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Old 22.08.2007, 07:53
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Future benefits from back-payments on pensions

If there are gaps in someones pension contributions, is it possible to make catch up payments, and if so where does this money go ?

The contributions (all persons AHV pillar I, and employers BVG pillar 2) have both and insurance element and an investment element.

If these catchup payments are made now are they going to provide the person future benefits, as opposed to insurance for an event that didnt happen ...?

dave
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Old 22.08.2007, 07:58
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Re: Future benefits from back-payments on pensions

Excellent question Dave... I am curious to read the responses (ehm, I mean ones that actually can contribute vs. one like mine)

Have a good one,

Fiona
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Old 22.08.2007, 09:26
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Re: Future benefits from back-payments on pensions

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If there are gaps in someones pension contributions, is it possible to make catch up payments, and if so where does this money go ?

The contributions (all persons AHV pillar I, and employers BVG pillar 2) have both and insurance element and an investment element.

If these catchup payments are made now are they going to provide the person future benefits, as opposed to insurance for an event that didnt happen ...?

dave
The answer to your questions:
1. AHV is based on the amount of money you earn and is mandatory. Thus if you have earned in Switzerland it must have been paid. You can check this by requesting an account statement from your "Ausgleichskasse". Given that this is the case and it covers the time you are in Switzerland only I don't see how a "catchup payment" would be possible. What is possible is to continue paying after you leave. If you think about this it makes a lot of sense otherwise a well travelled person would be able to pay tax free into multiple schemes and then claim a "good" pension in total at the end. After all if you check out the minimum and maximum levels in Switzerland with the salaries you will see what I mean. Paying the minimum is very advantageous here.

2. Catchup payments for the BVG are however very possible. In order to do this you need to contact the fund managers of your BVG and request to make a "zusatzlesitung". This is permitted up to the maximum purchase amount as stated on your BVG statement. This is usally at the bottom right. You can make a contribution as high as you can afford. There are certain restrictions though. You are not allowed to make a payment that would leave you with your salary not able to survive ie your income is not permitted to fall under the poverty line allowing you to make or better said make valid, social benefit contributions. ie you are not allowed to use the tax benefits of paying into your BVG to gain state help.
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Old 22.08.2007, 20:20
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Re: Future benefits from back-payments on pensions

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2. Catchup payments for the BVG are however very possible. In order to do this you need to contact the fund managers of your BVG and request to make a "zusatzlesitung". This is permitted up to the maximum purchase amount as stated on your BVG statement. This is usally at the bottom right. You can make a contribution as high as you can afford. There are certain restrictions though. Y
Would this then constitute another type of 'top up' to the 2nd pillar, meaning you can take this home with you to the EU if you leave?
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Old 23.08.2007, 21:44
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Re: Future benefits from back-payments on pensions

1. AHV - 1st Pillar
You can't top it up - no catch up payments allowed. And you have to make a minimum of 44 years of contribution to get the minimum pension at 65 which is currently Sfr 1,100 per month.

It is not refundable.

If you are EU or Swiss and will reside in a NON EU country, you can continue to make voluntary payments - a lump sum payable once a year based on your overseas salary - or if you are unemployed or early retired, it will be based on your assets. If the latter, you would have to pay 899.00 a year for assets worth 500,000 or less and an extra 98.00 for every 50,000 thereafter.

If you are NON EU you cannot make voluntary payments. If you are EU moving to an EU country you also cannot make voluntary contributions.

If you make less than 44yrs of contribution, the minimum pension of 1,100 is 2.3% less for every year lost.

Ring the AHV voluntry payment scheme people in Geneva. They are extremely helpful and will answer all your questions.

2. BVG - 2nd Pillar
We have topped it up every year to bring our taxable income down. For us it worked well.

If you leave Switzerland and you will reside in an EU country, you cannot take your BVG with you. Normally, it must remain in Switzerland. But if you are going to reside in an NON EU country even if you are an EU citizen, you can have the funds released. Note, if you withdraw it early, it will be taxed and this can hurt - however there are different rates in every Kanton, Kt. Schywz being the cheapest - max. 4.8%. I think Zurich is around 8%.

Anyway there is stacks of info on the forum about this.

Last edited by Cassie; 20.11.2007 at 19:57.
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Old 24.08.2007, 10:48
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Re: Future benefits from back-payments on pensions

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Would this then constitute another type of 'top up' to the 2nd pillar, meaning you can take this home with you to the EU if you leave?
This depends. And let me correct the good post from Cassie.
BVG is split into two parts. Mandatory and non-mandatory. The Mandatory part is blocked for a period of 5 years after leaving Switzerland. The non-mandatory or in German überobligatorischeteil is free to take when you leave Switzerland for an EU location...
Of course this could well change...
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Old 24.08.2007, 11:41
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Re: Future benefits from back-payments on pensions

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This depends. And let me correct the good post from Cassie.
BVG is split into two parts. Mandatory and non-mandatory. The Mandatory part is blocked for a period of 5 years after leaving Switzerland. The non-mandatory or in German überobligatorischeteil is free to take when you leave Switzerland for an EU location...
Of course this could well change...
Richard, what happens after the 5 years period - does one have to transfer the mandatory part into the respective EU state-sponsored scheme?
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Old 04.09.2007, 14:47
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Re: Future benefits from back-payments on pensions

Thank you everyone who has contributed the information above..

I am left with only one Q. If i do make a voluntary contribution into my pension fund, is it always tax-deductible? or are there any ifs-and-buts that I need to be aware of?
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Old 17.02.2008, 22:05
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Re: Future benefits from back-payments on pensions

Payment into the pension plan is generally tax deductible.
BUT:
if you dissolve the pension plan too soon
(because of retirement, immigration, etc.);
then the taxman may interpret the extraordinary contribution as tax avoidance and reverse the deduction .

Tax avoidance is despicable whereas providing for retirement is encouraged.

Now arises the question: When is it "too soon"? The taxman decides that. More than 5 years is OK. Less than 1 year is vulnerable.
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Old 01.06.2009, 00:56
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Re: Future benefits from back-payments on pensions

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Payment into the pension plan is generally tax deductible.
BUT:
if you dissolve the pension plan too soon
(because of retirement, immigration, etc.);
then the taxman may interpret the extraordinary contribution as tax avoidance and reverse the deduction .

Tax avoidance is despicable whereas providing for retirement is encouraged.

Now arises the question: When is it "too soon"? The taxman decides that. More than 5 years is OK. Less than 1 year is vulnerable.
Voluntary buy backs has to remain at least exactly 3 years in the circuit of the second pillar in order that the tax authorities accept it.
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Old 01.06.2009, 01:05
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Re: Future benefits from back-payments on pensions

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Richard, what happens after the 5 years period - does one have to transfer the mandatory part into the respective EU state-sponsored scheme?

Corrections:

The 5 year period is not correct.....
The mandatoryBVG/LPP part cannot be taken in cash when you are settling down in a EU-country.
When you reach the age of 60 years (5 years before the official retirement by the AHV/AVS), then you can ask as well for the cash payment of the mandatory part.

The reason to be able to cash it in is the preretirement of the pension capital and not the vested benefit (it is the same amount but just another reason and another name....).

If you are living
- (still) abroad at this moment, then you will pay tax at source on the amount of the pension capital (look for information to pay the lowest tax at source www.pensfree.ch).
- (again) in Switzerland, then you will taxes depending your domilicitaion (community and canton).

If you are living (again) at this time in Switzerland
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