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Old 12.07.2007, 17:11
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Pension Second Pillar contributions

If a company has an employee earning a gross salary of say 100000k, the company must enroll him in occupational pension scheme if he works for more than 3 months with him. This is pillar 2 (in addition to the other compulsory element pillar 1)

My questions are :

a) What are the minimum and maximum contributions %, and on what salary are they based ?

b) If the employee bears all the company costs, is it better that the company pay all the pension pillar 2 for the employee, and so reduces his gross salary on which deductions are made.

I realise these are quite specialist questions, but I am looking at the overview stuff available on the net, and I am none the wiser...

Thanks in advance

dave
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Old 12.07.2007, 17:37
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Re: Pension Second Pillar contributions

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If a company has an employee earning a gross salary of say 100000k, the company must enroll him in occupational pension scheme if he works for more than 3 months with him. This is pillar 2 (in addition to the other compulsory element pillar 1)

My questions are :

a) What are the minimum and maximum contributions %, and on what salary are they based ?
I think the minimums are those detailed in the law, ie 7%, 10%, 15% 18% depending on age. The insured salary is the portion between 23'205 CHF and 79560 CHF (the part below 23k being covered by the first pillar). Everything above 75960 can (but doesn't have to) be insured (superobligatory insurance).

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b) If the employee bears all the company costs, is it better that the company pay all the pension pillar 2 for the employee, and so reduces his gross salary on which deductions are made.
I think Lombard Odier used to do this back then when times were better.

Last edited by Shorrick Mk2; 12.07.2007 at 17:38. Reason: typo
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Old 12.07.2007, 17:48
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Re: Pension Second Pillar contributions

Aha..the mist is starting to clear. So for this 40-year employee, the company (and poss employee share together) a total of 10% of (79560-23205) = 56355 ?

So the company pays 5636chf for this employee (and employee nothing in this scenario) ? It doesnt sound like much...

dave




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I think the minimums are those detailed in the law, ie 7%, 10%, 15% 18% depending on age. The insured salary is the portion between 23'205 CHF and 79560 CHF (the part below 23k being covered by the first pillar). Everything above 75960 can (but doesn't have to) be insured (superobligatory insurance).



I think Lombard Odier used to do this back then when times were better.
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Old 12.07.2007, 17:58
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Re: Pension Second Pillar contributions

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Aha..the mist is starting to clear. So for this 40-year employee, the company (and poss employee share together) a total of 10% of (79560-23205) = 56355 ?

So the company pays 5636chf for this employee (and employee nothing in this scenario) ? It doesnt sound like much...

dave
I think the rate applies to the employee contribution (note I'm really not sure on this part)- which the company must at least match. The company can pay in whatever it likes (i worked for a bank which paid 3x my contributions). If the company elects to take over the employee's contribution, I think it then pays 2x the 10% you mentioned.

I'm not quite sure however whether that absolves the employee from paying tax on that part.

I have a colleague who used to have a scheme like this, unfortunately he's away on holidays.
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Old 12.07.2007, 18:10
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Re: Pension Second Pillar contributions

My b*stard agency pays the absolute minimum using these 25K and 79K (-ish) limits = 6% of this 54K difference

The % vs age think I think also depends on what "class" (for want of a better word) you're in. I'm in the shittiest obviously.

You know who you are.

One advantage of a gmbh is the pension contribution on the employer side.
It is 20-30% you can contribute.

IIRC, one other rule is the company must match or exceed the employee contribution.

Of course, Richard will turn up shortly and correct us all...
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Old 12.07.2007, 18:39
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Re: Pension Second Pillar contributions

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My b*stard agency pays the absolute minimum using these 25K and 79K (-ish) limits = 6% of this 54K difference

The % vs age think I think also depends on what "class" (for want of a better word) you're in. I'm in the shittiest obviously.

You know who you are.

One advantage of a gmbh is the pension contribution on the employer side.
It is 20-30% you can contribute.

IIRC, one other rule is the company must match or exceed the employee contribution.

Of course, Richard will turn up shortly and correct us all...
What were you saying. Pensions funds its all Nebuchanezzar! Whoops different thread, what was the question cos I really do know the answer.
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Old 12.07.2007, 18:41
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Re: Pension Second Pillar contributions

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My b*stard agency pays the absolute minimum using these 25K and 79K (-ish) limits = 6% of this 54K difference

The % vs age think I think also depends on what "class" (for want of a better word) you're in. I'm in the shittiest obviously.

You know who you are.

One advantage of a gmbh is the pension contribution on the employer side.
It is 20-30% you can contribute.

IIRC, one other rule is the company must match or exceed the employee contribution.

