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-   -   Retirement dilemma (https://www.englishforum.ch/finance-banking-taxation/297428-retirement-dilemma.html)

Marsalforn 27.03.2020 19:25

Retirement dilemma
 
I reach retirement age in 14 months. However, by that time its likely for my 2nd pillar that the conversion rate will have been lowered to pay for the present crisis, and that the fund will be worth even less than it is now due to low interest rates

I have a 3 month notice period. I'm wondering whether I shouldn't hand in my notice immediately and retire 10 months early.

Any opinions would be gratefully received.

bowlie 27.03.2020 19:37

Re: Retirement dilemma
 
Can you not simply retire early? You get less per month, but you collect it for 14 additional months?

Ardmore 27.03.2020 19:47

Re: Retirement dilemma
 
perhaps you could take your pension in cash, conversion rates are anyway appalling

HIAO 27.03.2020 19:50

Re: Retirement dilemma
 
Quote:

Originally Posted by Marsalforn (Post 3164144)
I reach retirement age in 14 months. However, by that time its likely for my 2nd pillar that the conversion rate will have been lowered to pay for the present crisis, and that the fund will be worth even less than it is now due to low interest rates

I have a 3 month notice period. I'm wondering whether I shouldn't hand in my notice immediately and retire 10 months early.

Any opinions would be gratefully received.

I’m a trustee of my employers pension plan; we reduced the conversion rate, and will almost certainly do this again in the future.

We recognized the impact for staff closer to retirement age and phased the implementation of the reduction over 30 months.

Would it be better if your employer terminated your employment? You’d remain eligible for chômage and even better if your employer offered a severance payment. And, then, no need to early retire.

me.anon 27.03.2020 21:52

Re: Retirement dilemma
 
Quote:

Originally Posted by Marsalforn (Post 3164144)
I reach retirement age in 14 months. However, by that time its likely for my 2nd pillar that the conversion rate will have been lowered to pay for the present crisis, and that the fund will be worth even less than it is now due to low interest rates

I have a 3 month notice period. I'm wondering whether I shouldn't hand in my notice immediately and retire 10 months early.

Any opinions would be gratefully received.

Does your current pension scheme allow you to retire early and immediately draw a (reduced) benefit ? Some pension schemes allow you to retire at 58 and even encourage you to go with assistance to cover the period until you can get your regular old age pension (AHV). If you don't know, it definitely worth speaking to them.

If you are below retirement age and are not working, you have to pay higher AHV contributions depending on your income and wealth. I have to pay this also for my wife. It is painful but not quite as bad as having to work.

My personal opinion: If you can afford to go now, then give it serious consideration.

The present crisis, if you are referring to the Corona virus, may actually help pension funds if it weeds out their older beneficiaries !

Marsalforn 27.03.2020 22:17

Re: Retirement dilemma
 
My problem is the following. If I retire now, interest rates are so low I will get very little. If I retire later, the conversion rate will doubtless be lowered, to pay for what has been spent during virus times.

Guest 27.03.2020 22:21

Re: Retirement dilemma
 
Just wondering, do you intend to stay in Switzerland or go and live somewhere where your CHF pension will go a lot further?

Jack of all trades. 27.03.2020 22:37

Re: Retirement dilemma
 
This one is balancing 10 months with whatever.

Who cares about whatever when 10 months are at stake.

10 months is, well not major if you have already considered throwing it down the toilet.

I say hang in there with will power and have a horror time for 10 months and then you will feel much better afterwards.

Think of all the stuff that lasted for more than 10 months that you got through with nothing but will power. Heaps. And your 10,000 year old mind (that is still running through the forests etc) will do the rest to convince you that you are the guru.

me.anon 27.03.2020 22:56

Re: Retirement dilemma
 
Quote:

Originally Posted by Marsalforn (Post 3164219)
My problem is the following. If I retire now, interest rates are so low I will get very little. If I retire later, the conversion rate will doubtless be lowered, to pay for what has been spent during virus times.

I doubt if 10 months makes much difference.

If your pension fund offers early retirement, there will be a clearly defined conversion rate (Umwandlungssatz) depending on your age at the time of leaving (years and months). You can almost certainly ask for estimate of what that means for you if you opt to take a monthly income. Also compare that with an estimate of what you will get if you wait until the regular retirement age. If you take a full lump sum, then it is irrelevant. In any case, you can surely ask for the rules of the pension fund and work it out for your self.

