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Old 18.07.2012, 21:32
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Tax efficient savings for long term returns

Searched around a bit and there is lots on 2nd pillar but couldn't find the specific case....

I have a UK final salary pension scheme but nothing else in the UK so I don't pay any UK tax. Having been here for more than 5 years, i pay minimum 1st pillar contributions only.

I'm trying to find tax efficient ways to save annual lump sums for a long term return.

I have the following questions

1. Is it correct that I can only invest in 2nd pillar here if my occupational pension is here ie would I have to transfer my pension (which I probably would be crazy to do)

2. Does investing into AVCs (are they still called that?) in the UK reduce my Swiss tax burden? Tax efficient savings in the UK is pointless as I pay no UK tax

3. Given the likelihood of the answers to 1&2 not being what I want to hear, are there any other tax efficient savings schemes to consider?

(I know I need to take proper advice at some point, I just need to know if I have options)

Thanks
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Old 18.07.2012, 23:22
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Re: Tax efficient savings for long term returns

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Searched around a bit and there is lots on 2nd pillar but couldn't find the specific case....

I have a UK final salary pension scheme but nothing else in the UK so I don't pay any UK tax. Having been here for more than 5 years, i pay minimum 1st pillar contributions only.

I'm trying to find tax efficient ways to save annual lump sums for a long term return.

I have the following questions

1. Is it correct that I can only invest in 2nd pillar here if my occupational pension is here ie would I have to transfer my pension (which I probably would be crazy to do)

2. Does investing into AVCs (are they still called that?) in the UK reduce my Swiss tax burden? Tax efficient savings in the UK is pointless as I pay no UK tax

3. Given the likelihood of the answers to 1&2 not being what I want to hear, are there any other tax efficient savings schemes to consider?

(I know I need to take proper advice at some point, I just need to know if I have options)

Thanks
It sounds like you are self employed, otherwise you must have some 2nd pillar savings.

1. No. As far as CH is concerned, your existing UK DB rights dont exist, and it is as if you popped into existence on arriving 5 years ago. Probably an advantage as you get a lifetimes contributions into the CH pension system even if you werent here the whole time.
2. No. Only contributions to approved Swiss pension schemes will be deductible. I am surprised if you can make AVCs into a UK scheme if you dont work and arent resident there in any event.
3. Bearing in mind answer 1. What is your capacity to buy extra pillar 2 contributions? Otherwise there is pillar 3 and not so much else.
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Old 18.07.2012, 23:37
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Re: Tax efficient savings for long term returns

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It sounds like you are self employed, otherwise you must have some 2nd pillar savings.

1. No. As far as CH is concerned, your existing UK DB rights dont exist, and it is as if you popped into existence on arriving 5 years ago. Probably an advantage as you get a lifetimes contributions into the CH pension system even if you werent here the whole time.
2. No. Only contributions to approved Swiss pension schemes will be deductible. I am surprised if you can make AVCs into a UK scheme if you dont work and arent resident there in any event.
3. Bearing in mind answer 1. What is your capacity to buy extra pillar 2 contributions? Otherwise there is pillar 3 and not so much else.
No, not self-employed. I pay the absolute minimum into the 2nd pillar, not even worth talking about.

What are DB rights?
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Old 18.07.2012, 23:40
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Re: Tax efficient savings for long term returns

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No, not self-employed. I pay the absolute minimum into the 2nd pillar, not even worth talking about.

What are DB rights?
DB = defined benefits = final salary.

Generally how much you pay into the second pillar is not optional but mandated by law and to some extent your employers based on age brackets.

Why are you asking about tax efficient pensions in CH and meanwhile paying the minimum into the second pillar?
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Old 18.07.2012, 23:41
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Re: Tax efficient savings for long term returns

Have you paid 30 years NI contributions in the UK? Paying voluntary contributions will likely give you a far better return than anything else.
You can have a full UK state pension & whatever your entitled to from CH. CH needs 44 years of contributions for a full CH pension.

Generall pensions are not tax free, just tax defered & you don't have control of the money. 'Tax Saving' products usually have charges that negate any possible benefit. Generally I would avoid.


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Searched around a bit and there is lots on 2nd pillar but couldn't find the specific case....

