Does anyone have experience with cashing out your 2nd pillar as a lump sum?

I know that you can cash out your whole retirement account when leaving CH and NOT going to an EU country; you get the money you set aside and the employer’s contributions.

However, I’m not super clear on a few things:

  • are there taxes to pay? if so, what are they (income tax? special tax?)
  • is the money taxed in Switzerland or in your new residence country?
  • is it better from a tax standpoint to become self-employed and cash the 2nd pillar out while still a resident instead? what are the criteria to meet for becoming self-employed, is saying “I’m self-employed now” and not having a salaried job enough?


I haven’t actually done it myself yet, but I can answer your questions.

  1. There is a Swiss withholding tax. This is deducted by the vested benefits foundation before they transfer the money. It is meant to encourage you to declare the money in your country of residence. The size of this tax depends on which canton the vested benefits foundation is domiciled in. Currently the lowest withholding taxes apply to vested benefits foundations in the canton of Schwyz.
  2. The money is taxable in the country you are resident in. If that country has a relevant double taxation agreement with Switzerland, you can reclaim the Swiss withholding tax. If it does not, then you cannot, and that is where the size of the Swiss withholding tax becomes relevant. You can find a useful map showing countries which have relevant pillar 2 and pillar 3a tax agreements with Switzerland here: Auswandern und Pensionskasse: So spart man Steuern - SWI
  3. Depending on which country you are moving to, withdrawing your benefits while still in Switzerland can be advantageous. For example, if you are moving to a country where the money would be taxed as income at high income tax rates, paying the low Swiss capital withdrawal tax is certainly preferable. On the other hand, if you are moving to a country with low or no taxes and a relevant DTA, you are better off withdrawing when you are there, and then reclaiming the Swiss withholding tax. If you are moving to a country without a relevant DTA, then withdrawing while still in Switzerland is almost always preferrable, because if you withdraw after moving you will pay both the Swiss withholding tax which you cannot reclaim, and the taxes applicable in your country of residence.
    The capital withdrawal tax you pay as a resident of Switzerland is progressive, and varies between cantons. The benefits are taxed separately from your other income, so the progression only applies to the amount you withdraw. If you withdraw over two years (two different vested benefits accounts), then progression is based on the amount withdrawn in one tax year (not on your full benefits), so doing this can save you money.

Thanks. Are you talking about the third pillar or the second pillar, because I don’t think it’s possible to have more than one second pillar account, right?

When you quit your job, you can split it (typically in two).

I see, so if I worked here 10 years, I can have one account holding 5 years and the other account holding the other 5 years. Then I withdraw one account each year and so I’m taxed on 5 years worth of money in the first year, and 5 years in the second year vs the whole 10 years at once?

I am not yet clear that you can really do this. In a separate thread, one of the forum contributors suggested you could settle your taxes to get the document from the commune that you were leaving before actually having moved to the new country, and present the document to the pension fund which should be enough for the pension fund to pay out.

However my pension fund and also Valuepension vested benefits fund told me they would not be allowed to pay out until after the departure date (meaning, when you are already resident in the new country). Perhaps other pension funds would approach this differently, however I do not know which ones.

The other option is to become self employed before leaving. In that case 2nd pillar can be cashed out in full I believe (subject to swiss taxes)

I’m wondering how do you do that in practice. Do you simply quit your job and say “I’m self-employed” without claiming unemployment benefits or are there more criteria (like you have to have clients, income, incorporate, etc)?

It would only really make sense if you would become self-employed or start your own business anyway. In terms of taking special steps (i.e. moving to another canton, becoming self-employed) just to save on taxes, the potential savings rarely warrant that, though there are situations where they may. For example, if you were moving to a country where withdrawing your benefits would put you in the top bracket and knock, say, 30% off your savings, I’d say being self-employed for a while to cash out at favorable Swiss tax rates could be preferable, assuming your income is not affected during that time.

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I was told by someone who became a coach, that they had to show 2 invoices issued to clients and were able to withdraw the whole 2nd pillar. Have not done this myself so I cannot verify this

This was my thought about moving to Spain. A 2nd pillar withdrawal for someone having worked several years in CH and withdrawing once resident in Spain could get into tax brackets of >45%, depending on the region. Discussed in a separate thread somewhere…

Unless you need the cash, might be worth keeping in 2nd pillar for as long as possible anyway, since valuepension allows arbitrary asset allocation, has favorable treaty benefits (e.g. 0% US withholding) and it’s going to be tax free growth in many countries (I’d expect in all EU countries at least).


My idea is to move to a country out of the EU after Switzerland so that I can travel for a bit and get the money as a lump sum. Then eventually move back to Europe, but I’d like to be able to use the money as I’m retiring early once I’m leaving Switzerland.

My understanding is that if you’re in a EU country, then the funds must be transferred to that EU country’s pension system and so its locked again until you turn 65+ which is not what I want.

