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Old 07.12.2013, 12:32
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Pay into 2nd pillar: voluntary contribution

If you want to reduce tax burden one way of doing it (after doing 3rd pillar contributions) is to pay into 2nd pillar. If you look closely at your 2nd pillar certificate there are 2 parts: an obligatory part and an over-obligatory part. The difference being that only the obligatory has a defined minimum rate. The overobligatory part is open...there is no constraint on max or min rate.
My question is: if you pay an extraordinary contribution to 2nd pillar is there a way to ask the pension fund to put it on the obligatory part only?
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Old 07.12.2013, 12:46
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Re: Pay into 2nd pillar: voluntary contribution

What difference would it make, just curious.
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Old 07.12.2013, 13:03
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Re: Pay into 2nd pillar: voluntary contribution

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What difference would it make, just curious.
It's about compound interest: since the interest rate is legally defined and slightly higher than for the over-obligatory part at the end when you go in pension you have more capital for yourself.
Example: imagine the overobligatory is always 0.5% less than the obligatory rate. Then for 10'000 CHF invested after 10 years you get:
- for 2% rate: 12 189 CHF at the end
- for 1.5% rate: 11 605 CHF at the end

If you have more than 10'000 in your LPP and you save for more than 10 years the difference increases significantly.
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Old 07.12.2013, 18:28
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Re: Pay into 2nd pillar: voluntary contribution

Thanks. I think they would be separated for a reason and not able to be crossed over, but thats just a logical guess. The reason why I guess this is that the non obligatory can probably be taken out under different circumstances to the obligatory, therefore it needs to be defined as to how the money was placed there in the first instance.
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Old 07.12.2013, 20:20
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Re: Pay into 2nd pillar: voluntary contribution

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My question is: if you pay an extraordinary contribution to 2nd pillar is there a way to ask the pension fund to put it on the obligatory part only?
Not sure I understand you question... But here goes...

If you look on the statement you will see that there is a line indicating the maximum amount you are allowed to buy in. This amount will normally amount to the short fall in the obligatory amount (not to be confused with the BVG amount) or perhaps a little more. So when you buy in, little or none should end up in the extraordinary amount, because it is first applied to the obligatory amount.

Once the obligatory amount is fully ensured there is no possibility to have further funds applied there until such time as a new hole opens up, which normally happens when you receive a pay increase and provided your overall contributions do not exceed the max buy in amount.

What can happen is when a hole does open up in the obligatory amount, there is still to much in the extraordinary amount and so the maximum buy in amount is still zero. In such cases you are not allowed to top up the obligatory amount from the extraordinary amount.
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