"Early retirement" option in 2nd pillar pension

Banks, Insurances & Third Pillar
1

Hi all
I was looking mostly out of curiosity at the possibility to pay into the 2nd pillar, since I have a plan with my company that last year gave 5% interest on überobligatorium and 3% on “obligatorium” wealth (insurer is AXA). It’s market dependant and in bad years they should give you just the minimum 1% interest rates for both parts.
The good interest rate combined with the tax deduction + I started a job late (25 y o) means I could fill in some of the hole I have there.

AXA has a portal where you can do a self service payment information so that you can then actually pay the money in your 2n pillar. In doing this, I saw that I have a hole of 28’000, and on top of it I could add even more money (up to 293’000) for “early retirement”.

My current date of 2nd pillar benefit is 1.1.2049. If I pay 293’000 extra for early retirement, that date change to 1.2.2042, 7 years earlier (I will be 58), but if you don’t retire by that date, you lose money:

Warning concerning early retirement payment

With the purchase for early retirement, your retirement age is reduced to the corresponding retirement date. However, if you do not retire on this retirement date, you will forfeit the part of your retirement assets that exceeds 5% of the regulatory performance target of the occupational benefits fund.

The difference I see is that the pension/month increase to 3873 chf/month, which is the same “capped” value if I simply “close the gap” of 28k. The difference with the extra “RE” funding is that I can start receiving this sum 7 years earlier.
The same for the assets if I choose to receive the assets. If I take out all the capital at 65, they calculate 783000 chf, if I take them out at 58 (7years less of interests and contribution, but have paid 293k before that), I can take out 1’000’000 at 58.

This was not the case at my former employer, where 2nd pillar was at 65 and i could onl pay to cover the gap because of my late career start. Is this some kind of special insurance my company got, or is more and more common place? Being able to take out the entire capital at 58 was something I was not aware of (of course, only if I pay into this “extra RE bucket”).

Not sure if this changes with age as well, like it will be more expensive for me later on near 58 to lower my retirement age. I find very little information on the AXA website on this topic actually. What would happen if I retire even earlier? EVerything would go into a “Frezügigkeitskonto”, but do I have the same rights and can take it out at 58…? Will try to investigate.

2 Likes
2

The basic laws governing the second pillar (the earliest age for retirement at 58, for example) are the same for all pension funds and vested benefits foundations.

Other rules, including the option to contribute extra towards early retirement, vary between pension funds as per their terms and conditions. Whether you can choose between withdrawing a lump sum or getting a pension, or a combination of both, is also up to the pension fund. Even the rules governing what happens to your second pillar assets if you die depend on the pension fund.

It is not uncommon for pension funds to give you the option of cashing out a lump sum instead of receiving a pension. Some let you cash out voluntary benefits, but keep your compulsory benefits and pay you a pension on these. The more flexibility your employer’s pension fund offers with regards to making voluntary contributions, and choosing between lump sums and pensions, the better for you.

You can find more info on lump sums vs. pensions here:

1 Like
3

Thanks. I found as well more information on the link below. It seems that if your Pensionkasse allows it, you can take out all the capital already with 58.
I did not know that. But it depends on many factors.

Are there Vested Benefits account that allow to take out with 58? Or is Pensionskasse only? Cannot really find this information…VIAC it seems you can take it out 5 years before AHV, so as of today with 60 years old.
Could be a good things to know if you Retire Early (like 50) and then you only need to wait 8 years instead of 10 to get the capital of 2nd pillar.

5 Likes
4

So Freizügigkeit Konto is always 5 years before AHV age. While employer 2nd pillar can be 58 if so regulated.

5

A question I have (for the tax office, actually, but perhaps people here know), is whether this extra payments would also be tax deductible from my income? Sounds a bit discriminatory to allow my current me to deduct these extra money while preventing my past me to do the very same thing…
Axa answered yes, but I not sure I can trust them on this.

1 Like
6

At least for me in Vaud, voluntary contributions into second pillar towards early retirement were fully deducted from my taxable income.