The pension fund is also not that free to alter the conversion rate, it is fixed by law, although it gets complicated here because some of the money in your fund may not be protected by the law, which could include any extra (non-mandatory) contributions you made.

Depending on your pension fund rules, if you go before a certain age, they may give you only a full lump sum, transferred into a blocked account. However, as you are so close to a regular retirement, you'd probably not be treated so harshly and you may still be given a choice.

If you are worried that your pension fund is in such bad shape that it needs a "Sanierung" (partial liquidation) then going now may not help because they will attempt to ensure that early leavers don't escape having to make a contribution to sorting it out.

Are you incidentally going to take a lump sum or a regular income or a combination of both or are you not sure ?

Pachyderm 27.03.2020 23:13

Re: Retirement dilemma
 
Why not ask for redundancy?
  • You'll probably get a severance payment
  • You can sign up with the RAV and get 70-80% of your income for the next 14 months
  • You'll get all your Pillar 2 contributions refunded which you can invest while the stock market is low. Yes, it might go lower, but it should eventually rise again
  • Or if you're planning to retire to another country, keep it in cash because, along with your severance payment and other savings, your money is probably suddenly worth a lot more.
  • Depending on your job, you may well be stuck at home in any case for a few months. Why not be done with it?
  • Your employer might appreciate a voluntary departure if things remain bad.

wantone 28.03.2020 09:06

Re: Retirement dilemma
 
Quote:

Originally Posted by Pachyderm (Post 3164244)
Why not ask for redundancy?
  • You'll probably get a severance payment
  • You can sign up with the RAV and get 70-80% of your income for the next 14 months
  • You'll get all your Pillar 2 contributions refunded which you can invest while the stock market is low. Yes, it might go lower, but it should eventually rise again
  • Or if you're planning to retire to another country, keep it in cash because, along with your severance payment and other savings, your money is probably suddenly worth a lot more.
  • Depending on your job, you may well be stuck at home in any case for a few months. Why not be done with it?
  • Your employer might appreciate a voluntary departure if things remain bad.

Why an employer is this shitty situation will give packages? I doubt they will.

Marsalforn 28.03.2020 11:20

Re: Retirement dilemma
 
My employer has never given severance packages, even in normal times, apart from Executive Committee members, who negotiate.

It's not an easy decision. I am likely to be temporarily laid off in the near future and would receive 80% of my salary for doing nothing. But that doesn't alleviate the dilemma because a) I would retire later and the conversion rate would likely be reduced in that time and b) my pension pot wouldnt be filled either by me or by my employer during this time, though it would mean that I wasn't touching it I guess.

Marsalforn 28.03.2020 11:20

Re: Retirement dilemma
 
Quote:

Just wondering, do you intend to stay in Switzerland or go and live somewhere where your CHF pension will go a lot further?
I would like to retire here if financially possible.

Pachyderm 28.03.2020 11:36

Re: Retirement dilemma
 
Quote:

Originally Posted by Marsalforn (Post 3164327)
My employer has never given severance packages, even in normal times, apart from Executive Committee members, who negotiate.

It's not an easy decision. I am likely to be temporarily laid off in the near future and would receive 80% of my salary for doing nothing. But that doesn't alleviate the dilemma because a) I would retire later and the conversion rate would likely be reduced in that time and b) my pension pot wouldnt be filled either by me or by my employer during this time, though it would mean that I wasn't touching it I guess.

Not some great severance package, no, but you'll get your holidays paid up, and many companies will pay an estimated bonus payment. It's a lump of cash + your Pillar 2 contributions repaid. (Note -- you don't get it in cash unless leaving the country. It will be paid into a holding account.)

It's just something to think about. In this difficult period when many employers are thinking of laying people off and downsizing, they may welcome volunteers.

I'm not sure what the Pillar 2 choices are if you retire here but if you were leaving the country you'd get your pension pot paid in cash. Not sure of your nationality but the UKP has weakened to the point where exporting CHF to the UK offers quite a bit more than it did just a few weeks ago.

As for likely conversion rates if staying here, I can't offer any insights. But you raise a good point -- that the financial consequences of this situation will ripple down the years.

Guest 28.03.2020 12:45

Re: Retirement dilemma
 
Quote:

Originally Posted by Marsalforn (Post 3164328)
I would like to retire here if financially possible.

