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Old 13.08.2007, 13:43
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Freizuegigkeitskonto [vested benefit account]

Hello. I've had a nice time in Switzerland and now it's time for me to be moving along to pastures new. Pastures German as it happens. One of the things I still have to sort out is a Freizuegigkeitsknoto (Vested benifit account??) for my occupational pension money (pillar II) to go into when I leave. Can anyone recommend a particular account or give any general advice on what to look for?

Thanks a lot!
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Old 25.08.2007, 20:32
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Re: Freizuegigkeitskonto [vested benefit account]

The best way I can see at the moment and depending on the amount of your BVG, is to move it out of Kanton Zurich where the withdrawal of BVG tax is higher (it's taxed at retirement or if withdrawn early i.e. going to live in NON EU countries).

I will use a pension company that offers other solutions beside the vested benefit account. I will be able to invest my BVG into a fund or be able to have my own individual portfolio of shares, bonds etc. The benefits of the latter is that any dividends or interest paid will not be taxed the 35% withholding tax and I should hopefully get a much better return. I can also move bonds, shares into the BVG from my external portfolio as long as the same amount is exited at the same time. A bit complex but tax wise interesting and hopefully a better return than the interest offered on the Vested Benefits account.

I can also split my BVG into 2 separate blocked BVG accounts. 1 can be blocked till 60 and the other 65.

I still have many questions regarding the set-up and of course fees are involved but half that of UBS Private Banking.

If anybody has any experience regarding the flexible BVGs, I would be interested to hear from them.
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Old 26.08.2007, 18:25
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Re: Freizuegigkeitskonto [vested benefit account]

Is it possible to mention the name of that company?
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Old 27.08.2007, 11:22
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Re: Freizuegigkeitskonto [vested benefit account]

Thanks for the info.

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Is it possible to mention the name of that company?
I'll second that.
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Old 27.08.2007, 12:05
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Re: Freizuegigkeitskonto [vested benefit account]

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The best way I can see at the moment and depending on the amount of your BVG, is to move it out of Kanton Zurich where the withdrawal of BVG tax is higher (it's taxed at retirement or if withdrawn early i.e. going to live in NON EU countries).

I will use a pension company that offers other solutions beside the vested benefit account. I will be able to invest my BVG into a fund or be able to have my own individual portfolio of shares, bonds etc. The benefits of the latter is that any dividends or interest paid will not be taxed the 35% withholding tax and I should hopefully get a much better return. I can also move bonds, shares into the BVG from my external portfolio as long as the same amount is exited at the same time. A bit complex but tax wise interesting and hopefully a better return than the interest offered on the Vested Benefits account.

I can also split my BVG into 2 separate blocked BVG accounts. 1 can be blocked till 60 and the other 65.

I still have many questions regarding the set-up and of course fees are involved but half that of UBS Private Banking.

If anybody has any experience regarding the flexible BVGs, I would be interested to hear from them.
I am not quite sure what you are getting at here, other than a way to convert bonds into cash legitimately. You also need to be careful what you are saying about the restrictions on BVG accounts.

In practice a Freizugigkeitskonto is simply an investment account in which you can place cash from the funds of your pension scheme when you are either not working, have changed jobs or are leaving the country. Many banks and insurance companies offer this type of account and additionally pay a fixed interest of 1.5% either now or at the next quarter end. This might not seem an attractive growth rate so it is possible again with practically every company offering these accounts to switch to a Freizugigkeits depot account. With this type of account it is possible to invest in a range of BVG type funds which offer a (usually) better rate of return. As an example long term bonds over 25 years offering 4% are not unusual and this provides a "win" of 2.5% over the standard offerings.

Note here that for the OP it is necessary to ascertain what the motivations are and what can be done with the money in the BVG account. Is this all mandatory BVG or is there additional monies in there? All money that is not mandatory can be cashed in on leaving Switzerland, and this is actually more tax efficient than leaving it in for the reason that monies paid out of the BVG in the form of pension are subject to tax at the normal rate whereas capital payments are taxed at 40% of the normal rate...
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Old 16.10.2007, 14:21
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Re: BVG - non Freizuegigkeitskonto [vested benefit account]

In reply to MUZE7 and OMMTHREE

The company I will use is Pensfree in Kanton Schwyz to invest my BVG
http://www.pens-expert.ch/en/free/

After months of researching it's the best solution I can find for my personal circumstances regarding fees, fund cost ratios, performance and taxes. I can invest it how I want (no Freizuegigkeitskonto) - up to 50% in equities is allowed for BVG. Or I can also choose one of their BVG funds.

