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  #401  
Old 20.12.2016, 09:12
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Re: 3rd Pillar Pension Fund

Derivative of taxes with respect to taxable income.
lim_{d -> zero} ((taxes at income N + d) - (taxes at income N)) / d

It shows at what rate is any *additionational* income that you make taxed. E.g. if your marginal rate is 30%, you pay 30 Fr extra taxes on every extra 100 Fr you make. And vice versa: if you can deduct 100 Fr from your taxable base, you'd save 30 Fr in taxes.
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  #402  
Old 20.12.2016, 09:19
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Re: 3rd Pillar Pension Fund

What are the other parts
If I have Permit B, my annual gross salary is 130,000CHF, my employer pays withholding tax for me ~12%. Will I need to pay some extra taxes after submitting yearly tax statement?
I am asking because I want to predict what will be my tax saving if I pay in 6768CHF this year to 3rd pillar.
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  #403  
Old 20.12.2016, 09:32
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Re: 3rd Pillar Pension Fund

When you earn >120k gross per year, you'll be required to file tax declaration and will go through the ordinary tax assessement process. Deducted tax at source will be considered merely a prepayment towards the final tax amount that you'll owe in the end. You'll have to pay or get reimbursed the difference after your tax declaration is processed, which will take a couple of years or so.

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Will I need to pay some extra taxes after submitting yearly tax statement?
Depends on where you live. Tax at source is levied at average cantonal rates. But for definitive taxes it'll be important what's the municipal tax rate (Steuerfuss) of your commune. If you live in an expensive commune like Stadt Zürich, with its above average Steuerfuss of 119%, tax at source will not actually fully cover the final taxes and you'll normally have to pay some extra, yes.

If you do pillar 3a (which is not accounted for in the "typical" deductions they use for calculating tax at source rates), then you'll owe less taxes of course, and probably they'll pay you then.

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I want to predict what will be my tax saving if I pay in 6768CHF this year to 3rd pillar.
I'd guesstimate 30% at 130k gross income.

But it depends a lot. Most important factors: commune, marital status, number of kids/dependants, and what additional tax deductions you can claim. Church tax status too, if you were silly enough to let them sign you up for it - it's an optional tax.
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  #404  
Old 20.12.2016, 09:48
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Re: 3rd Pillar Pension Fund

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I am asking because I want to predict what will be my tax saving if I pay in 6768CHF this year to 3rd pillar.
Use the tax calculator in the below link. It uses official figures and you should be within the ballpark of the final tax bill.

Link: http://www.estv2.admin.ch/d/dienstle...uerrechner.htm

Ivank has a way of over complicating things... Limits to explain how much savings are made based a nominal deduction of taxable income and an assumed marginal tax rate? Hello? Not everybody is a quant you know!
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  #405  
Old 20.12.2016, 09:53
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Re: 3rd Pillar Pension Fund

It's just a very basic high-school-level calculus. If you want to name things right, that's the way to do it!
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  #406  
Old 20.12.2016, 09:59
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Re: 3rd Pillar Pension Fund

Hmm my Gemeinde Volketswil has Steuerfuss of 114% which I guess tell me how much Municipal Tax of my Gemeinde is above cantonal average (used for Withholding tax declaration). So if average Municipal Tax in canton Zurich is ~9000CHF than I would need to pay extra 1160CHF.

I am still not sure were are you taking 30% from?

Btw. I just called Credit Suisse and asked them about any fees associated with 3a Pillar and they said there are none.
This is also what comparis.ch tells about their offer:
Credit Suisse - Pension account - 3rd pillar

Fee for early withdrawal
None

Fee for changing provider
None

Early withdrawal
Savings of the restricted provision scheme may be withdrawn early for the following purposes:
  • Financing owner-occupied residential property
  • Renovating owner-occupied residential property
  • Taking up self-employment
  • Leaving Switzerland forever
  • Purchasing additional retirement benefits
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  #407  
Old 20.12.2016, 10:02
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Re: 3rd Pillar Pension Fund

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Hmm my Gemeinde Volketswil has Steuerfuss of 114% which I guess tell me how much Municipal Tax of my Gemeinde is above cantonal average (used for Withholding tax declaration). So if average Municipal Tax in canton Zurich is ~9000CHF than I would need to pay extra 1160CHF.

I am still not sure were are you taking 30% from?

