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  #21  
Old 21.09.2020, 17:12
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Re: Oldest question of all: how to pay less taxes? Are Pillar2 contributions a good d

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100k is way too small for a Pillar 2,
Whait . Why was I thinking all the way long it is about pillar 3a?

O.k. still same formula and same idea. And yes you are right.
Here the table with 10% and 15% payout tax applied.

Name:  Pillar 3a vs Alternative 10 small.jpg
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Name:  Pillar 3a vs Alternative 15 small.jpg
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Specially consider that one is "robbed" in case of pillar 2 as part of the performance is used to finance existing rents. Even this alone can contribute to a lost performance of 2% or more.

In Pillar 2 the risk of death and disability is not financed by your saving capital but insured and covered by the Risikobeitrag/Risk contribution.
https://www.pensionskasse-swissre.ch/en/key-words.html
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  #22  
Old 22.09.2020, 14:21
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Re: Oldest question of all: how to pay less taxes? Are Pillar2 contributions a good d

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Indirect is when you do not directly reduce the principal of the mortgage.
If you use the money directly to lower the mortgage it is considered direct.
FTFY

Amortisation is the reduction of the mortgage, this is the meaning of the word. There is no such thing as Amortisation that doesn't reduce the mortgage. Used to be, the reduction would happen by multiple periodic pay-ins, though that may have changed with the advent of the near-zero interest environment.

"Hey bank, here's 10k to reduce the mortgage" is direct Amortisation, using pillar 3a is considered indirect.
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  #23  
Old 29.10.2020, 13:22
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Re: Oldest question of all: how to pay less taxes? Are Pillar2 contributions a good d

having concluded that Pillar2 "top-up" does not yield the best return on capital over a certain horizon, are there other ways/tactics to reduce the tax bill?
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Old 29.10.2020, 13:47
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Re: Oldest question of all: how to pay less taxes? Are Pillar2 contributions a good d

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having concluded that Pillar2 "top-up" does not yield the best return on capital over a certain horizon, are there other ways/tactics to reduce the tax bill?
Quit your job.
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Old 29.10.2020, 13:48
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Re: Oldest question of all: how to pay less taxes? Are Pillar2 contributions a good d

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Quit your job.
I already tried to ask my employer to pay me less but they insist on paying me my worth
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  #26  
Old 29.10.2020, 14:10
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Re: Oldest question of all: how to pay less taxes? Are Pillar2 contributions a good d

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having concluded that Pillar2 "top-up" does not yield the best return on capital over a certain horizon, are there other ways/tactics to reduce the tax bill?
Yup a few. Investment in property to reduce wealth taxes and use write-offs against income. Non-taxable investments overseas.
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Old 23.11.2020, 18:52
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Re: Oldest question of all: how to pay less taxes? Are Pillar2 contributions a good d

Have you considered an off-shore account in Cayman Island or Panama?

Joking aside, as someone said earlier, if you are not planning to retire in Switzerland, you should not think about contributing to Pillar 2. If you own a house and currently paying mortgage on it, the payment is tax-exempt, same with any expense going into repairing and maintaining the house up to good use. So perhaps investing in a house would benefit your tax purpose?
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  #28  
Old 23.11.2020, 19:03
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Re: Oldest question of all: how to pay less taxes? Are Pillar2 contributions a good d

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Have you considered an off-shore account in Cayman Island or Panama?

Joking aside, as someone said earlier, if you are not planning to retire in Switzerland, you should not think about contributing to Pillar 2. If you own a house and currently paying mortgage on it, the payment is tax-exempt, same with any expense going into repairing and maintaining the house up to good use. So perhaps investing in a house would benefit your tax purpose?
It's not as good as that as you are taxed on the notional rent you would pay on the house.
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  #29  
Old 23.11.2020, 20:39
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Re: Oldest question of all: how to pay less taxes? Are Pillar2 contributions a good d

One never knows what can happen down the road and the rules may just change in the future. Would only do it if your not going to miss the money and have no better way to park it. By the way a certain amount of pillar 2 can be invested in the market (e.g. stocks, bonds, etc..)
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  #30  
Old 23.11.2020, 21:44
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Re: Oldest question of all: how to pay less taxes? Are Pillar2 contributions a good d

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One never knows what can happen down the road and the rules may just change in the future. Would only do it if your not going to miss the money and have no better way to park it. By the way a certain amount of pillar 2 can be invested in the market (e.g. stocks, bonds, etc..)


Sorry for being dumb - but how do I choose to do this.

I've never seen any options to make any investment decisions within pillar 2. Not until you earn over 150k at least (I won't in 2020 as haven't worked the full year).

Last edited by HickvonFrick; 23.11.2020 at 22:40.
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  #31  
Old 23.11.2020, 23:01
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Re: Oldest question of all: how to pay less taxes? Are Pillar2 contributions a good d

Pullar 2 for me is a grey choice because the capital is 100% secured with a minimum of a 1% interest regardless of pension performance

This is pure arbitrage. You are getting a plus 1% pillar 2 return when the base is -.75%.
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  #32  
Old 23.11.2020, 23:08
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Re: Oldest question of all: how to pay less taxes? Are Pillar2 contributions a good d

It seems you're looking for two different outcomes simultaneously:

1. Tax efficiency and 2. Sustained market-benchmarked growth

Tax optimised pension products are not set up to achieve both of the above. They are deliberately structured to encourage solidarity of the younger helping to finance the older, especially as the Pillars 2 &3 are recent compared to Pillar 1 (AHV/AVS). The employer matching of P1&P2 are the main initial contribution benefit rather than any underlying growth thereafter.