Good luck

Last edited by Cassie; 22.10.2007 at 12:24.
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Old 30.01.2008, 01:16
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Re: Freizuegigkeitskonto [vested benefit account]

Is Pensfree trustworthy? I guess it depends how protected these Freizugigkeitstiftungs are by the government in terms of guarantees, and that I do not know.

Edit: I would not recommend UBS. Interest on vested benefit is lower than competitors at 1.75% and I do not like their fee structure.

Last edited by muze7; 04.02.2008 at 20:43.
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Old 30.01.2008, 10:09
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Re: Freizuegigkeitskonto [vested benefit account]

How about UBS Freizuegigkeitskonto [vested benefit account] . They will maintain this blocked account for you and keep updating you with the yearly statements.

Others, your views on this please..
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Old 04.02.2008, 21:05
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Re: Freizuegigkeitskonto [vested benefit account]

Ok I found that for people who are interested in moving their pension money to kantons with cheaper tax rates upon payout, like Schwyz, there are many options in this kanton like

Pillar 2:
  • www.pens-expert.ch (PensFree) (need >50k, fees deducted on payout, amount unclear)
  • www.pfs.ch (also in English including payout forms) (if <50k, and <12months, then 500 fee on payout, if >50k, then fee is higher; any other fee unclear)
  • www.szkb.ch Schwyz kantonalbank Konto SZKB (multiple fees deducted, 500 on opening, 500 on credit, 300 on payout,+ 0.3% on Vermogen/year)
but their fee structures are very different. Also, I finally understand how it works. If you leave Switzerland and request payout at this time, you pay a kind of income tax (einkommensteuer) that is based on where you live, but it is taxed separately from your income. If you request payout once you are in a foreign country, you will pay quellensteuer. Not only is this a different rate, it will also be based on the kanton where your pension organisation is based.

This not only applies to Freizugigkeitskonto (pillar 2=company pension) but also pillar 3a. Quellensteuer in Schwyz for this purpose is a flat 2.5% up to 25k, for rates afterwards see http://www.sz.ch/steuern/quellensteu..._mb_010107.pdf. In Aargau it is not flat, the 2.5% boundary lies at 25k for singles or 49k for families. The Bund part of this is very low, see www.estv.admin.ch/d/dbst/dokumentation/rundschreiben/2-033-D-2007-d-Beilage4.pdf for all kantons.

So if you live outside the low tax kantons, the best strategy is to open accounts in Schwyz if you are rich, and in Aargau if you have less than 49k if single, then leave CH, and request the money back later.

Pillar 3a
__________________________________________________ ____________

Rules for taking pensions with you (as set out often by Richard before):

Pillar 2
  1. Compulsory part (obligatorisch): needs to stay in CH until retirement unless you move to Non-EU, including Romania or Bulgaria, or do not have to be insured in the EU for mandatory governement cover for old age, death and disability. This amount is 7% per year of your koordiniertes inkomen; not sure how to calculate this but the total accrued is listed on your pension statement as BVG-Altersguthaben, or Prestation Libre Passage in French. The rules when buying a house in the EU with the compulsory part are still not clear, at least to me.
  2. Non-compulsary part (ueberobligatorisch): you can take with you; if you have not been here for decades, the calcuation is usually (your age - 20)*4 = % of your total accrued arbeitnehmerbeitrage. Example if you are 45, the % is 45-20 = 100%, if you are 33 it is 52%. Add your own contributions (arbeitnehmerbeitrage) to the non-compulsary part, and substract the compulsory part to come up with the total you can take with you.
  3. Buy-in part: if you contributed voluntarily, this part needs to stay put for three years. So if you move to the EU, the freizuegigskeitkonto could contain the compulsory part until retirement, plus your voluntary part for three years after leaving.
What I do not know is what happens if you move to the EU, have to leave the compulsary part, then move to non-EU after a few years, so whether you could then take the compulsory part after all.

