Brainstorming ideas for making your pillar 2 work harder

Investing / Others
1

A lot of occupational pension funds are very conservative and have a low bond-like rate of return to ensure being able to pay out 5-6% pension income. Yet if you retire very early, you will likely be kicked out of the pension fund and never benefit form this 5-6% rate that you suffered the growth penalty for.

However, some newer providers such as VIAC offer high equity strategies for the non-mandatory portion of your pension.

As you reach your early retirement target, your pension pot might grow big enough that the opportunity cost of staying at work and missing out on the equity gains might be substantial.

So I was thinking what options might be available:

  1. Stuff your pension as full as possible and then retire early. Move pension pot to high equity strategy to benefit from better returns. But how do you survive until you access your pension?

  2. As per #1 but split your pension pots with 2 providers by mandatory and non-mandatory portion. Then get a job again and bring back only the mandatory portion into the new occupational scheme leaving your non-mandatory amounts with the VB account growing nicely

  3. Become self-employed (thanks @Wolverine)

  4. Added for completeness: there are also ways to take the pension funds as cash e.g. leave the country, pay off mortgage - but in these cases it is no longer in a VB account accruing tax-free.

Any other ideas?

Do these ideas sound plausible?

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2

For the career paths that allow for it: become self-employed, work as a consultant and keep doing what you were doing as your job with your previous 2nd pillar savings in a vested benefits solution and increased maximal 3a contributions.

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3

I see this is not a new idea: FreizĂŒgigkeitskonto: Die Rettung vor der Umverteilung im BVG?

4

Yes, self-employment would be a simple way to achieve this!

5

Another alternative is to earn a ton and join a company that offers, or convince your company to offer, the option of using “1e plans”. That’s for people earning more than CHF 132 300 and allows you to drive your own asset allocation with elective/above-obligatory BVG funds.

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6
  • Take out pension fund assets under a pretext to reimburse a mortgage.
  • Reimburse the mortgage.
  • In few years, increase your mortgage.
  • Invest additional borrowings.

From my understanding, this is a completely legal scheme.

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7

This is illegal and should not be discussed here. Please remove this from the kist - I don‘t want to be part of a community that discusses illegalities. Thank you!

8

It is legal, but only extracts the funds, it does not place them into a VB account.

9

I’ve reviewed the law and see a legal way to do this. The article I linked also suggests it is common practice.

10

True, although options might still be a little limited and the part below 130k is still sub-optimal.

Say you earn a whopping 264’300 CHF. So half your pension contribution goes into the 1e. If the 1e offers a 40% equity option, then your overall pension is still only a meagre 20% equity and that’s with a massive salary!

11

Where does that come from? (I don’t think that’s how 1e works)

If you have a very high salary/comp, most likely the pension is not more than 10-20% of your wealth anyway?

12

How does 1e work?

Possibly true, but irrelevant to the topic of maximizing the Pillar 2 return.

13

Ah no looks like indeed only the contributions above 120k go to the 1e pool, the rest goes to regular pillar 2.

(I kinda assumed the split would have been on the mandatory vs. supplementary part instead)

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14

You can pick the 100% equity option, or ask your employer to give you one


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15

I would say its a grey area, so neither legal nor illegal :slight_smile:

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16

you can setup the plan so that a lower percentage is saved in the classic pk below 132k and a higher percentage is saved in 1e. so total savings of salary are for example 20% of salary, 25% savings on 1e party and 15% on classic pk.

in 1e you select the asset allocation individually, with finpension you can go up to 80% stocks, 20% bonds.

17

Also in practice pks are ok with this. since the more money you bring into the pk when joining a new company the higher their latter pension liability will be.

I have never seen a pk calling an asking why a 40 year old person that just joined the company has no previous pk savings


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18

I just thought of one thing that you need to be careful of if you keep funds in VB account and do not transfer it to a new employer on employment: if new pensionfund is not aware of your other pension and so their calcuation of voluntary additional payments limit will not be correct.

You will need to adjust this to ensure that you don’t contribute more than you are permitted to.

19

Well they make you consider it:) On the questionnaire for the voluntary purchase you need to declare any VB. If you dont do that, than its an illegal act.