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  #21  
Old 27.05.2021, 17:10
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Re: Taking a loan to fund voluntary contributions to 2nd pillar?

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Perhaps it‘s the pillar 1e that people see as relatively attractive? My contribtions on salary over a certain amount go into a globally diversified portfolio with 75% equities component with a management fee of something like 30bps. The capital and risk is all mine and there is no cross subsidisation of other fund members.
Is the proportion over 150K?

We are only allowed to put it in 40% equities AFAIK (and I earn so little over 150K that I haven't bothered looking into it much)
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  #22  
Old 27.05.2021, 17:25
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Re: Taking a loan to fund voluntary contributions to 2nd pillar?

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Is the proportion over 150K?

We are only allowed to put it in 40% equities AFAIK (and I earn so little over 150K that I haven't bothered looking into it much)
I said a certain amount, so that I didn‘t have to go an look it up. It‘s anything over 98k I think, but I don‘t know if that is before or after the „co-ordination deduction“ of 28k, so somewhere between 98k and 126k plus bonus and I think anything if I were to close the gap.
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  #23  
Old 27.05.2021, 17:27
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Re: Taking a loan to fund voluntary contributions to 2nd pillar?

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Understood. But if you are planning taking a loan to finance the 2nd pillar, one might as well take a Lombard loan invest wisely and pay high taxes as a professional trader while small taxes on loan itself.
If you‘re investing you won‘t pay professional trader taxes.
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  #24  
Old 28.05.2021, 13:35
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Re: Taking a loan to fund voluntary contributions to 2nd pillar?

Thank you for all the responses.

Let me clarify my situation / assumptions / objectives a bit better:
- I have an equity portfolio of roughly 4M CHF
- That's expected to continue to grow as LTIPs vesting / cash bonuses / savings from solid base salary etc. continue to accumulate
- I already periodically take a 100-200k low interest loan (with my equity as collateral) to acquire high dividend yield shares at the right price (yield FAR in excess of the interest on the loan
- I also already generate extra returns by writing covered calls etc.
- So exploring some tax optimization options by taking on more low interest loan for this voluntary second pillar contribution idea
- My LTV would still be FAR below the max so close to zero risk of a margin call


Costs
a) interest on loan
b) future tax on payout of pension

Benefit
c) return on additional pension contributions
d) tax benefit on additional pension contribution
e) tax deductibility of the interest on the loan

For the sake of the argument let's assume a vs. c+e are a wash

My future annual pension payment would be much lower than my current salary. Hence in a much lower tax bracket. That is driving my idea of there ultimately being a benefit (d > b) which would make it worth my while to leverage up on loans and load up on voluntary 2nd pillar contributions.

Above makes sense (based on the assumptions given)?
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  #25  
Old 28.05.2021, 13:46
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Re: Taking a loan to fund voluntary contributions to 2nd pillar?

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Thank you for all the responses.

Let me clarify my situation / assumptions / objectives a bit better:
- I have an equity portfolio of roughly 4M CHF
- That's expected to continue to grow as LTIPs vesting / cash bonuses / savings from solid base salary etc. continue to accumulate
- I already periodically take a 100-200k low interest loan (with my equity as collateral) to acquire high dividend yield shares at the right price (yield FAR in excess of the interest on the loan
- I also already generate extra returns by writing covered calls etc.
- So exploring some tax optimization options by taking on more low interest loan for this voluntary second pillar contribution idea
- My LTV would still be FAR below the max so close to zero risk of a margin call


Costs
a) interest on loan
b) future tax on payout of pension

Benefit
c) return on additional pension contributions
d) tax benefit on additional pension contribution
e) tax deductibility of the interest on the loan

For the sake of the argument let's assume a vs. c+e are a wash

My future annual pension payment would be much lower than my current salary. Hence in a much lower tax bracket. That is driving my idea of there ultimately being a benefit (d > b) which would make it worth my while to leverage up on loans and load up on voluntary 2nd pillar contributions.

Above makes sense (based on the assumptions given)?
i think the main issue is the pension product. if your pension product has a decent return instead of the crappy pension i have (which has generated something like annualised 1.5% return from 2009-today - i.e. during the biggest everything boom in history) then you could consider doing it and it would have wealth tax benefits too. if your pension is crappy like mine, it's better just to invest outside the pension.
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  #26  
Old 28.05.2021, 13:59
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Re: Taking a loan to fund voluntary contributions to 2nd pillar?

Are you already classified as a professional investor?