Pillar 3a:
  • No restrictions when leaving but you will have to pay tax. (See above).

Last edited by muze7; 02.05.2008 at 21:26.
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Old 17.02.2008, 20:58
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Re: Freizuegigkeitskonto [vested benefit account]

Currently best interest rate on Fz accounts is 2.25%, offered by Raiffeisen and Kantonal banks of Schwyz, Appenzell and others.

Of course, you can choose to invest up to 50% in equity mutual funds. You are then exposed to the vagaries of the markets.

Fz assets are free of wealth tax, income tax and capital gains taxes in Switzerland. Check with your new country, how they tax this.

For Swiss residents, it makes no sense to hold equity within the Fz, because capital gains are anyway tax free. Smart would be to use other assets for equity investments but take risk-free interest within the Fz.

Before transferring assets abroad, shift Fz funds to Schwyz, which has the lowest TDS (tax deducted at source). Some of the TDS benefits are however eaten up by the SZ foundations demanding higher fees.
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Old 17.02.2008, 21:03
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Re: Freizuegigkeitskonto [vested benefit account]

Definitely split vested benefits into 2 Fz accounts. Reasons:
* Flexibility in withdrawal.
* Spreads the risk.
* Substantial tax benefits, due to Swiss progressive tax rates, i.e higher amounts subject to a higher tax rate.
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Old 18.02.2008, 12:42
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Re: Freizuegigkeitskonto [vested benefit account]

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Definitely split vested benefits into 2 Fz accounts. Reasons:
* Substantial tax benefits, due to Swiss progressive tax rates, i.e higher amounts subject to a higher tax rate.
Er is that evasion or avoidance? Somehow the former I suspect.

Daniel
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Old 18.02.2008, 20:40
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Re: Freizuegigkeitskonto [vested benefit account]

Splitting the Fz into 2 accounts is standard practice. I am told it is explicitly permitted in the legislation (I am not a lawyer!). The tax authorities accept it.

Banks report dissolution of Fz and pension accounts directly to the pertinent tax offices and usually subtract the tax liability before paying out the after-tax amount. So there is nothing clandestine or evasive about the procedure.

Some Cantons (e.g. St.Gallen) are unhappy about this splitting, when the withdrawals are close to each other. Then they just club the 2 withdrawals and assess.

Hence, always split. Best case separate assessment. Worst case clubbing for assessment. Not an offense!
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Old 19.02.2008, 09:48
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Re: Freizuegigkeitskonto [vested benefit account]

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Splitting the Fz into 2 accounts is standard practice. I am told it is explicitly permitted in the legislation (I am not a lawyer!). The tax authorities accept it.

Banks report dissolution of Fz and pension accounts directly to the pertinent tax offices and usually subtract the tax liability before paying out the after-tax amount. So there is nothing clandestine or evasive about the procedure.

Some Cantons (e.g. St.Gallen) are unhappy about this splitting, when the withdrawals are close to each other. Then they just club the 2 withdrawals and assess.

Hence, always split. Best case separate assessment. Worst case clubbing for assessment. Not an offense!
You are quite right about holding multiple "Freizügigkeitskonten". This is perfectly legal and permitted. However tax paid on withdrawals is not taxed according to the tax regime of the kanton where the "konto" is located but instead the canton in which you live. Furthermore, if you have left Switzerland then the taxation is done according to the last place in which you were resident.

And finally if you make capital withdrawals from any kind of "vorsorge account" (BVG, FZ, 3. pillar) it is subject to tax. This tax is entered as a record for the year and each withdrawal is progressively taxed. This means that if you withdraw from your BVG account 30K and from your 3. Pillar and from your wifes BVG and from your wifes 3. Pillar you will be taxed according to a capital withdrawal of 120K and not 4 x 30K.

Before paying the money out, which by the way must go into a locked vested account, the payer must ascertain the tax level for the withdrawal from your local tax office. This is then deducted before payment.
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Old 19.02.2008, 09:52
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Re: Freizuegigkeitskonto [vested benefit account]

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Splitting the Fz into 2 accounts is standard practice. I am told it is explicitly permitted in the legislation (I am not a lawyer!). The tax authorities accept it.