I have a UK final salary pension scheme but nothing else in the UK so I don't pay any UK tax. Having been here for more than 5 years, i pay minimum 1st pillar contributions only.

I'm trying to find tax efficient ways to save annual lump sums for a long term return.

I have the following questions

1. Is it correct that I can only invest in 2nd pillar here if my occupational pension is here ie would I have to transfer my pension (which I probably would be crazy to do)

2. Does investing into AVCs (are they still called that?) in the UK reduce my Swiss tax burden? Tax efficient savings in the UK is pointless as I pay no UK tax

3. Given the likelihood of the answers to 1&2 not being what I want to hear, are there any other tax efficient savings schemes to consider?

(I know I need to take proper advice at some point, I just need to know if I have options)

Thanks
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Old 18.07.2012, 23:50
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Re: Tax efficient savings for long term returns

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Why are you asking about tax efficient pensions in CH and meanwhile paying the minimum into the second pillar?
Because up to now I have been paying the maximum into the UK scheme, but I'd maybe like to invest more here now

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Have you paid 30 years NI contributions in the UK? Paying voluntary contributions will likely give you a far better return than anything else.
You can have a full UK state pension & whatever your entitled to from CH. CH needs 44 years of contributions for a full CH pension.

Generall pensions are not tax free, just tax defered & you don't have control of the money. 'Tax Saving' products usually have charges that negate any possible benefit. Generally I would avoid.
No, not yet, but frighteningly not far off

I understand that it's deferral to some extent, but reducing taxable income by investing in a pension or similar is definitely interesting right now

Ok....so bottom line is that I probably can't do much and the amounts allowed in 3rd pillar aren't especially exciting
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Old 19.07.2012, 00:03
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Re: Tax efficient savings for long term returns

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Ok....so bottom line is that I probably can't do much and the amounts allowed in 3rd pillar aren't especially exciting
If you have almost 30 years contributions you are aged c.50? Been here c.5 years.

So you are allowed to make Swiss "AVC" for say age 23-45 (before you got to CH) or 22 years of contributions at c.16% (depending on your employer's scheme). Plus max out the last 5 years as you have changed age bracket and had pay-rises hopefully.

So you can probably save 3+ years of salary into the second pillar tax free... hardly nothing!

You received a regular pensions statement that should show the additional contribution amount to the CHF. Also enquire with your HR department.
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Old 19.07.2012, 00:04
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Re: Tax efficient savings for long term returns

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If you have almost 30 years contributions you are aged c.50? Been here c.5 years.

So you are allowed to make Swiss "AVC" for say age 23-45 (before you got to CH) or 22 years of contributions at c.16% (depending on your employer's scheme). Plus max out the last 5 years as you have changed age bracket and had pay-rises hopefully.

So you can probably save 3+ years of salary into the second pillar tax free... hardly nothing!

You received a regular pensions statement that should show the additional contribution amount to the CHF. Also enquire with your HR department.
Problem is the more you pay in the lower the tax saving.......
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Old 19.07.2012, 00:06
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Re: Tax efficient savings for long term returns

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Problem is the more you pay in the lower the tax saving.......
Of course you should spread your catch ups over a couple of years to make the most of your marginal tax rate.
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Old 19.07.2012, 00:08
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Re: Tax efficient savings for long term returns

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I understand that it's deferral to some extent, but reducing taxable income by investing in a pension or similar is definitely interesting right now
Do you plan to return to the UK? If so and if you are making a fair amount of "uber obligatorisch" contributions you can extract those for a final tax rate of c7% when you leave.

It's only the "obligatory" part of the second pillar that has to stay in CH if you leave for an EU country.
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Old 19.07.2012, 00:09
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Re: Tax efficient savings for long term returns

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Of course you should spread your catch ups over a couple of years to make the most of your marginal tax rate.
Well as Swiss tax rates increase with every 1000 of earnings, it's not as easy as say in the uk.
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Old 19.07.2012, 00:13
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Re: Tax efficient savings for long term returns

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Well as Swiss tax rates increase with every 1000 of earnings, it's not as easy as say in the uk.
Im not familiar with the OPs tax rates in Thun, but a lot of cantons have progressive marginal tax rates for mid income earners well in excess of 40% (over 50% in some Romand cantons). Which often makes it a lot easier to save tax than the UK.