(Borrowing to invest + calls ticks two boxes for this)
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Old 28.05.2021, 14:14
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Re: Taking a loan to fund voluntary contributions to 2nd pillar?

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If you‘re investing you won‘t pay professional trader taxes.
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Are you already classified as a professional investor?

(Borrowing to invest + calls ticks two boxes for this)
However, when you borrow money to invest it is already viewed as one of the conditions to qualify to be a professional trader. Well, at least it implies that - by excerpt from the Moneyland.

The 5 criteria used to determine your tax status

Guidelines published by the Federal Tax Administration list 5 criteria to be used by municipal and cantonal tax offices in determining the tax status of investors. You can only be sure that you will not be categorized as a professional investor if you meet all of these criteria:

1. You hold securities for at least 6 months before you sell them.

2. The transaction volume of all of your securities trades combined (total spent on purchases and total earned on sales) is not higher than 5 times the total value of your securities at the start of a tax year.

3. Capital gains generated through securities trading do not account for a significant portion of your basic income. The rule of thumb: Capital gains should account for less than 50 percent of your net income.

4. You use your own assets to finance the purchase of securities. Or: Taxable returns like interest and dividends are higher than interest owed on loans.

5. If you invest using derivatives – and options in particular – these can only be used to hedge your own securities.
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  #28  
Old 28.05.2021, 20:36
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Re: Taking a loan to fund voluntary contributions to 2nd pillar?

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However, when you borrow money to invest it is already viewed as one of the conditions to qualify to be a professional trader. Well, at least it implies that - by excerpt from the Moneyland.

The 5 criteria used to determine your tax status

Guidelines published by the Federal Tax Administration list 5 criteria to be used by municipal and cantonal tax offices in determining the tax status of investors. You can only be sure that you will not be categorized as a professional investor if you meet all of these criteria:

1. You hold securities for at least 6 months before you sell them.

2. The transaction volume of all of your securities trades combined (total spent on purchases and total earned on sales) is not higher than 5 times the total value of your securities at the start of a tax year.

3. Capital gains generated through securities trading do not account for a significant portion of your basic income. The rule of thumb: Capital gains should account for less than 50 percent of your net income.

4. You use your own assets to finance the purchase of securities. Or: Taxable returns like interest and dividends are higher than interest owed on loans.

5. If you invest using derivatives – and options in particular – these can only be used to hedge your own securities.
1 = all good, i tend to be buy and hold forever
2 = all good as well
3 = all good as well
4 = all good as well: my returns in the form of dividends are WAY higher than the modest interest on the Lombard loans
5 = borderline here... 95% of my options income is writing covered calls, so the 5% you could consider speculative

Still don't understand the so what of being considered a prof investor?
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  #29  
Old 28.05.2021, 21:00
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Re: Taking a loan to fund voluntary contributions to 2nd pillar?

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Thank you for all the responses.

Let me clarify my situation / assumptions / objectives a bit better:
- I have an equity portfolio of roughly 4M CHF
- That's expected to continue to grow as LTIPs vesting / cash bonuses / savings from solid base salary etc. continue to accumulate
- I already periodically take a 100-200k low interest loan (with my equity as collateral) to acquire high dividend yield shares at the right price (yield FAR in excess of the interest on the loan
- I also already generate extra returns by writing covered calls etc.
- So exploring some tax optimization options by taking on more low interest loan for this voluntary second pillar contribution idea
- My LTV would still be FAR below the max so close to zero risk of a margin call


Costs
a) interest on loan
b) future tax on payout of pension

Benefit
c) return on additional pension contributions
d) tax benefit on additional pension contribution
e) tax deductibility of the interest on the loan

For the sake of the argument let's assume a vs. c+e are a wash

My future annual pension payment would be much lower than my current salary. Hence in a much lower tax bracket. That is driving my idea of there ultimately being a benefit (d > b) which would make it worth my while to leverage up on loans and load up on voluntary 2nd pillar contributions.

Above makes sense (based on the assumptions given)?
I think you need to state how far from retirement you are. That's the key variable above all other if you are sacrificing annual % returns for a one off tax deduction.

Also - Are you able to take your pillar 2 as a lump sum at retirement.

In most cases Id Just use your Lombard loan to fund general equity purchases rather than pillar 2. 1.5% return over the long term is poor - obviously.
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  #30  
Old 28.05.2021, 21:34
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Re: Taking a loan to fund voluntary contributions to 2nd pillar?

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I think you need to state how far from retirement you are. That's the key variable above all other if you are sacrificing annual % returns for a one off tax deduction.

Also - Are you able to take your pillar 2 as a lump sum at retirement.

