Go Back   English Forum Switzerland > Help & tips > Finance/banking/taxation
Reply
 
Thread Tools Display Modes
  #1  
Old 23.09.2016, 11:19
Junior Member
 
Join Date: Apr 2007
Location: Geneva
Posts: 43
Groaned at 0 Times in 0 Posts
Thanked 2 Times in 2 Posts
Yarg has no particular reputation at present
Purchasing 2eme / LPP topup

Hi All,

I was away from Switzerland for about 14 months on unpaid leave. In the interrim, my emloyer was purchased by a bigger company and so technically I've changed employers at the same time as starting work again this year.

I contacted the pension company and asked about topping up the contributions which are missing. They have come back stating that I can purchase approx CHF 20k in missing contributions.

My question to the board experts is whether in the long-term it's worth injecting that 20k which we currently have as savings, or better to use it in other ways, eg we need to get a car now that we are back working. If we don't buy those contributions back now, does it become more expensive to do so later? Or will it always just be a fixed amount of 20k missing which I can top up progressively over time?

Retirement is still 30 years away and we plan to remain working in Switzerland for that time if possible if it makes any difference...

Thanks for any pointers on the murky world of pensions!
Reply With Quote
  #2  
Old 23.09.2016, 11:41
fatmanfilms's Avatar
Forum Legend
 
Join Date: Apr 2010
Location: Verbier
Posts: 13,716
Groaned at 209 Times in 181 Posts
Thanked 11,029 Times in 6,254 Posts
fatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond repute
Re: Purchasing 2eme / LPP topup

I topped up 35,000 & 10 years later it had hardly grown. Investing in equities the value would have doubled or more, I would say it's a bad deal, I saved less than 9k in tax but paid only 2 k on withdrawal so did make 7k on the deal.

Quote:
View Post
Hi All,

I was away from Switzerland for about 14 months on unpaid leave. In the interrim, my emloyer was purchased by a bigger company and so technically I've changed employers at the same time as starting work again this year.

I contacted the pension company and asked about topping up the contributions which are missing. They have come back stating that I can purchase approx CHF 20k in missing contributions.

My question to the board experts is whether in the long-term it's worth injecting that 20k which we currently have as savings, or better to use it in other ways, eg we need to get a car now that we are back working. If we don't buy those contributions back now, does it become more expensive to do so later? Or will it always just be a fixed amount of 20k missing which I can top up progressively over time?

Retirement is still 30 years away and we plan to remain working in Switzerland for that time if possible if it makes any difference...

Thanks for any pointers on the murky world of pensions!
Reply With Quote
  #3  
Old 23.09.2016, 14:51
Member
 
Join Date: Jul 2011
Location: Gland
Posts: 170
Groaned at 0 Times in 0 Posts
Thanked 109 Times in 76 Posts
Macer is considered knowledgeableMacer is considered knowledgeableMacer is considered knowledgeable
Re: Purchasing 2eme / LPP topup

You can usually top up at any point. The amount is likely to get larger. This is because in future years you will need to pay the 20K, plus any income that the 20K would have generated in your pension pot.

FMF, had a pretty bad case I think. By law, they have to pay a minimum of 1.25% at the moment, and the average pension has paid about 3.5% a year over the last 10 years. So, over a 10 year period, you should be looking at more that a 40% return. But, none of the rates are guaranteed! The minimum can be reduced... and the average came down quite a lot!

As FMF mentioned, there are also potential tax benefits. You can reduce the buy back from your taxable income. Again, the actual amount is dependent on your personal situation.

Personally, I always put some of my investments into the 2nd pillar becasue I see it as a good hedge against the debt I have on my mortgage... currently, the income is higher than my mortgage rate and the 2nd pillar can be used to repay a mortgage. And, the payout will generate quite a good income for my family if anything should happen to me.