Banks report dissolution of Fz and pension accounts directly to the pertinent tax offices and usually subtract the tax liability before paying out the after-tax amount. So there is nothing clandestine or evasive about the procedure.

Some Cantons (e.g. St.Gallen) are unhappy about this splitting, when the withdrawals are close to each other. Then they just club the 2 withdrawals and assess.

Hence, always split. Best case separate assessment. Worst case clubbing for assessment. Not an offense!
Makes sense, standard anti evasion/avoidance type rules. I get the point about spreading the counterpart risk and diversification, but where does that leave the tax benefit - unless you are "lucky enough" to get split treatment, which boils back to my point "its not kosher". Dont get me wrong Im not trying to be sanctimonious, just understand if it is sound tax planning or the sort of thing that could royally backfire.

Daniel

Daniel
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Old 19.02.2008, 09:59
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Re: Freizuegigkeitskonto [vested benefit account]

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You are quite right about holding multiple "Freizügigkeitskonten". This is perfectly legal and permitted. However tax paid on withdrawals is not taxed according to the tax regime of the kanton where the "konto" is located but instead the canton in which you live. Furthermore, if you have left Switzerland then the taxation is done according to the last place in which you were resident.
Sounds like some Schwyz based pensions advisors trying to bend the rules here too. There are definitely people floating around here with impression you can shift the assets to SZ, leave and cash in at the lower rate.

D
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Old 19.02.2008, 10:26
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Re: Freizuegigkeitskonto [vested benefit account]

Various contradictory postings have appeared here. I reiterate my understanding:

1. Withdrawals within a calendar year: These are definitely cumulated for spouses and all retirement savings (Pillars 2 and 3).
2. Withdrawals in separate years: Most often not clubbed. Depends on where you live. Canton Zurich is usually lenient.
3. Resident in Switzerland: Tax rates of domicile Canton.
4. Not resident in Switzerland: Tax rate of Canton where the "Stiftung" (tax protected foundation) is located. Hence the attraction of SZ foundations.

SZ foundations charge higher administrative fees, i.e. worthwhile only for larger pension amounts.

Those fortunate to have large pension plans should seek competent professional advice. Statements in this forum would enable you to do the math and ask probing questions. The tax planning can be beneficial.

Note that you can get an advance written ruling from the tax authorities. This is binding when all pertinent details are revealed and remain valid at assessment time. You (or a friend speaking the local language) can also phone the local tax officer and get informal feedback.
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Old 19.02.2008, 10:32
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Re: Freizuegigkeitskonto [vested benefit account]

Why have two FZ kontos or in fact two 3. Säule accounts. If you need to make capital withdrawals, you are subsequently time barred from making further withdrawals for a period of 5 years. If you have more than one account then you can do this annually simply by choosing another account.
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Old 19.02.2008, 10:51
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Re: Freizuegigkeitskonto [vested benefit account]

The preferred gambit is different for expats and locals (those retiring here).

Expats: Can dissolve Pillars 2 and 3 when they leave, albeit restrictions for those returning to EU countries. Most probably smaller pension capital (only a few years contributions in CH). Unlikely prepared to wait several years to avoid clubbing. Not much benefit in splitting (also because of minimum tax rates).

Locals: Cannot dissolve before age 60 (some premature withdrawals permitted, e.g. starting own business, mortgage loans, etc.). Must dissolve latest at age 70. Pension plans convert to annual pension or capital at retirement 65. Always taxed according to rules of domicile Canton. Most likely to benefit from tax planning.
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Old 05.03.2008, 01:54
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Re: Freizuegigkeitskonto [vested benefit account]

Ok, silly question perhaps. If you withdraw pillar 3a and pillar at the same time (after having left CH so paying only quellensteuer), are the totals added up and then taxed?

I am asking because kanton Aargau for example taxes in steps (per 1000 CHF) and under 25k they are cheaper than Schwyz but if you need to add pillar 3a and 2 together, and then go over 25k, then Schwyz at 2.5% is cheaper.
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