In most cases Id Just use your Lombard loan to fund general equity purchases rather than pillar 2. 1.5% return over the long term is poor - obviously.
I'm mid 40's and might retire at 50 or perhaps 55

I am already using Lombard loans to stock up on high yield companies but like to diversify (therefore also real estate, physical gold, etc.)
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  #31  
Old 28.05.2021, 22:06
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Re: Taking a loan to fund voluntary contributions to 2nd pillar?

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Sounds like a financial perpetual-motion machine...

...and we all know how perpetual-motion machines work.
https://www.jaeger-lecoultre.com/us/...hes/atmos.html
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  #32  
Old 28.05.2021, 22:07
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Re: Taking a loan to fund voluntary contributions to 2nd pillar?

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Where would you get a personal loan with interest rate less than 1.5%?
Regular UBS by the way. One email and done.
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  #33  
Old 28.05.2021, 22:36
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Re: Taking a loan to fund voluntary contributions to 2nd pillar?

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I'm mid 40's and might retire at 50 or perhaps 55

I am already using Lombard loans to stock up on high yield companies but like to diversify (therefore also real estate, physical gold, etc.)
But you won't be able to take your pillar 2 out until much later - unless you leave the country - so Id avoid.
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  #34  
Old 29.05.2021, 20:24
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Re: Taking a loan to fund voluntary contributions to 2nd pillar?

I was wondering if you can do this for house mortgage too? Pledge equity portfolio for 20% downpayment.

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That’s an easy one. He is pledging his equity portfolio.
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Old 29.05.2021, 20:40
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Re: Taking a loan to fund voluntary contributions to 2nd pillar?

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I was wondering if you can do this for house mortgage too? Pledge equity portfolio for 20% downpayment.
Unlikely - the point of a pension pledge is that it is administered by the pension company and protected, you can't get at the money so the bank is confident it won't disappear. And when you can get at it, at retirement, it aligns with the mortgage rules around paying down the excess.

With a generic investment portfolio, what's to stop you just cashing in and spending it?
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Old 29.05.2021, 21:30
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Re: Taking a loan to fund voluntary contributions to 2nd pillar?

That's what I was thinking. Maybe there is an option of transferring positions to a protected account. Something similar like account for rental deposit.

Of course then the question is about securities itself. What would be considered by the bank of good enough.


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Unlikely - the point of a pension pledge is that it is administered by the pension company and protected, you can't get at the money so the bank is confident it won't disappear. And when you can get at it, at retirement, it aligns with the mortgage rules around paying down the excess.

With a generic investment portfolio, what's to stop you just cashing in and spending it?
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  #37  
Old 29.05.2021, 22:44
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Re: Taking a loan to fund voluntary contributions to 2nd pillar?

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I was wondering if you can do this for house mortgage too? Pledge equity portfolio for 20% downpayment.
Yes. At least migros bank allow this.
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  #38  
Old 29.05.2021, 22:47
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Re: Taking a loan to fund voluntary contributions to 2nd pillar?

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Unlikely - the point of a pension pledge is that it is administered by the pension company and protected, you can't get at the money so the bank is confident it won't disappear. And when you can get at it, at retirement, it aligns with the mortgage rules around paying down the excess.

With a generic investment portfolio, what's to stop you just cashing in and spending it?
Because you have to hold the equities with the mortgage provider.

https://blog.migrosbank.ch/de/wie-vi...-den-hauskauf/

English translation:

You can not only pledge or lend pension funds, but also other assets.
Instead of selling bonds, stocks, funds and other securities and adding them to the mortgage financing as cash, you can pledge them to the bank. You can also pledge your Pillar 3a assets, funds from vested benefits foundations and life insurance policies. Important: Pledged accounts and securities must be with Migros Bank, as well as the original policy of a pledged life insurance policy. As a rule, 100 percent of the assets are not taken into account, but the loan-to-value ratio is 60 to 90 percent, depending on the security
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  #39  
Old 29.05.2021, 23:09
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Re: Taking a loan to fund voluntary contributions to 2nd pillar?

Wow, can‘t believe this post. Believe me, when you are going into retirement (voluntarily or not), the World is your Oyster if you don‘t have debt, and have a healthy amount (+), not revolving debt (-) on your banking account after 2 pillar pay-out
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Old 29.05.2021, 23:46
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Re: Taking a loan to fund voluntary contributions to 2nd pillar?

nobody mentionned it but i'm pressure there is a limit to how much you can contribute in your 2nd pillar, defined by your insured salary and your contributions history.
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