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  #21  
Old 13.03.2017, 19:36
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Re: Lump sum offer to retirees

Actually I retired at 55, almost 7 years ago. I'm not eligible for AVS (it's complicated) though. I can't even have a third pillar as I'm collecting a pension.
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  #22  
Old 13.03.2017, 20:32
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Re: Lump sum offer to retirees

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Actually I retired at 55, almost 7 years ago. I'm not eligible for AVS (it's complicated) though. I can't even have a third pillar as I'm collecting a pension.
I think 19.7 years advance pension is a very good deal, I would take the cash before they changed their minds & lower it to 16 years up front.
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  #23  
Old 06.04.2017, 12:08
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Re: Lump sum offer to retirees

I have now been able to talk to some tax experts. Much to my surprise I can reduce my annual tax significantly by taking the lump sum. If the Credit Suisse tax calculator can be believed - perhaps as much as 20K annually.

So, in other words, the 10% tax paid on the lump sum can be recovered in just over 11 years.

One avenue for us to invest is to buy-back years in my wife's 2nd Pillar, allowing her to retire early. That would return a big non-monetary benefit.

The remaining question is what to do with the remaining capital. An accountant suggested that if I want something completely safe I get 'three quotes' for an annuity from Swiss Insurance Companies. He suggests an Insurance broker would be 'happy' to do so. (He actually said 'drooling over the commission'). I am new to all of this and don't even know where to get started finding an insurance broker. What should I be looking for, and what should I be looking out for?

Previous comments here have been very! (very!!, very!!!) helpful. Thank you all again for those, and for some further hints ....
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  #24  
Old 06.04.2017, 16:02
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Re: Lump sum offer to retirees

If you withdraw pension just to buy an annuity, I don't see how this can possibly be any better than not withdrawing at all. Your pension fund is already an annuity. For switching, you'll pay withdrawal taxes, heavy commissions, and your annuity payment will be still taxed as income. Unless new annuity can offer a much better conversion rate, but I doubt that - rates are very low everywhere

Sure, you'll probably have less taxes indeed - as a result of lower income overall! Saving taxes is great, but saving money is much better

Using the money to pay into another pillar 2 might be worth it if you can withdraw it in a few years and have a high enough tax burden.

Last edited by ivank; 06.04.2017 at 16:13.
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  #25  
Old 06.04.2017, 16:24
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Re: Lump sum offer to retirees

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If you withdraw pension just to buy an annuity, I don't see how this can possibly be any better than not withdrawing at all.
Read the original post of the thread:

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To the best of my knowledge the plan is still solvent (Funds in excess of 225m made a +5.5% return for 2016). Plan is dual DB and DC with employees hired after 1 Jan 2005 in DC, others including me in DB. But:
He is on Leistungsprimat and not on Beitragsprimat. This is also the reason why the actual payout amount was initially unknown and the pension plan wants to get rid of him.
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  #26  
Old 06.04.2017, 16:38
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Re: Lump sum offer to retirees

I'm also not sure about this. OK, you can weigh up getting cash up front vs 6.8% guaranteed. Is there any risk that the fund could go bankrupt? Or does the company have to 'bailout' the fund? (assuming also this wouldn't bankrupt the company)
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  #27  
Old 06.04.2017, 16:39
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Re: Lump sum offer to retirees

Well, that's all in the past, now the choice is between concrete numbers: take the cash and invest yourself, or continue with pension which is like buying 5.07% annuity with that cash
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  #28  
Old 06.04.2017, 16:48
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Re: Lump sum offer to retirees

i guess there might be a part way option of taking, say, half of it as lump sum and still getting the other half as a guaranteed payment from the pension fund.
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  #29  
Old 06.04.2017, 17:04
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Re: Lump sum offer to retirees

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I'm also not sure about this. OK, you can weigh up getting cash up front vs 6.8% guaranteed.
In Leistungsprimat there are no 6.8% or whatever percent. There is just a monthly pension, this is why he gets cash or 5.07% for ever.

Disregarding any tax:
With 3% interest you can finance the current rent for 30 years.
If you die before that you heirs win as there is still capital left, if you live beyond the 30 years you "loose" and would have better taken the 5% instead of the lump sum. You also win when you achieve a better interest/gain than 3%.