Btw. I just called Credit Suisse and asked them about any fees associated with 3a Pillar and they said there are none.
This is also what comparis.ch tells about their offer:
Credit Suisse - Pension account - 3rd pillar

Fee for early withdrawal
None

Fee for changing provider
None

Early withdrawal
Savings of the restricted provision scheme may be withdrawn early for the following purposes:
  • Financing owner-occupied residential property
  • Renovating owner-occupied residential property
  • Taking up self-employment
  • Leaving Switzerland forever
  • Purchasing additional retirement benefits
Of course the guy at Credit Swiss is a liar, as you know bankers don't work for free. What he means is there are no additional costs to you as the fund pays all the costs & fees.
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  #408  
Old 20.12.2016, 10:02
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Re: 3rd Pillar Pension Fund

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Derivative of taxes with respect to taxable income.
lim_{d -> zero} ((taxes at income N + d) - (taxes at income N)) / d
To be honest I haven't done any of these limit stuff for over 15 years. I know that when d -> zero that equation should go to infinity (I'm probably wrong) but I'm happy to learn more how this relates to how much more or less tax is paid or saved based on additional income (d).

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It shows at what rate is any *additionational* income that you make taxed. E.g. if your marginal rate is 30%, you pay 30 Fr extra taxes on every extra 100 Fr you make. And vice versa: if you can deduct 100 Fr from your taxable base, you'd save 30 Fr in taxes.
This is a good follow up explanation for non quant types.

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It's just a very basic high-school-level calculus. If you want to name things right, that's the way to do it!
Ouch! That's a bit below the belt!
How many people do you estimate were a) took those lessons, b) paid attention to those lessons c) if a + b still remember and know how to use things they might have touched on many many years ago?
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  #409  
Old 20.12.2016, 10:05
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Re: 3rd Pillar Pension Fund

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Of course the guy at Credit Swiss is a liar, as you know bankers don't work for free. What he means is there are no additional costs to you as the fund pays all the costs & fees.
Technically not a lie, as they never said there are no fees.

Total 3a Pillar Fund fees = Annual management fee + any custody fees + tracking error.
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  #410  
Old 20.12.2016, 10:06
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Re: 3rd Pillar Pension Fund

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Btw. I just called Credit Suisse and asked them about any fees associated with 3a Pillar and they said there are none.
Yes, the basic cash-only 3a account is usually totally free. It also pays a very low interest 0 - 1% or so. The reason is that banksters can make way more money for themselves on this, basically near interest-free long-term loan from you to them.

Purchasing stock funds in 3a is where every bank will charge you an arm and a leg though. (Because there the banks suddently they have to share with you the stock market profits)

Note that withdrawal will attract taxes. The taxes are on a separate progression from income taxes - Kapitalleistungssteuer, and usually quite low. Expect around 4-5% unless withdrawing hundreds of thousands of franks.

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I am still not sure were are you taking 30% from?
As I said, it's just a guess, a rough ballpark amount. If you want exact number, use tax calculators, e..g The_Love_Doctor's link or https://www.comparis.ch/steuern/steu...errechner.aspx
Do one calculation without pillar 3a deduction, another with it, and take the difference.
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  #411  
Old 20.12.2016, 10:13
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Re: 3rd Pillar Pension Fund

Thank you. I didn't know there are different 3a pillar options (cash only or stock). Do you know if it is possible to change between them afterwards?

To calculate tax saving I am using link provided by Love_Doctor
Is Pensionskassenbeiträge corresponds to Pension Fund (pillar 2), not AHV that my employee pays, correct?. Looks like it can be deducted from tax as well...
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  #412  
Old 20.12.2016, 10:15
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Re: 3rd Pillar Pension Fund

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Thank you. I didn't know there are different 3a pillar options (cash only or stock). Do you know if it is possible to change between them afterwards?
Yes, but beware of transaction fees.

ZKB for example charges me 0.65% for buying and selling pillar 3a funds.

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Is Pensionskassenbeiträge corresponds to Pension Fund (pillar 2), not AHV that my employee pays, correct?. Looks like it can be deducted from tax as well...
All social security payments they've deducted from your gross salary (i.e. your part of them) are fully tax deductible - AHV/IV/EO, ALV, NBUV, pillar 2.

Employer's part is not, it's not your money from tax perspective.
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  #413  
Old 20.12.2016, 10:22
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Re: 3rd Pillar Pension Fund

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Thank you. I didn't know there are different 3a pillar options (cash only or stock). Do you know if it is possible to change between them afterwards?
Yes as Ivank said.

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To calculate tax saving I am using link provided by Love_Doctor
Is Pensionskassenbeiträge corresponds to Pension Fund (pillar 2), not AHV that my employee pays, correct?. Looks like it can be deducted from tax as well...
Please note that the Pensionskassenbeitraege on the first page of the link I posted refers to any additional Pillar 2 contributions you make to top up any gaps etc. This is not the amount of money that gets automatically deducted by your employer, this amount will be shown in the next page and is automatically calculated by the tax calculator.

