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  #21  
Old 28.10.2020, 14:36
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Re: Max pillar 2 pension contribution

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For most people who come to switzerland for five odd years and *DO* plan to leave back to the UK rather then live here forever the pillar 2 pension is not to get a return but to save the 10 / 15% tax.

The pillar 2 is marketed as an effective risk free positively paying account which can be taken out in full to finance a property upon departure - For this reason alone I am making overpayments to the max allowed on the understanding that tax today is saved but the funds will be available for withdrawal when I leave to the UK for repayment of a mortgage.
The tax deductibility of your additional 2nd pillar contributions is lost if you try to drawdown your pension savings within three years of making the additional contribution. The authorities interpret the ‘buyback’ as being intended to avoid tax and will clawback accordingly.

FMF will explain his experience better than I can, but in principle on departure from Switzerland, don’t assume that you will get all of your 2nd pillar contributions back. If your destination country has a mandatory social security arrangement, you will be able to drawdown the extra mandatory portion of your accrued savings, not the entire amount.
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  #22  
Old 28.10.2020, 14:37
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Re: Max pillar 2 pension contribution

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My taxable income is 135 after deudctions like travel etc ....

I can make 35K contributions which is the 20% cap - No kids no church just 40

At 135K
Tax breakdown
Cantonal tax7’016 CHF
Communal tax3’508 CHF
Church tax0 CHF
Personal tax0 CHF
Direct federal tax5’646 CHF
Total tax
16’170 CHF


At 100K after making the 35k pension
Tax breakdown
Cantonal tax4’832 CHF
Communal tax2’416 CHF
Church tax0 CHF
Personal tax0 CHF
Direct federal tax2’702 CHF
Total tax
9’950 CHF

So deferring 35K results today in a 6.5K saving which is a 19% saving....

When I leave I pay 5% payout tax so its 14% deferral for saving it in pillar 2 instead of cash savings account at my bank....

Thats for schwyz - So definitely worth it
Your are making an assumption that you will only be liable to Swiss withholding tax, that may or may nit be true down the line.
If you invest in equities, you could easily pay more tax than you save, this happened with my UK pension.
Total tax saved £2,224 Tax payable over on liquidation £13,636. It would have been far better to have bought a PEP at the time (now ISA).
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  #23  
Old 28.10.2020, 14:44
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Re: Max pillar 2 pension contribution

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Your are making an assumption that you will only be liable to Swiss withholding tax, that may or may nit be true down the line.
Those are todays rules correct - This is what should be used as the basis for evaluating options rather then speculating what might change

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If you invest in equities, you could easily pay more tax than you save, this happened with my UK pension.
Total tax saved £2,224 Tax payable over on liquidation £13,636. It would have been far better to have bought a PEP at the time (now ISA).
Equities carries risk - This investment strategy locks in a 19% tax saving today with no risk other than legislation changes
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  #24  
Old 28.10.2020, 14:51
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Re: Max pillar 2 pension contribution

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Equities carries risk - This investment strategy locks in a 19% tax saving today with no risk other than legislation changes
Not entirely - risk is usually calculated vs the cash return rate, or in some cases vs inflation (which for a pension is probably more useful), or even against your earnings expectation.

So although all are zero or less at the moment, there is a longer term risk your pension doesn't keep up with inflation, and a virtual certainty it doesn't match your earnings.
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  #25  
Old 28.10.2020, 15:00
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Re: Max pillar 2 pension contribution

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Those are todays rules correct - This is what should be used as the basis for evaluating options rather then speculating what might change



Equities carries risk - This investment strategy locks in a 19% tax saving today with no risk other than legislation changes
Risk over time reduced, since you could easily spend 30 years in retirement a pension is about investment over 65years, possibly more.
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  #26  
Old 28.10.2020, 15:09
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Re: Max pillar 2 pension contribution

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Swiss pensions are not invested as a long term investments, too much bonds & too little equities. I suspect over 30 years 100% of Swiss pensions have underperformed the SMI by more than 30%.

Do you have some figures for the Top 10 Swiss pension funds please, perhaps the under performance is more than 50%.

You've just demonstrated why so many fail. Because it has very little to do with the figures and everything to do with human behavior.


It's very easy read the books and do the maths, but it does not take into account the human factor. They'll pull out of the market in case there might be a crash, they'll happily buy over prices stocks, stock their mates suggested, the talking heads etc...


