Hello awesome folk,

I recently decided to buy back some years of 2eme Pillier, kiling two birds with a stone

Reducing my taxable income while increasing my years of service.

I arrived here past 2005 and according to the letter with calculations I got back from the pension fund, I can buy back a maximum of ~15k (don't know how this translates to years, if at all)

My question to you is - how much of this 15k will be tax deductible, should I pay it before year-end? All of it? Up to a limit? If up to a limit, can I pay the max deductible this year and still buy-back more next year, or is this a one-time thing?

I am also considering a 3eme pillier account, but there I know the max is ~6,5k a year and I think I will adhere to that.

Is there anything else I can employ as investment/savings tool to reduce my taxable income and yet increase the savings and future potential of buying a house, for example?

Thank you for any pointers and advice!

"I arrived here past 2005"
Not sure exactly your meaning, but if you were here before 2006 then I think the amount you can contribute is not limited by salary. If you arrived after 01-Jan-2006, I think you are limited to 20% of salary.

The 15k will relate to your age, your insured salary and the value already contributed in your pension.

In principle if you pay ('purchase missing years') 15k into the pension before the 2010 deadline (likely to be mid-December - ask your pension provider) then the whole amount can be recorded on your 2010 tax return as a reduction in taxable salary. However, if this reduces your taxable salary to a silly low level (don't know how that is defined - I think it is the whim of the tax man) then the tax relief won't apply e.g. your salary is 100k, you have a 150k gap in your pension and you purchase 95k missing years, tax man may not be happy.

Assuming next year you are still in pensionable employment and your insured salary is similar, any unfilled hole will remain - so sure, pay 10k this year and 5k next for example. If you are planning to earn a lot more next year, it may make sense to defer the purchase, as the tax saving effect is more pronounced on higher salaries e.g. a low salary you may save 10-15%, on a high salary you may be saving 30-35% marginal rate.

A few points about the 2/3rd pillar money once you paid it and saved all that lovely tax. You can get it out again for the following reasons

a) owner-occupied house purchase - you will pay a tax calculated according to your place of residence - if you plan to withdraw e.g. 50k, you'll pay maybe 2-3k tax, if you plan to withdraw 500k you'll pay more like 50k tax - and that has to be paid before they give you the money from the pension (ie you must have this tax money to hand already - maybe not the easiest thing when buying a house)

b) leaving switzerland permanently - transfer it first (ie before leaving) to a low tax Freizügigkeit account (ie in Zug) as you will be taxed on the location of the stiftung holding the assets (so I read on this forum)

c) leave it and retire in luxury - for this is it good to pay into a series of 3rd pillar accounts, a different one each year, or a least have a handful that you can rotate between - when you cash in after you retire you can then take a lump of money each year at relatively low tax rate from a different 'pot' - but withdrawals from a single account are limited to one every 5 years - it can get expensive to cash in all in one tax year as the tax rate rises according to amount withdrawn

Thank you, Jaudi! Very informative reply!

The sole reason I mention "came after 2005" is a small print on the questionnaire I had to fill-in to receive the estimate: figured this should matter or have some impact on what I can/cannot buy back.

Most certainly, I will first open me and my wife 3a accounts for the year and then decide what to put in the 2eme

I didn't know one could have more than one 3a account, thus acquiring flexibility with his/her savings. Will open my first this year and shop around for another one next year. Any tips as to how to do this? Can I have multiple 3a accounts with the same bank/insurance/fund, or should these (is it smarter to) be different each year?

Thanks again for your advice

Thought to revive this thread seeing it is coming to year end and some of us maybe considering paying (extra) into 2nd pillar pension fund of company to enjoy tax refund for 2011.

Basically I have done some readings about this topic and am wondering if making additional payment into second pillar is advisable for people under 30 (means not anywhere near retirement age). I know there are two goals for making additional payment - to fill in "hole" or to enable early retirement. But for me at this stage it is the ability to offset some tax paid in taxable income that is interesting. I read about the 3-year lock after payment. It seems that if I am going to leave CH soon, the additional payment would have to be transferred to a Freizügigkeitskonto and be locked for three years before I can withdraw it.

Has anyone experience in this? Due to career reason I might move at anytime (but for sure not before end of 2011 - so a full tax year 2011), but the witholding tax correction would only happen somewhere in March. Although it is highly possible I will stay after March too, but I am just wondering is it too high a risk for me to take? If somehow the tax relief is not approved, I would be subjected to "punishment" (in form of tax paid when capital withdraw) if I have to move out CH...so it won't be a good move for me afterall.



Another point worth considering is of course the point above where it makes much sense to defer the payment if we are going to have a higher salary. I think it is the reason why the additional payment is advised when one is at the age of near-pensionable age (assuming people will have the highest salary as they advance in their career)

But for someone who is most likely not going to retire in CH, isn't it better to claim the money before one leaves permanently?

Will appreciate any thought on this! Thanks.

I paid 50% of salary one year to buy all the missing years, totally deductable however I wiuld have paid less tax if I could have split it over 2 or 3 years. As I expected the company to go bankrupt, this was not an option & yes they did go down 18 months later!

But when you move to a new company, is the new company in CH/Europe? I mean if it is in Europe, basically you still cannot withdraw the money, can you? And assuming you are earning more working now than working at the previous bankrupt company, isn't it better to buy the missing years now?

Thanks for the explanation...

I have not had a full time job since, so could not buy the years now. It's in a frozen account.

Oh I see. If you plan to have a full time job in future, then the money (I assume it is now in a Freizügigkeitskonto?) has to be transferred to the pension fund of the new company. Of course if you have not full time all the way till retirement it is indeed better to buy it on the last few years when you were employed.

Just out of curiosity, did you do a proper tax return to claim back the tax? As I am still paying withholding tax the only possibility I have is to fill in the "correction" form in March next year....wondering whether it would be ok...

I had a C permit at the time so just filled in a tax return. My tax bill dropped by 2/3rds that year.

I am kind of new in Switzerland and try to figure out the tax deductions via 2nd or 3rd pillar.. msntongue:
Is there any difference between 2nd and 3rd pillar in terms of tax deduction, benefits, withdraw? Shall I first use the 2nd pillar gap, and then consider the 3rd pillar?
Thanks!

There is no difference regarding the deduction, but whilst you can buy back years for pillar 2, you can only use your 6,800 (approx) that year, so use it up first