(if your employer matches you get at least a 100% return each month on your salary sacrifice contributions, without examining ongoing growth thereafter).

I'm not a financial adviser, but given your obligations I'd ask if you have the following coverages first:

1. Do you have adequate life insurance for both you and your wife including waiver of premium cover should your income drop (but you wish to retain the policies, eg due to a serious diagnosis)?

2. Do you have adequate critical illness cover which would pay you a lump sum in the event of a serious diagnosis allowing you to: a) repay your mortgage for example and b) Reduce your fixed living costs to be covered by an IPP or other provision/investment/cover?

3. Do you have an adequate income protection policy (IPP) to pay you circa 80% of your previous salary index-linked until retirement, should you become partially or fully disabled?

I ask the above as funds you invest in a Pillar 2 policy could become part of a disability pension payable before retirement leading to the possible conversion of your pension funds into an annuity, and therefore a loss of re-allocation for other pension variants on retirement (such as x% drawdowns etc).

In other words you may prefer to keep a "Pillar4 and 5" outside of the regulated regime to retain investment flexibility, particularly if you have arranged the life event coverages indicated above. Property you live in could be an example of one such Pillar as previously mentioned in an earlier post by Jim2007.

Tax benefits usually come at the cost of flexibility and are subject to change.

As Capital Gains Tax on eligible investments (not including Options) held at least six months amongst other criteria, is usually exempt: only having to pay Asset/Wealth tax annually may seem reasonable to retain flexibility, control etc. over the term you indicated. https://thepoorswiss.com/?s=capital+gains

I guess it depends on your attitude/confidence in managing your funds surpluses.

Do you prefer to leave it to a third party to take care of day to day, or are you prepared/willing/able to take on such responsibility yourself?

Personally I don't let tax treatment affect my investing once I've made the usual P1/P2/P3a arrangements, given it can change anytime. Good luck in your investing!
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  #33  
Old 24.11.2020, 17:47
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Re: Oldest question of all: how to pay less taxes? Are Pillar2 contributions a good d

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It seems you're looking for two different outcomes simultaneously:

1. Tax efficiency and 2. Sustained market-benchmarked growth

Tax optimised pension products are not set up to achieve both of the above. They are deliberately structured to encourage solidarity of the younger helping to finance the older, especially as the Pillars 2 &3 are recent compared to Pillar 1 (AHV/AVS). The employer matching of P1&P2 are the main initial contribution benefit rather than any underlying growth thereafter.
That's me out . Seriously why should I fund the private pension of well-off retired pharma execs?

I don't mind a little bit of socialism in pillar 1 - that's to stop people going destitute after all. I'm not Dominic Cummings.

I do mind it in pillar 2.

Pillar 2 should be a simple calculation: You put money in, there is an investment return - you get the money out and/or buy an annuity. Treating it as one big pot where the elderly can dip into not only their investment returns but mine also - that's a big no no for me. I think its unfair and unnecessary for proper functioning of the system. I will be withdrawing every 5 years - essentially not participating in the system.
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  #34  
Old 28.11.2020, 14:18
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Re: Oldest question of all: how to pay less taxes? Are Pillar2 contributions a good d

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Non-taxable investments overseas.
Tell us more
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Old 28.11.2020, 14:20
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Re: Oldest question of all: how to pay less taxes? Are Pillar2 contributions a good d

I see 2nd pillar as a great way to reduce my taxable income and set aside some money that are safe from myself, i.e., I could screw up completely on the investments I manage myself but the 2nd pillar money would still be there, it's another way of diversifying risk.
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Old 28.11.2020, 14:24
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Re: Oldest question of all: how to pay less taxes? Are Pillar2 contributions a good d

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Joking aside, as someone said earlier, if you are not planning to retire in Switzerland, you should not think about contributing to Pillar 2.
Why? I think it actually makes *more* sense to invest in the 2nd pillar if you plan on leaving: that way the savings on taxes on the years you contributed won't be diluted when you cash out before leaving (and you can then move to Money to a another canton to pay less tax).
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  #37  
Old 28.11.2020, 15:40
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Re: Oldest question of all: how to pay less taxes? Are Pillar2 contributions a good d

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having concluded that Pillar2 "top-up" does not yield the best return on capital over a certain horizon, are there other ways/tactics to reduce the tax bill?
Move to Zug!
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  #38  
Old 28.11.2020, 15:54
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Re: Oldest question of all: how to pay less taxes? Are Pillar2 contributions a good d

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Tell us more
Real estate or shares which do not pay dividends.
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Old 28.11.2020, 16:07
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Re: Oldest question of all: how to pay less taxes? Are Pillar2 contributions a good d

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Real estate or shares which do not pay dividends.
For the shares, I don't see the difference with stocks domiciled in CH.

For real estate, I tend to disagree: I have to declare 4.25% of the value of my properties abroad as Eigenmietwert, and I guess any rent I would earn would be added as it is to my income in CH...
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Old 28.11.2020, 16:13
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Re: Oldest question of all: how to pay less taxes? Are Pillar2 contributions a good d

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For the shares, I don't see the difference with stocks domiciled in CH.

For real estate, I tend to disagree: I have to declare 4.25% of the value of my properties abroad as Eigenmietwert, and I guess any rent I would earn would be added as it is to my income in CH...
Why would you invest is Swiss stocks, Berkshire Hathaway does not pay a dividend. Looks like you are doing your taxes wrong.
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