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Old 21.05.2015, 16:17
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Payback Pillar 2 or invest externally?

A question that I cannot find answered elsewhere...

My wife and I already had offshore pensions rolling along when we arrived in Switzerland, which we've continued to add to. Since these provisions were already in place, we recently used the majority of our combined Pillar 2 funds towards the deposit on an apartment.

Now we're trying to work out, what's best... to use our monthly extra savings to pay back these Pillar 2 funds directly (tax efficient we believe but typically low annual interest rates of only 2-3%), OR invest instead in non-tax efficient mutual funds such as index funds - via brokerages such as TD Investing - where we could reasonably expect much better compounded returns over the long term.

Note: we already have Pillar 3As set-up, which we max out every year, which is why these aren't proposed.

We've rather reached the ceiling of our math knowledge, so not sure how to calculate the best approach moving forwards. Appreciate any solid advice, thanks!
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Old 21.05.2015, 16:52
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Re: Payback Pillar 2 or invest externally?

AIUI if you've used your pillar 2 for property purchase, you are going to have to pay it back in at some point, either when you move next or before you retire (check which). If you can get a better return on the money before you have to pay it back in, then it makes sense to do that so that you can actually pay in more in a shorter time, no? The trick is not to lose money on a higher-risk investment (for the higher return). If you pay back directly into pillar 2, you won't get high returns but you also run no risk of losing money that is ultimately earmarked to go back in
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Old 26.05.2015, 07:49
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Re: Payback Pillar 2 or invest externally?

I am having the same question at the moment. I keep hearing Pillar 2 is good for saving taxes, but highly unreliable, specially if you are not close to retirement age. We run the risk that others, retiring early and living forever, as they do in Switzerland, will max out the funds on Pillar 2. There are discussions on changing the current payback model, and so what you put in, might not necessarily come back to you later in life.
My finance advisor strongly adviced not to put a single penny extra on Pension 2... But I also cannot calculate really the impact on taxes of just investing...
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Old 26.05.2015, 09:32
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Re: Payback Pillar 2 or invest externally?

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I am having the same question at the moment. I keep hearing Pillar 2 is good for saving taxes, but highly unreliable, specially if you are not close to retirement age. We run the risk that others, retiring early and living forever, as they do in Switzerland, will max out the funds on Pillar 2. There are discussions on changing the current payback model, and so what you put in, might not necessarily come back to you later in life.
My finance advisor strongly adviced not to put a single penny extra on Pension 2... But I also cannot calculate really the impact on taxes of just investing...
As there is no CGT in CH, if pension funds perform well you will pay significantly more tax in the end.

With a pension 800 would attract tax relief, invested privately the billions would be tax free
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