Last edited by Macer; 23.09.2016 at 14:58. Reason: Corrected minimum rate
Reply With Quote
  #4  
Old 23.09.2016, 14:59
aSwissInTheUS's Avatar
Forum Legend
 
Join Date: Nov 2007
Location: Zurich area
Posts: 5,028
Groaned at 40 Times in 38 Posts
Thanked 7,070 Times in 3,215 Posts
aSwissInTheUS has a reputation beyond reputeaSwissInTheUS has a reputation beyond reputeaSwissInTheUS has a reputation beyond reputeaSwissInTheUS has a reputation beyond reputeaSwissInTheUS has a reputation beyond reputeaSwissInTheUS has a reputation beyond repute
Re: Purchasing 2eme / LPP topup

Quote:
View Post
FMF, had a pretty bad case I think. By law, they have to pay a minimum of 1.75% at the moment, and the average pension has paid about 3.5% a year over the last 10 years.
Show me pension fund which paid an average of 3.5% in interest over the last ten years.

Here a list which may help with your research:
http://www.pensionskassenvergleich.c...agszeitung.pdf

Also, the minimum for 2016 is just 1.25%
Reply With Quote
This user would like to thank aSwissInTheUS for this useful post:
  #5  
Old 23.09.2016, 15:01
roegner's Avatar
Forum Legend
 
Join Date: May 2011
Location: Zurich
Posts: 3,023
Groaned at 87 Times in 65 Posts
Thanked 3,043 Times in 1,559 Posts
roegner has a reputation beyond reputeroegner has a reputation beyond reputeroegner has a reputation beyond reputeroegner has a reputation beyond reputeroegner has a reputation beyond repute
Re: Purchasing 2eme / LPP topup

Quote:
View Post
You can usually top up at any point. The amount is likely to get larger. This is because in future years you will need to pay the 20K, plus any income that the 20K would have generated in your pension pot.


What needs to be paid in? Other than the "mandatory" payments from your employer and yourself, there is no need/requirement to top up?


I do pay in to get some tax relief from that but put a similar amount in stock/funds etc.
Reply With Quote
  #6  
Old 23.09.2016, 15:24
Senior Member
 
Join Date: May 2007
Location: Basel
Posts: 436
Groaned at 11 Times in 7 Posts
Thanked 146 Times in 98 Posts
SwissMorgs has earned some respectSwissMorgs has earned some respect
Re: Purchasing 2eme / LPP topup

Quote:
View Post
I topped up 35,000 & 10 years later it had hardly grown. Investing in equities the value would have doubled or more, I would say it's a bad deal, I saved less than 9k in tax but paid only 2 k on withdrawal so did make 7k on the deal.
So you made 20%?

Where would you put the cash instead, fundsmith?
Reply With Quote
  #7  
Old 23.09.2016, 22:55
Member
 
Join Date: Jul 2011
Location: Gland
Posts: 170
Groaned at 0 Times in 0 Posts
Thanked 109 Times in 76 Posts
Macer is considered knowledgeableMacer is considered knowledgeableMacer is considered knowledgeable
Re: Purchasing 2eme / LPP topup

Quote:
View Post
Show me pension fund which paid an average of 3.5% in interest over the last ten years.

Here a list which may help with your research:
http://www.pensionskassenvergleich.c...agszeitung.pdf

Also, the minimum for 2016 is just 1.25%
Yes. You were quick. As soon as I posted, I edited the post to correct the minimum. I realised that I hadn't actually looked at any data for a while, and corrected my mistake asap.

The article you posted is good. I can't read German, but the charts are clear. And it is great that it details each fund. I have been using the data on the Credit Suisse Pension Fund Index. There, the last 10 years average return is 3.015%. (Over 11 years, the average is 3.89%).