But you’re saying it’s possible to keep the money in Switzerland while being able to control how it’s invested and withdraw from it to pay for living expenses, even when living in the EU?

Your benefits are not transferred to the EU country’s pension system. The (mandatory) benefits must stay in a Swiss vested benefits foundation until you either retire or are able to withdraw them prematurely (e.g. you become self-employed or buy a house). You can withdraw possible voluntary benefits.

So yes, even if you move to an EU/EFTA country, the benefits stay in Switzerland and you can transfer them to new Swiss vested benefits foundations/solutions of your choice until you retire/withdraw. BUT you cannot withdraw them to pay living expenses. The conditions for withdrawal are just the same as if you lived in Switzerland.

If you are looking to fully withdraw all of your benefits early, your options are:

  • Become self-employed (i.e. service companies as a consultant rather than an employee. Must be at least two) and then withdraw your benefits. In this case you will pay your canton’s capital withdrawal tax. Ideally, you will withdraw over two tax years, as capital withdrawal taxes are progressive.
  • Move to a non-EU/EFTA country which has low/no income taxes (or exempts pension benefits) and a bilateral agreement with Switzerland. Then reclaim the Swiss withholding tax.
  • Move to a non-EU/EFTA country which has low/no tax but does not have a relevant DTA. In this case, you cannot reclaim the Swiss withholding tax, so you will want your benefits to be at a vested benefits foundation in canton Schwyz and you will ideally withdraw them over two years as Swiss withholding taxes are progressive.

Another option to withdraw all the benefits. If you move to an EU/EFTA country, I have read that if you are not subject to social security in that country, you can also withdraw the mandatory part. This situation can arise if you are not working in that country. It is necessary to provide the pension plan in CH a statement from the authorities in the destination country that you are not subject to social security.

Kapitalleisungssteuer of your canton+municipality you’re still resident in Swizerland, or a special cantonal Quellensteuer of your pension fund’s canton if not. Note they have different rates. For the latter, Schwyz is the cheapest, but you’re gonna pay $$$($) to park and withdraw the money at all schwyz establishments, whereas at non-SZ funds it’s usually free.

Depends, potentially both.

Depends, but probably that’d be the least effective thing to do as you will get taxed by your residency canton+municipality. Are you willing to temporarily move to boondocks to optimize the taxes?

Applies to both

You thought wrong. Yeah in principle you’re not supposed to have two pillar two account, if you change jobs you should transfer the balance of old fund to the new fund, but then again people are lazy and do end up with multiple accounts often enough. There’s no enforcement/punishments for this.

Depends. I’m not 100% sure but I think Quellensteuer is per withdrawal case/account (so 5+5) and Kapitalleistungssteuer is generally per tax(=calendar in CH) year (so, 10 at once). But with pillar 2 you can ask for partial withdrawal and spread it over multiple withdrawals/years, also transfer balance of one account into another etc

The latter

Most EU countries are gonna tax your pension fund payout, potentially at highly unfavorable tax rates, if you withdraw as an EU resident… On the bright side you should normally get swiss Quellensteuer refunded in such cases, thus your main worry should be how your EU country is gonna treat and tax foreign pension fund payouts.

Maybe make plans for a holiday in neutral third country after leaving CH so that you would only have to pay the relatively low swiss tax, around 5% in SZ (unless we’re talking about 7+ figure acc’s). Watch out for some barbaric countries (France IIRC) that might want to disregard such holidays and tax you from the day you left CH rather than from arrival and actual residency as is usually the case in civilized world

Partial transfers are not possible. When you leave your pension fund (i.e. leaving and employer or leaving the country) you can have the pension fund transfer your benefits to up to 2 vested benefits foundations. Your benefits will then be divided into two accounts/funds/etc for as long as they are vested.

Vested benefits accounts always have to be cashed out in full. You cannot make partial withdrawals or trasnfers (the only exception applies to divorce). So if you want to move benefits to a different vested benefits solution, you have to close the old account and transfer the full amount to the new one. If you want to withdraw, you have to close the account and cash out the full amount in one go.

That’s why you have the option of splitting between 2 foundations. So that you can withdraw in 2 different tax years to avoid high tax brackets.

In theory. In practice my bank couple years ago had zero problems making a partial withdraw from even pillar 3 (for mortgage amortization), even though everyone says it’s unpossible, well but my bank statements say otherwise

Anyway, a staggered withdrawal is unlikely to make financial sense anyway, too much hassle and fees. Get it right the first time and be done with it.

Partial pillar 3a withdraw is not an issue when the withdrawal reason is your residential property. However, it’s not possible for other withdrawal situations (self-employment, retirement age, emigration), as far as I know.

Not being able to withdraw mandatory BVG part is one reason you may even have to do partial withdrawal when emigrating.

…as well as emigration to EU/EFTA countries (non-mandatory part) and early withdrawal for home ownership.

It’s not. You can request a partial payout for home ownership (in pillar 2 too).

Do you pay withdrawal tax on pillar 2 to buy a property?

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