Retiring in Switzerland should be possible for most on a Swiss pension- the question is where. Some regions have much much lower costs, but higher taxes- so just depends on your personal situation and if prepared to re-locate.

doropfiz 28.03.2020 13:35

Re: Retirement dilemma
 
Quote:

Retiring in Switzerland should be possible for most on a Swiss pension- the question is where. Some regions have much much lower costs, but higher taxes- so just depends on your personal situation and if prepared to re-locate.
Yes, the operative word here is "should". And yes, as you say, it depends on the personal situation.

However, I know a number of people who've aleady had to leave Switzerland, or who are planning to do so, although they don't really want to relocate at all. The bald fact is that their pensions just don't suffice. All of those who come to mind right now are born and bread Swiss citizens who've always worked in Switzerland, and contributed, or non-Swiss who've lived and worked here for at least 30 or 40 years.

Their pensions are too low, not because they did foolish things along the way (although I do know one such foolish case, too), but because they were not in a high-earning category to start with, nor entrepreneurs, so they have had to live from month to month, and could not build up much in the way of savings, let alone an investment portfolio.

Sometimes it's to do with health issues or disabilities which cause them extra costs which the Swiss medical insurance and/or Disability insurance decline to cover. One man, for example, can hear only with a certain type of hearing-aid, which is not on the list of acceptable devices, and this (and the many procedures around his diminished hearing) has caused a significant drain on his income, all his life long. Another has a daughter, now adult and healthy, who spent most of her childhood years very ill, which caused a financial drain in other ways. Another woman needs daily care at home, but cannot afford what she needs in Switzerland, so has left for abroad.

P.S. When I started writing this post, I had 3 people in mind. By the time I got to the end, I'd remembered 11 people who find themselves in such circumstances.

Guest 28.03.2020 13:46

Re: Retirement dilemma
 
It can be tough indeed. But thinking of those cases, would, for instance, such a specialised hearing aid be available in another country and covered?

When I mentionned re-location, I meant within Switzerland, not abroad.
In some regions, you can get a decent flat for 500.- and buy a nice house for 500k- with a cheap mortgage which will reduce tax. Retiring in Geneva or the Riviera, will not be an option for that many.

People come and retire in my region, despite relatively high taxes, because of cheap housing to rent or buy, tons of space with pets allowed, great facilities for sport and proximity to great countryside, great public transport and charity transport till very late/early morning at week-ends, local products, cultural activities, CineClub, U3A, etc, proximity to France, Bern, Lausanne less than 1 hour. A choice and recently more retired expats, for reasons stated. Not a choice for some.

meloncollie 28.03.2020 14:11

Re: Retirement dilemma
 
My crystal ball has gone dark and cloudy, so take my advice with a grain o' salt.

That said, if financial concerns are the primary driver, I would not approach the company with a request for early retirement at this point.

Rather, it might be prudent to wait until they approach you or otherwise make it known that they are seeking voluntary retirement. If the company is the initiator you have a bit more negotiating leeway and thus there could be a chance of a better exit outcome.

All the best with your decision.

doropfiz 28.03.2020 14:28

Re: Retirement dilemma
 
Quote:

It can be tough indeed. But thinking of those cases, would, for instance, such a specialised hearing aid be available in another country and covered?

When I mentionned re-location, I meant within Switzerland, not abroad.
In some regions, you can get a decent flat for 500.- and buy a nice house for 500k- with a cheap mortgage which will reduce tax.
The person had to pay for the hearing aid themselves, and probably still will. It was sourced in a European country, and the next model, as needed, probably still will be. But all the other living costs will drop substantially, making it so much more possible to save up to afford the hearing aid.

As I understand it, a pensioner who has a low pension and no or very little savings is highly unlikely to qualify for a mortgage.

A rental of Fr. 500 is appealing, that's true. What could one get, for that? Is there no accommodation shortage, as in the cities? Could such an appartment be found in a location that's suitable for someone with restricted mobility?

And are the wages for carers are similarly proportionately lower, where you live, than in Swiss cities?

HIAO 28.03.2020 14:39

Re: Retirement dilemma
 
Quote:

Originally Posted by wantone (Post 3164275)
Why an employer is this shitty situation will give packages? I doubt they will.

Employers give severance packages for many reasons. Especially at times like this, it's quite cost-effective as most severance packages pay for themselves in a few months.

Combined with a mutual agreement it removes most legal risks, especially for older, more senior staff.

It can help remove resistance to departures, some staff even volunteer. And, it can help to smooth transition of responsibilities.

It's a way of treating people with respect, for organisations that care about their reputation.

I don't speak for the OP's employer.


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