And if they have access to the funds, they will come up with an array of very sensible reason for spending it now to save later.... but it never happens, because the bit about putting the savings back later is forgotten.
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  #27  
Old 28.10.2020, 15:18
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Re: Max pillar 2 pension contribution

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You've just demonstrated why so many fail. Because it has very little to do with the figures and everything to do with human behavior.


It's very easy read the books and do the maths, but it does not take into account the human factor. They'll pull out of the market in case there might be a crash, they'll happily buy over prices stocks, stock their mates suggested, the talking heads etc...


And if they have access to the funds, they will come up with an array of very sensible reason for spending it now to save later.... but it never happens, because the bit about putting the savings back later is forgotten.
It worked for me, I cashed out my Swiss pension 8 June 2015 & invested in Fundsmith on the 11 June 2015 . Increase in CHF of 104% at yesterdays price.
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  #28  
Old 28.10.2020, 15:22
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Re: Max pillar 2 pension contribution

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You've just demonstrated why so many fail. Because it has very little to do with the figures and everything to do with human behavior.


It's very easy read the books and do the maths, but it does not take into account the human factor. They'll pull out of the market in case there might be a crash, they'll happily buy over prices stocks, stock their mates suggested, the talking heads etc...


And if they have access to the funds, they will come up with an array of very sensible reason for spending it now to save later.... but it never happens, because the bit about putting the savings back later is forgotten.
This is exactly why the Swiss pensions setup would benefit from something like the UK SIPP. Ability to invest in markets, with some restrictions on excessive risk, and rules around withdrawal.

Even if they just extended the 3a allowance and allowed investment in a wider range of funds it would be a good step.
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  #29  
Old 28.10.2020, 16:46
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Re: Max pillar 2 pension contribution

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Those are todays rules correct - This is what should be used as the basis for evaluating options rather then speculating what might change



Equities carries risk - This investment strategy locks in a 19% tax saving today with no risk other than legislation changes
With a bigish salary and no kids I'd suggest that you shouldn't be restricting yourself to low risk options.
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  #30  
Old 28.10.2020, 21:45
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Re: Max pillar 2 pension contribution

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My taxable income is 135 after deudctions like travel etc ....

I can make 35K contributions which is the 20% cap - No kids no church just 40

At 135K
Tax breakdown
Cantonal tax7’016 CHF
Communal tax3’508 CHF
Church tax0 CHF
Personal tax0 CHF
Direct federal tax5’646 CHF
Total tax
16’170 CHF


At 100K after making the 35k pension
Tax breakdown
Cantonal tax4’832 CHF
Communal tax2’416 CHF
Church tax0 CHF
Personal tax0 CHF
Direct federal tax2’702 CHF
Total tax
9’950 CHF

So deferring 35K results today in a 6.5K saving which is a 19% saving....

When I leave I pay 5% payout tax so its 14% deferral for saving it in pillar 2 instead of cash savings account at my bank....

Thats for schwyz - So definitely worth it
I've already opined that I disagree with your conclusion, the maths:

That's 2.65% annual return from tax savings when you compound. Add in a typical 1.5% pension return makes 4.15% annual return.

Average SP500 return is up over 10%.
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  #31  
Old 28.10.2020, 21:53
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Re: Max pillar 2 pension contribution

Eh? Where did you get 2.65% from???

And the sandp 10% year on year return. Ok just look at today’s one day move.

If I want to trade which I have in the past I will day trade with igIndex using spread betting with razor thin margins and spreads

My maths shows a 14% return from tax saved today. Not theoretical but actual
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  #32  
Old 29.10.2020, 00:55
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Re: Max pillar 2 pension contribution

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Eh? Where did you get 2.65% from???

And the sandp 10% year on year return. Ok just look at today’s one day move.

If I want to trade which I have in the past I will day trade with igIndex using spread betting with razor thin margins and spreads

My maths shows a 14% return from tax saved today. Not theoretical but actual
2.65^5 makes 14. I've just annualised it for a 5 year horizon.

I'm not interested in day trades or daily shifts in sentiment. As Terry Smith says - there are two types of people regarding market timing:: those who think they can do it and can't and those who know they can't do it.
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  #33  
Old 29.10.2020, 09:52
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Re: Max pillar 2 pension contribution

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This is exactly why the Swiss pensions setup would benefit from something like the UK SIPP. Ability to invest in markets, with some restrictions on excessive risk, and rules around withdrawal.

