingly. Hence, my contributions to the Column 2 pension plan were taxed as required.
b) My company's contribution to my Column 2 pension plan should be reported on the Form 8938. These do not appear to be taxed yet since this is only an attachment.

There is no FATCA reporting obligation for pension funds in Switzerland since the IRS considers them to be of low risk for tax evasion.
I'm not an expert and the IRS doesn't give a lot of direct guidance for these kinds of things, but I think you need to look further into a couple of details:

a) reporting your full salary is correct, but you should also be including your employer's contributions as income. Your employer is placing money into an account in your name and the IRS doesn't recognize a 2nd pillar account as anything special, so the compensation is income.

b) Form 8938 is only necessary if you meet the reporting requirements at which point you need to report all accounts. I don't think there is any reason why 2nd pillar would be treated differently for that form.

c) Instead of FATCA reporting obligation, do you mean FBAR? If so, you most certainly should be reporting the 2nd pillar account balance on the FBAR since it is a financial account in your name.
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Old 26.03.2015, 11:34
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Re: Swiss pension question

You are on the right track but not fully there yet. As for a) yes that is a start. But employer contributions also have to be included as income and tax paid, as the above post indicates. Thus each year employer contributions have to be added to form 1040 and tax paid.

Further, the 8938 and FBAR are just reporting of financial accounts, not for taxing. So your total interest in your second pillar, not employer contributions, is to be reported on 8938.

8938 is for FATCA reporting by individuals. Foreign banks also have FATCA reporting. Pillar 1 is exempt. Pillars 2 and 3 no.

If you also have pillar 3, taxation gets even more complidated.

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I haven't had a great deal of time to sit down with these, but my initail impression is:

a) I reported my full salary (as it appeared on my Lohnausweis) and my tax should be (and was) calculated accordingly. Hence, my contributions to the Column 2 pension plan were taxed as required.
b) My company's contribution to my Column 2 pension plan should be reported on the Form 8938. These do not appear to be taxed yet since this is only an attachment.

There is no FATCA reporting obligation for pension funds in Switzerland since the IRS considers them to be of low risk for tax evasion.
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