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Old 15.05.2008, 18:27
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What pensions become

Dear all,

Firstly - this is one of the best forums I have come across. It is really impressive - both in terms of content and also the attitudes people have posting on it. I have trawled through a lot of the content and it has been very, very useful. That said, everyone's position is individual and therefore I do have some unanswered questions that I would really appreciate some help with!!

Basically, I am in the middle of negotiating my contract for a job in Geneva. I will be taking a pay cut, but I believe that will be compensated for by the non-financial benefits of being in such an amazing country/city etc. However, I still need to work out my bottom line. Most of my questions do relate to this topic board, but I'm going to split them up to keep them more focussed.

First question concerns Pensions - I've been doing all my own retirement planning up until now, having spent most of my time in the field and tax free. I am trying to get an idea of what the pension payments I will find deducted will equate to in terms of what I am currently 'spending' on investments.

I understand about the payments (1, 2 and 3) but I have not been able to find any information on the forum about what format these pensions end up as (particularly regarding the occupational pillar 2 pension): are they final salary? annuity? managed by a fund manager? should I expect my employer to contribute/match my contributions? are they taxed on drawdown? do I have any say in how they are invested (like the UK self-trade pensions)? does anyone know of a link where I can investigate this more?

In terms of percentages, the contract offer details approximately 7.6% pillar 2 and the standard 5.05% pillar 1.

Thanks for any assistance with these questions!
GVAbound
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Old 15.05.2008, 18:36
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Re: What pensions become

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I understand about the payments (1, 2 and 3) but I have not been able to find any information on the forum about what format these pensions end up as (particularly regarding the occupational pillar 2 pension): are they final salary? annuity?
Pillar one is annuity. Pillar two and three can be withdrawn either as capital or as an annuity

Quote:
managed by a fund manager?
Pillar one does its own management. Pillar two can be done either in-house if it's a bank or delegated to an investment manager. Pillar three is always managed by the financial institution who sells it to you.

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should I expect my employer to contribute/match my contributions?
Match the obligatory part, not match what you choose to contribute extra. Pension Second Pillar contributions

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are they taxed on drawdown?
Yes.

Quote:
do I have any say in how they are invested (like the UK self-trade pensions)?
Pillar one and two no, pillar three you can choose among several "risk profiles".

Quote:
does anyone know of a link where I can investigate this more?
It's all been done here


Quote:
In terms of percentages, the contract offer details approximately 7.6% pillar 2 and the standard 5.05% pillar 1.

Thanks for any assistance with these questions!
GVAbound
Pillar 1 is fixed. Pillar two increases with age.
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Old 15.05.2008, 18:37
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Re: What pensions become

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Dear all,

Firstly - this is one of the best forums I have come across. It is really impressive - both in terms of content and also the attitudes people have posting on it. I have trawled through a lot of the content and it has been very, very useful. That said, everyone's position is individual and therefore I do have some unanswered questions that I would really appreciate some help with!!

Basically, I am in the middle of negotiating my contract for a job in Geneva. I will be taking a pay cut, but I believe that will be compensated for by the non-financial benefits of being in such an amazing country/city etc. However, I still need to work out my bottom line. Most of my questions do relate to this topic board, but I'm going to split them up to keep them more focussed.

First question concerns Pensions - I've been doing all my own retirement planning up until now, having spent most of my time in the field and tax free. I am trying to get an idea of what the pension payments I will find deducted will equate to in terms of what I am currently 'spending' on investments.

I understand about the payments (1, 2 and 3) but I have not been able to find any information on the forum about what format these pensions end up as (particularly regarding the occupational pillar 2 pension): are they final salary? annuity? managed by a fund manager? should I expect my employer to contribute/match my contributions? are they taxed on drawdown? do I have any say in how they are invested (like the UK self-trade pensions)? does anyone know of a link where I can investigate this more?

In terms of percentages, the contract offer details approximately 7.6% pillar 2 and the standard 5.05% pillar 1.