But, this average is way higher than the return in your article. So, now I am wondering, which pension fund that is not listed in the article, but uses Credit Suisse as a custodian is performing so well, that it can pull up the average so much....
Reply With Quote
  #8  
Old 23.09.2016, 22:59
Member
 
Join Date: Jul 2011
Location: Gland
Posts: 170
Groaned at 0 Times in 0 Posts
Thanked 109 Times in 76 Posts
Macer is considered knowledgeableMacer is considered knowledgeableMacer is considered knowledgeable
Re: Purchasing 2eme / LPP topup

Quote:
View Post
What needs to be paid in? Other than the "mandatory" payments from your employer and yourself, there is no need/requirement to top up?


I do pay in to get some tax relief from that but put a similar amount in stock/funds etc.
No, there is not a requirement to top up. Any 'buy backs' are optional.
Reply With Quote
  #9  
Old 26.09.2016, 12:25
Junior Member
 
Join Date: Apr 2007
Location: Geneva
Posts: 43
Groaned at 0 Times in 0 Posts
Thanked 2 Times in 2 Posts
Yarg has no particular reputation at present
Re: Purchasing 2eme / LPP topup

Thanks for all your replies. Guess some more research and umm-ing and ah-ing is going to be needed!

Reply With Quote
  #10  
Old 26.09.2016, 13:01
aSwissInTheUS's Avatar
Forum Legend
 
Join Date: Nov 2007
Location: Zurich area
Posts: 5,028
Groaned at 40 Times in 38 Posts
Thanked 7,070 Times in 3,215 Posts
aSwissInTheUS has a reputation beyond reputeaSwissInTheUS has a reputation beyond reputeaSwissInTheUS has a reputation beyond reputeaSwissInTheUS has a reputation beyond reputeaSwissInTheUS has a reputation beyond reputeaSwissInTheUS has a reputation beyond repute
Re: Purchasing 2eme / LPP topup

Quote:
View Post
The article you posted is good. I can't read German, but the charts are clear. And it is great that it details each fund. I have been using the data on the Credit Suisse Pension Fund Index. There, the last 10 years average return is 3.015%. (Over 11 years, the average is 3.89%).

But, this average is way higher than the return in your article. So, now I am wondering, which pension fund that is not listed in the article, but uses Credit Suisse as a custodian is performing so well, that it can pull up the average so much....
I assume the difference is in actual payout to account holders vs. performance of the fund itself. The difference is: used to finance the fund, pocketed by the managment, put in a reserve pot.

The performance of the funds is listed at "Schwache Renditen bei allen Anlagen" (where they cut the Gold Cake). The payout is listed at "Tiefe Zinsen drücken auf die Rendite"
Reply With Quote
  #11  
Old 26.09.2016, 14:03
Forum Veteran
 
Join Date: Feb 2012
Location: ZH
Posts: 585
Groaned at 36 Times in 29 Posts
Thanked 346 Times in 222 Posts
ivank has no particular reputation at present
Re: Purchasing 2eme / LPP topup

Quote:
View Post
My question to the board experts is whether in the long-term it's worth injecting that 20k
Long term no.

Short term, yes, for tax avoidance, if you plan on getting the money out in a few years anyway (for property or moving abroad). But I'd utilize pillar 3a to the max here first, its withdrawal conditions are more liberal.

Quote:
or better to use it in other ways, eg we need to get a car now
A car is an expense, not investement. You're guaranteed to lose money on its deprectiation.
Reply With Quote
Reply




Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
pension LPP transfer vaudoise Finance/banking/taxation 1 25.07.2016 16:02
AVS and 2eme pillier Nathyb Leaving Switzerland 9 19.10.2015 23:48
Avs, 2eme pillier and car leasing Nathyb Leaving Switzerland 8 02.09.2015 13:42
Vodafone UK mobile topup paizuri TV/internet/telephone 3 11.11.2008 11:22
Claim LPP coco Finance/banking/taxation 7 02.11.2006 08:01


All times are GMT +2. The time now is 03:59.


Powered by vBulletin® Version 3.8.4
Copyright ©2000 - 2016, Jelsoft Enterprises Ltd.
LinkBacks Enabled by vBSEO 3.1.0