Here a calculator:
http://www.calculator.net/annuity-pa...ngth&x=52&y=18
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  #30  
Old 06.04.2017, 17:40
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Re: Lump sum offer to retirees

sorry, to clarify, my question was not about the option of taking lump sum or getting payments, but rather who bears the risk/liability for shortfalls in the fund.

i'm assuming here the the DB is like the UK where you get a fixed amount each month, so theoretically the fund can run out of money.
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  #31  
Old 06.04.2017, 18:01
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Re: Lump sum offer to retirees

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sorry, to clarify, my question was not about the option of taking lump sum or getting payments, but rather who bears the risk/liability for shortfalls in the fund.

i'm assuming here the the DB is like the UK where you get a fixed amount each month, so theoretically the fund can run out of money.
The current contributors to the fund.

The same issue with the DC scheme where you have an actual accumulated fund but get a guaranteed conversion rate (at least for the obligatory part).

The current contributors pay for it with either lower interest rates on their capital.
Lower future conversion rates.
Extra payments from employer and all employee which are used to decrease the deficit.
Lower current conversion rate on the part above the obligatory part.

This is o.k. as long as there are still others contributing to the fund. But if the company no longer exists and the only thing that remains are the old pensioners and the pension fund then they can also, as a last resort, lower the rent.
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  #32  
Old 06.04.2017, 18:10
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Re: Lump sum offer to retirees

I found an example online: the Novartis pension fund has provisions in Article 27.
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  #33  
Old 06.04.2017, 18:38
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Re: Lump sum offer to retirees

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To the best of my knowledge the plan is still solvent (Funds in excess of 225m made a +5.5% return for 2016).
As pension fund investment decisions are regulated, a one-off 5.5% return looks ok, though there are better indicators of pension fund health.

Is 5.5% the investment return, or the pension committees' decision on what interest rate to credit to employees pension savings? Either is unlikely to affect an existing retiree's pension. (Plan regs vary).

Pension coverage rate, a percentage showing the plans ability to meet its current and future liabilities is a more meaningful indicator of the plan health and sustainability.

The coverage rate is impacted by life expectancy. Since the beginning of 2017, the longevity tables used by many plans in Geneva changed (they were last updated in 2005) and life expectancy is higher. For plans with more retirees, an older workforce, and DB benefits, this must have adversely affects the coverage rate overnight.

Dumping expensive and difficult to calculate DB liabilities, improves the coverage rate and, I'll bet your pension that it's cheaper than the employer topping up the fund.

It's a risky (or desperate) employer who tries to buy out a pensioner from any kind of plan, especially a DB arrangement.

This approach should have been minuted at the pension board meeting, who must be represented equally by employer and employee and should also have pensioner representation. It presumably has been calculated by the pension actuary and communicated in writing to the cantonal pension monitoring authority, ASFIP.

If I were in the same position, I would ask the pension board and / or the actuary for an explanation of the rationale in writing.

I'd also ask ASFIP for their views. You also hold the right to see the pension fund financial reports.

In my opinion, it is reasonable to ask the pension board to pay for you to get independent financial advice. Indeed, if I was a pension board member, I would insist that you got this advice to cover my own ass big-time.

Finally, as they will have calculated an offer to you, based on reducing their liability, treat the offer as negotiable. Why not?
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  #34  
Old 21.04.2017, 11:07
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Re: Lump sum offer to retirees

I'm 99% certain that we are going to accept the offer. I've found a good tax advisor in Geneva and am fairly comfortable with that side of the equation.

I am still looking for a financial advisor who, for a reasonable fee, can manage the capital.

English speaking prefered, but I am reasonably fluent in French.

I would appreciate any recommendations you might have.
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  #35  
Old 21.04.2017, 15:24
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Re: Lump sum offer to retirees

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I am still looking for a financial advisor who, for a reasonable fee, can manage the capital.
10y gov't bonds:
Greece: 6.47% Portugal 3.71% Italy 2.24% Spain: 1.65% France: 0.92% Germany: 0.23%
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