Of course, Richard will turn up shortly and correct us all...
quoted in case they have you on ignore mate
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Old 12.07.2007, 18:50
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Re: Pension Second Pillar contributions

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If a company has an employee earning a gross salary of say 100000k, the company must enroll him in occupational pension scheme if he works for more than 3 months with him. This is pillar 2 (in addition to the other compulsory element pillar 1)

My questions are :

a) What are the minimum and maximum contributions %, and on what salary are they based ?

b) If the employee bears all the company costs, is it better that the company pay all the pension pillar 2 for the employee, and so reduces his gross salary on which deductions are made.

I realise these are quite specialist questions, but I am looking at the overview stuff available on the net, and I am none the wiser...

Thanks in advance

dave
If he is earning more than 25K they need to have him in a pension fund.

1. The minimums are set out in a table that you should be able to get hold of. It is as Shorrick says with the progressions being 18-25(=0%), 25-35, 35-45 etc. Note under 25 there is risk only. What the contributions are based on is dependent on the scheme you have in place. The minimum is on the salary lying in the difference between the AHV loan maximum and pillar 1 contributions. The maximum is theoretically fairly open until the last five years of contributions when it is in tight bands. If however you contribute too much the tax office might see this as not acceptable - problem here is that once contributed money cannot be taken back out of a pension scheme...

2. The minimum contribution of the company is 50% of the cost in which case your model won't work.

3. I know you never asked this question. As a company owner the pension scheme is the best method of tax evasion possible. This is especially true if you have multiple employees. For example if you have a good year and have surplus cash you can prepay BVG contributions up to a maximum of 5 years. This is then tax free. Now look how good this can be with this example...

4 employees each earning 100K
Pension rate is 20%
You prepay 5 years worth of BVG = 400K
You then decide to liquidate the company.
You transfer the pension schemes of the employees to their next employers scheme.
You then are still left with your scheme and your prepaid locked account. The company is closing the money is there and you are the beneficial owner. The money is thus transfered into your pension fund ie all of it.
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Old 12.07.2007, 19:46
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Re: Pension Second Pillar contributions

Surely someone should employ your services Richard? This stuff is too good to be getting free though I'm not complaining. Are your services for hire?
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Old 12.07.2007, 21:28
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Re: Pension Second Pillar contributions

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quoted in case they have you on ignore mate
Cheers. Wouldn't want them to miss it...
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Old 12.07.2007, 23:15
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Re: Pension Second Pillar contributions

What is an AHV-Loan-Maximum as mentioned below (my bold) ?

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If he is earning more than 25K they need to have him in a pension fund.

1. The minimums are set out in a table that you should be able to get hold of. It is as Shorrick says with the progressions being 18-25(=0%), 25-35, 35-45 etc. Note under 25 there is risk only. What the contributions are based on is dependent on the scheme you have in place. The minimum is on the salary lying in the difference between the AHV loan maximum and pillar 1 contributions. The maximum is theoretically fairly open until the last five years of contributions when it is in tight bands. If however you contribute too much the tax office might see this as not acceptable - problem here is that once contributed money cannot be taken back out of a pension scheme...
Is the key to this that you have prepaid BVG for all your empoyees ,and yet when you liquidate, say after year one, you only pass on that one year of employee contributions to your employees' new scheme leaving you as the (company owner) beneficiary of the remaining prepaid three years of everyones contributions ? If I understand this correctly then this is great.
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3. I know you never asked this question. As a company owner the pension scheme is the best method of tax evasion possible. This is especially true if you have multiple employees. For example if you have a good year and have surplus cash you can prepay BVG contributions up to a maximum of 5 years. This is then tax free. Now look how good this can be with this example...
4 employees each earning 100K
Pension rate is 20%
You prepay 5 years worth of BVG = 400K
You then decide to liquidate the company.
You transfer the pension schemes of the employees to their next employers scheme.
You then are still left with your scheme and your prepaid locked account. The company is closing the money is there and you are the beneficial owner. The money is thus transfered into your pension fund ie all of it.
Many thanks for this most-excellent information.

dave
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Old 13.07.2007, 00:58
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Re: Pension Second Pillar contributions

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What is an AHV-Loan-Maximum as mentioned below (my bold) ?
Is the key to this that you have prepaid BVG for all your empoyees ,and yet when you liquidate, say after year one, you only pass on that one year of employee contributions to your employees' new scheme leaving you as the (company owner) beneficiary of the remaining prepaid three years of everyones contributions ? If I understand this correctly then this is great.


Many thanks for this most-excellent information.

dave
MAximum AHV Loan is for 2007 79560. The "koordinationabzug" ie the AHV bit is 23205. Minimum BVG is then paid on the difference. This is described in Art 2,5+7 of BVG.