Even if they just extended the 3a allowance and allowed investment in a wider range of funds it would be a good step.
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It worked for me, I cashed out my Swiss pension 8 June 2015 & invested in Fundsmith on the 11 June 2015 . Increase in CHF of 104% at yesterdays price.
Remember why we want to make sure people have pension savings? Because if they don’t have adequate savings, come election time they’ll vote for candidates that will help them get a share of your pension pot.

The demographics are shifting and more and more voters are going to have to live of pensions and savings... you might do well, but if others don’t, then you can expect to see capital taxes and pension fund levies become a feature.

Swiss pension restrictions ensures that average citizens come out fairly well prepared and most important - they don’t become a burden on you.

I don’t have any confidence in self directed pensions, because I expect far too many will FU and it will cost everyone in the end.
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Old 29.10.2020, 09:58
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Re: Max pillar 2 pension contribution

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Remember why we want to make sure people have pension savings? Because if they don’t have adequate savings, come election time they’ll vote for candidates that will help them get a share of your pension pot.

The demographics are shifting and more and more voters are going to have to live of pensions and savings... you might do well, but if others don’t, then you can expect to see capital taxes and pension fund levies become a feature.

Swiss pension restrictions ensures that average citizens come out fairly well prepared and most important - they don’t become a burden on you.

I don’t have any confidence in self directed pensions, because I expect far too many will FU and it will cost everyone in the end.
Hence the reason I specifically said "with restrictions on risk".

I also support having a mandatory low-risk base pension so everyone has a basic living income pre-funded in retirement, and people younger than them don't have to sort out the mess.
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Old 29.10.2020, 10:14
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Re: Max pillar 2 pension contribution

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Remember why we want to make sure people have pension savings? Because if they don’t have adequate savings, come election time they’ll vote for candidates that will help them get a share of your pension pot.
You are aware, that with the current pillar 2 system a lot of hands are taking out money out of your pension pot and thus you are deprived of your adequate and just savings?
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  #36  
Old 29.10.2020, 10:38
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Re: Max pillar 2 pension contribution

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Remember why we want to make sure people have pension savings? Because if they don’t have adequate savings, come election time they’ll vote for candidates that will help them get a share of your pension pot.

The demographics are shifting and more and more voters are going to have to live of pensions and savings... you might do well, but if others don’t, then you can expect to see capital taxes and pension fund levies become a feature.

Swiss pension restrictions ensures that average citizens come out fairly well prepared and most important - they don’t become a burden on you.

I don’t have any confidence in self directed pensions, because I expect far too many will FU and it will cost everyone in the end.
Even with this slightly misanthropic view, there are compromises to be had. For example, letting people choose 100% passive trackers and then lock them in for eg 5 years.

Or even just don't give people a choice and invest the money properly. The investment strategy is simply not appropriate for young people with a long horizon. There is also an unacceptable disconnect between ones own money and the performance of the fund. They should be one and the same (minus reasonable charges). I love Switzerland and don't moan about anything else here - the pension system is my one issue. And the people most affected are the Swiss themselves.

Also - you said on the Brexit thread you didn't believe British people took democracy seriously because "the people aren't sovereign". Is that attitude really consistent with nannying them like this?

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  #37  
Old 31.10.2020, 12:47
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Re: Max pillar 2 pension contribution

I read this with interest but talks only about the years you would be getting an "OASI income" - so would only cover the years one gets an income subject to AHV in Switzerland and not every year that it missing - correct?
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Old 31.10.2020, 13:47
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Re: Max pillar 2 pension contribution

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I read this with interest but talks only about the years you would be getting an "OASI income" - so would only cover the years one gets an income subject to AHV in Switzerland and not every year that it missing - correct?

I read it in French.
'Au moment où vous effectuez le versement de rattrapage, vous devez disposer d’un revenu soumis à l’AVS.'
Then in German.
'Sie müssen zum Zeitpunkt der Nachzahlung über ein AHV-pflichtiges Einkommen verfügen.'
My interpretation: one must earn income subject to first pillar deductions in the year that one makes the repurchase.


As to the number of years in arrears: I understand it to be from the age of 25 on but that is not entirely clear. Nor is it entirely clear to the Conseil des États/Ständerat.
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