Edit: correction, you do have to enter all Pillar 2 contributions on the first page it seems, so if you do make additional ones you can just sum them up and put them there.
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  #414  
Old 20.12.2016, 10:24
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Re: 3rd Pillar Pension Fund

Looks like tax saving would be around 1900CHF.
I see that taxes are calculated for the household (my income + my wife income). So it would make sense for both of us to open 3a pillar to double the saving, right?
My wife started to work in the middle of the year so her income doesn't exceed 120,000CHF and will be much lower than mine. I thought that final tax is calculated for each of us individually. Therefore, tax savings for my wife would be much lower (because of lower percentage of withholding tax). But looks my assumptions were wrong.
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  #415  
Old 20.12.2016, 10:30
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Re: 3rd Pillar Pension Fund

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Looks like tax saving would be around 1900CHF.
I see that taxes are calculated for the household (my income + my wife income). So it would make sense for both of us to open 3a pillar to double the saving, right?
My wife started to work in the middle of the year so her income doesn't exceed 120,000CHF and will be much lower than mine. I thought that final tax is calculated for each of us individually. Therefore, tax savings for my wife would be much lower (because of lower percentage of withholding tax). But looks my assumptions were wrong.
If you're married you file together. I think you can both have your own 3a Pillar accounts in the same way you have separate Pillar 2 contributions.
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  #416  
Old 20.12.2016, 10:30
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Re: 3rd Pillar Pension Fund

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Technically not a lie, as they never said there are no fees.

Total 3a Pillar Fund fees = Annual management fee + any custody fees + tracking error.
Add a Bid / Offer spread, usually quite high on such amazing tax saving investments.
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  #417  
Old 20.12.2016, 10:34
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Re: 3rd Pillar Pension Fund

Quote:
I see that taxes are calculated for the household (my income + my wife income). So it would make sense for both of us to open 3a pillar to double the saving, right?
My wife started to work in the middle of the year so her income doesn't exceed 120,000CHF and will be much lower than mine. I thought that final tax is calculated for each of us individually. Therefore, tax savings for my wife would be much lower (because of lower percentage of withholding tax). But looks my assumptions were wrong.
Tax at source is levied individually, but at separate rates for single and married persons.

For ordinary tax assessement, married couples are assessed jointly as a single unit. Your income and deductions are summed together and taxed at a special tax progression, which is somewhat milder than for a single person, but not much. If you wife earns a lot less than you, it will be to your tax advantage. If you're both double earners and earn more of less equally, the joint taxation will penalize you - this is the so-called Heiratsstrafe (marriage penalty).

AFAIK, pillar 3a deduction is per person. In a married couple, each person can pay up to the limit in his own account and get the deduction, and the deductions will be summed for both of you in the end.
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  #418  
Old 20.12.2016, 10:39
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Re: 3rd Pillar Pension Fund

The total worldwide household income is taxed.

Both spouses can open there own pillar 3a account.

Stay away from pillar 3a life insurance options, unless your really, really fully and wholesomely understand what you are doing and committing yourself to.

For tax at source the gross income is used, for the full tax return your actual net income minus further deductions is used.

At the end of the year you will get an income statement from your employer stating net and gross income including benefits. Looks like this:
https://www.estv.admin.ch/dam/estv/d...rechts-dfe.pdf
You would transfer the number on line 11 into the full tax declaration as income.
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  #419  
Old 20.12.2016, 10:45
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Re: 3rd Pillar Pension Fund

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Add a Bid / Offer spread, usually quite high on such amazing tax saving investments.
They had very tight spreads on the funds the guy at CS showed me, understandably so as the yearly fee was 1.5%

They rope you in with tax incentives, no custody fees and tight spreads then royally shaft you with the yearly fee.
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Old 20.12.2016, 10:59
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Re: 3rd Pillar Pension Fund

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Derivative of taxes with respect to taxable income.
lim_{d -> zero} ((taxes at income N + d) - (taxes at income N)) / d

It shows at what rate is any *additionational* income that you make taxed.
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It's just a very basic high-school-level calculus. If you want to name things right, that's the way to do it!
I get it

Was just a bit confused when I saw the limit!

If I graph the Tax function TF, for nominal taxable income N and additional taxable income d:

TF = (Tax(N +d) - Tax(N)) / d

When d goes from 1 to infinity (let's say say 1000000) then it makes sense. When d goes to 0 the function is undefined, but I guess the way you wrote it is the way a mathematician would write this.

Without the marginal tax table for a specific kanton and the relevant gemeinde and kanton rates + federal tax table it's difficult to simulate this on a basic excel sheet.

Hope this might help anyone else who might have been thrown off by your post.
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