Even saving "only" 23% here in the lowest tax commune in CH, I am maxed out, because unlike the UK system you can still access CH pension savings pretty easily (although there is talk to reduce this).
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Old 19.07.2012, 00:15
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Re: Tax efficient savings for long term returns

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Im not familiar with the OPs tax rates in Thun, but a lot of cantons have progressive marginal tax rates for mid income earners well in excess of 40% (over 50% in some Romand cantons). Which often makes it a lot easier to save tax than the UK.

Even saving "only" 23% here in the lowest tax commune in CH, I am maxed out, because unlike the UK system you can still access CH pension savings pretty easily (although there is talk to reduce this).
Never paid anything near 23%, nearer 10% which is why I don't see any point.
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Old 19.07.2012, 00:20
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Re: Tax efficient savings for long term returns

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Im not familiar with the OPs tax rates in Thun, but a lot of cantons have progressive marginal tax rates for mid income earners well in excess of 40% (over 50% in some Romand cantons). Which often makes it a lot easier to save tax than the UK.

Even saving "only" 23% here in the lowest tax commune in CH, I am maxed out, because unlike the UK system you can still access CH pension savings pretty easily (although there is talk to reduce this).
how do you mean 'access pension savings'? i now locked up some pension money and planned to use it in real estate, but since i don't live in my house any more, this option is no longer open and i need a way to access the cash again.
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Old 19.07.2012, 00:22
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Re: Tax efficient savings for long term returns

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how do you mean 'access pension savings'? i now locked up some pension money and planned to use it in real estate, but since i don't live in my house any more, this option is no longer open and i need a way to access the cash again.
Become 100% self employed-
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Old 19.07.2012, 00:40
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Re: Tax efficient savings for long term returns

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Never paid anything near 23%, nearer 10% which is why I don't see any point.
Admittedly I was assuming the OP was making a bit more income. Even so I suspect you are saving more than you think even in a very low tax canton.

In Zug you would pay 11643chf per year tax on 120kchf (c.10% tax). If you paid an extra 20kchf into 2nd pillar your tax would go down to 8353chf, a saving of 3.3kchf on 20kchf, so just over 16% saving marginally.

In Thun, which seems quite expensive as a canton, on the same salary you would save 21% on a 20kchf contribution out of a 120kchf salary. 20kchf pension saving out of 250kchf income would save 42.5% tax however.
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Old 19.07.2012, 00:42
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Re: Tax efficient savings for long term returns

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Become 100% self employed-
For example, or buy another house, leave Switzerland for Oz...

It is not freely accessible, but much more so than the UK where it's sayonara to age 65 or whatever.
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Old 19.07.2012, 00:47
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Re: Tax efficient savings for long term returns

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Admittedly I was assuming the OP was making a bit more income. Even so I suspect you are saving more than you think even in a very low tax canton.

In Zug you would pay 11643chf per year tax on 120kchf (c.10% tax). If you paid an extra 20kchf into 2nd pillar your tax would go down to 8353chf, a saving of 3.3kchf on 20kchf, so just over 16% saving marginally.

In Thun, which seems quite expensive as a canton, on the same salary you would save 21% on a 20kchf contribution out of a 120kchf salary. 20kchf pension saving out of 250kchf income would save 42.5% tax however.
I don't earn anywhere near 120k
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Old 19.07.2012, 01:10
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Re: Tax efficient savings for long term returns

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I don't earn anywhere near 120k
I assume you mean you earn less? If so, you dont save much tax, but you dont pay much tax in the first place either. Seems fair enough.

My figures were based on married, no kids, no taxable religion, single earner, living in Zug, Zug. If you earn more and only pay 10% these factors are different or you have special circumstances.
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Old 19.07.2012, 01:12
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I assume you mean you earn less? If so, you dont save much tax, but you dont pay much tax in the first place either. Seems fair enough.

My figures were based on married, no kids, no taxable religion, single earner, living in Zug, Zug. If you earn more and only pay 10% these factors are different or you have special circumstances.
Less, way way less. I spend several times as much in Petrol as I do in tax....
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