To your other question. You have a good year and prepay several years BVG. This goes in your company "pot". On Jan 1 of each year it is then paid over to your employees accounts or paid monthly as you wish. Once it is paid into the pot of the accounts it can't be touched. Only you have several years of money paid in and when you liquidate the company you get to collect the pot into your personal pension fund. Simply put once paid in the money can't be taken out and there is no-one else left in the company to pay it to. So you land the jackpot all legitimate and above board. And of course you then have a big fat BVG. All you then need to do is wait five years and retire. Simple really... Of course you do need to get the employees etc first.
The five year wait is a precaution I would take but technically it is not necessary. As soon as you are 58 you put your feet up take capital and bobs your uncle so to speak.

Any more questions about second pillars?
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Old 08.01.2008, 15:47
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Re: Pension Second Pillar contributions

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I think the minimums are those detailed in the law, ie 7%, 10%, 15% 18% depending on age. The insured salary is the portion between 23'205 CHF and 79560 CHF (the part below 23k being covered by the first pillar). Everything above 75960 can (but doesn't have to) be insured (superobligatory insurance).



I think Lombard Odier used to do this back then when times were better.
I think the answer to your questions is not quite so simple. An employee has to joinn the second pillar company pension plan for both risk and savings at the earliest on the 1st january following his 24th birthday and provided he earns at least CHF 19'890.00 per annum.Each company plan can be different but it is true that the standard savings rates are 7%,10%,15% and 18% according to your age. Incidentally don't forget to buy back missing years in 2008, if this is possible, as they are tax deductible.If you've just arrived in Switzerland this is limited to 20% of your insured salary....
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Old 09.01.2008, 16:12
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Re: Pension Second Pillar contributions

One could also consider the possibilty of introducing the age group 18-24 into the LPP plan and thus create tax deductible missing years purchases...
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Old 09.01.2008, 16:30
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Re: Pension Second Pillar contributions

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If you've just arrived in Switzerland this is limited to 20% of your insured salary....
You are talking of purchasing missing years here aren't you?
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Old 09.01.2008, 17:38
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Re: Pension Second Pillar contributions

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You are talking of purchasing missing years here aren't you?
Yes I am...........
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Old 28.01.2008, 09:17
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Re: Pension Second Pillar contributions

Just to update this, the figures for 2008 are the same as for 2007 ie
AHV maximum is 79560 and the minimum including coordination deduction is still 23205.
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Old 26.05.2008, 16:37
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Re: Pension Second Pillar contributions

Therefore the 7%, or 10%...etc is calculated based on CHF 56,355.00 per annum.

I.e if the 7% applies (25-35 years old) it would be CHF 3,944.85 correct?

And then how does one pay this every month? Is calculated based on 12 or 13 months (i.e. inclusive of the bonus salary or not?)

If for example it's calculated based on 12 months, then the employee should pay 3.5% instead of 7%, namely CHF 1,972.42 per year or CHF 164.36.

Is the above correct?

Now is it possible for more than a total of 7% to be applied for a 25-35 year old? And could it be somewhere in between 7% and 10% or 10% and 12%?
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Old 26.05.2008, 23:13
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Re: Pension Second Pillar contributions

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Therefore the 7%, or 10%...etc is calculated based on CHF 56,355.00 per annum.

I.e if the 7% applies (25-35 years old) it would be CHF 3,944.85 correct?

And then how does one pay this every month? Is calculated based on 12 or 13 months (i.e. inclusive of the bonus salary or not?)

If for example it's calculated based on 12 months, then the employee should pay 3.5% instead of 7%, namely CHF 1,972.42 per year or CHF 164.36.

Is the above correct?

Now is it possible for more than a total of 7% to be applied for a 25-35 year old? And could it be somewhere in between 7% and 10% or 10% and 12%?
The Swiss pension legislation specifies the minimum. An employer can offer better fringe benefits, e.g. 70%:30% premium split between employer and employee, instead of minimum 50%:50%. Special treatment may also apply to bonuses. Hence, you should ask your pension officer or get and read the pension rules for your employer's plan.
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Old 26.05.2008, 23:21
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Re: Pension Second Pillar contributions

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You have a good year and prepay several years BVG. This goes in your company "pot". On Jan 1 of each year it is then paid over to your employees accounts or paid monthly as you wish. Once it is paid into the pot of the accounts it can't be touched. Only you have several years of money paid in and when you liquidate the company you get to collect the pot into your personal pension fund.
Former employees also have a claim on the liquidated company pension. Moreover, the tax officer can assess such windfalls as tax evasion and "deemed dividends" (in German verdeckte Ausschuttung) because the same person is both the employer and the beneficiary employee.
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