As indicated in other posts, you should wait 3 years after the last contribution before withdrawing 2P capital, otherwise you have to reimburse the tax savings.

1 Like
7

I’m still wondering the risks of doing this if you change jobs before you retire “early”. Is the new 2P scheme does not recognize these contributions and you go above what they can hold for you, I am hoping that at least you get to keep the extra capital and you can invest in in a Freizügigkeitskonto/compte de libre passage.

1 Like
8

Yes that is a bit of an unknown. I wonder as well if you retire early, can you take the entire surplus on a FZK or are there any condition…

9

Voluntary contributions to the pillar 2 are fully tax-deductible. There is a limit to how much you can contribute voluntarily. This limit varies from person to person based on gaps between your current salary and your future pension. The amount you are entitled to contribute voluntarily is normally shown on your annual pension fund statement. If not, ask your pension fund to share it with you.

You can continue making voluntary contributions every year until the limit is reached. If increasing your pension fund benefits makes sense with regards to your overall portfolio, then making voluntary contributions is a good way to lower your taxable income.

Depending on your pension fund’s statutes, benefits resulting from voluntary payments (generally called pillar 2b) may be subject to different rules for early retirement than those resulting from compulsory payments. For example, your voluntary benefits may be used to pay out a pension from a younger age (55, for example), with the compulsory benefits kicking in later (at the earliest legal age of 58, for example). AFAIK, this is the case with the few Swiss pension funds which are QROPS-compatible.

If you have a very high salary, It can also be worth asking your employer about a 1e plan. These let you participate in the investment of part of the voluntary portion of benefits. You can find more on this topic here:

1 Like
10

Also check if voluntary contributions get lost if you die. There are a lot of pension funds that do exactly that.

1 Like
11

Thanks @Cortana , I just checked and yes mine with Axa does exactly that, quote verbatim:

Ein aus allfälligen Einkäufen für ordentliche wie auch für vorzeitige Pensionierung resultierendes Altersgutahben und die daraus berechnete voraussichtliche Altersrente bzw. das voraussichtliche Alterskapital werder bei der Bemessung der Höhe der hinterlassenleistungen nicht berücksichtig.

The same is written for invalidity benefit, which is covered in my 2nd pillar.

So paying to cover your age “hole” particualrly if you were studying, but do not go over the Altersguthaben unless you are a couple of years out of retirement age and can “gamble” a bit by paying more and anticipating your retirement age.

Additionally in rereading the rules of my 2nd pillar I noticed that there is a 24 months “wartefrist” for the invalidity benefit. Does anybody know why is that? because two years are covered by AI/unemployment benefit? I was wondering if something happens and I’m fully invalid, covering 2 years is doable with my saving is doable but maybe other insurances are kicking in.

12

If I remember correctly, the first 2 years are often covered by the KTG (Krankentaggeldversicherung) in case of illness, after a certain number of days directly covered by the employer. After that, pillars 1 (IV) and 2 take over. However, a KTG is not required by law and the employer may not be required to keep paying your salary for 2 years. If you don’t have a KTG that covers the gap, I’d look into the details, ask your employer. I don’t know whether unemployment benefits are available in such a case.

1 Like
13

Of course you can (see here, last sentence).

The question is if - or rather how - that excludes voluntary contributions that occurred more than three years prior.

As a matter of fact, many pension funds or vested benefits foundations do only report voluntary contributions within the last three years prior to transferring the benefits (to AXA, in this case), if at all. In other words, if you made voluntary contributions with other pension funds earlier in life / before becoming insured with AXA, AXA likely won‘t know or find out.

2 Likes
14

Yeah I was also wondering about that. If you used all your regular buyins, and you do an early retirement buyin, how does that work if you stop working before retirement, or you change employer?

I kinda assume the new fund (or the vested benefit account) won’t differentiate between the various types of buyins. The fund might even refuse the money and force you to put in in a vested benefits account due to being higher than what they allow?

1 Like