Thanks for any assistance with these questions!
GVAbound

Regarding the occupational plan, if this is a company plan, they should provide you details. But the plans are set up either on a final salary or on a defined contribution basis. The employer must contribute to the plan at least as much as the employee though often the company will contribute a higher percentage. Usually, the amount of contribution is pre-defined as per the plan rules and thus no matching, as both employee and employer contributions are fixed. Defined contribution plans here is slightly different than in other countries as the investment risk is still with the company not with the employee, no reduction of the capital value year on year (more or less).

The plans, as far as I am aware, usually pay out an annuity but there is an option to take part as a lump sum on retirement.

The assets are invested by a Pension Trust Board (if it is a large company plan) who subcontracts to an asset manager or if a smaller plan is managed by an insurance company.

The employee does not have a say in how the assets are invested, for a final salary plan, it doesn't matter and for a defined contribution plan, employee will receive a credit based on the actual investment performance but there is no choice of investments as one would have in the UK or US (see point on investment risk).

Last edited by dakman; 16.05.2008 at 09:27.
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Old 15.05.2008, 20:06
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Re: What pensions become

Thanks - some excellent information there.

I haven't worked out yet how to register a "thank you" and contribute to people's 'thank you totals' - but the sentiment is there nonetheless!!
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Old 16.05.2008, 15:47
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Re: What pensions become

GVAbound - you'll get a 'thanks' button magically appear after you've made, I think, 10 posts; I asked the same noob 'where's the thanks button' question too...

Good luck for your move.

kodokan
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Old 04.12.2008, 15:58
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Re: What pensions become

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Regarding the occupational plan, if this is a company plan, they should provide you details. But the plans are set up either on a final salary or on a defined contribution basis. The employer must contribute to the plan at least as much as the employee though often the company will contribute a higher percentage. Usually, the amount of contribution is pre-defined as per the plan rules and thus no matching, as both employee and employer contributions are fixed. Defined contribution plans here is slightly different than in other countries as the investment risk is still with the company not with the employee, no reduction of the capital value year on year (more or less).

The plans, as far as I am aware, usually pay out an annuity but there is an option to take part as a lump sum on retirement.

The assets are invested by a Pension Trust Board (if it is a large company plan) who subcontracts to an asset manager or if a smaller plan is managed by an insurance company.

The employee does not have a say in how the assets are invested, for a final salary plan, it doesn't matter and for a defined contribution plan, employee will receive a credit based on the actual investment performance but there is no choice of investments as one would have in the UK or US (see point on investment risk).
I have tried to carefully read the information here on pensions and tax-optimisation; thanks a ton for all the useful posts. Being new to Suisse, I am trying to work out the contribution etc. Most of my questions have been answered already, but dare I ask for a clarification? Clearly, you can contribute to pillar 3a on a pre-tax basis. Is that true for pillar 2 (i.e. your company pension) as well? I presume it is, but no one has said so explicitly here...

The reason I ask this is that my company has now offered a choice to increase my (i.e. employee) contribution by a couple % pts or so, with their contribution remaining unchanged. If I am comfortably able to put some extra money aside this way, is this a no-brainer? obviously assuming that this will be pre-tax as above. Any reason why it may not be tax-efficient to do so?
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Old 06.12.2008, 23:23
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Re: What pensions become

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I have tried to carefully read the information here on pensions and tax-optimisation; thanks a ton for all the useful posts. Being new to Suisse, I am trying to work out the contribution etc. Most of my questions have been answered already, but dare I ask for a clarification? Clearly, you can contribute to pillar 3a on a pre-tax basis. Is that true for pillar 2 (i.e. your company pension) as well? I presume it is, but no one has said so explicitly here...

The reason I ask this is that my company has now offered a choice to increase my (i.e. employee) contribution by a couple % pts or so, with their contribution remaining unchanged. If I am comfortably able to put some extra money aside this way, is this a no-brainer? obviously assuming that this will be pre-tax as above. Any reason why it may not be tax-efficient to do so?
Contributions to the pension plan are generally deductible from taxable income. However, there is some tax on redemption.

Before you invest into a company plan, verify whether the pension plan is fully funded. Many pension plans have deficits because of the recent sharp drop in equities and bonds.
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