So to protect our 3A investments, it would be good to have them paid out to pay part of the mortgage? Is this a viable solution to try avoiding heavy federal taxation when retiring?
Not sure if the taxes will heavily increase - I mean, it probably is still a preferred tax rate and in comparison to other countries still on the lower end (based on the knowledge couple of weeks ago, I cannot recall if there are already concrete numbers communicated).
Itâs still a calculation between wealth tax, shielded dividend/interest taxed as income and taxes at withdrawal.
3a can be withdrawn to buy in pillar 2 or pay down a mortgage so thatâs an option. I would not actively search to get it (we either want real estate or not and we either want our mortgage at the level it is or not, there are other factors to take into account) but since itâs my situation, I feel comfortable paying into 3a, knowing thereâs a way for me to take it our early that Iâd feel comfortable with in case undesirable changes to taxation appear on the shorter term radar (I donât like owing things to the bank so taking down my mortgage is acceptable to me).
In the current situation, I think Iâd be comfortable with it anyway: Iâm confident no make or break change in taxation will be made with 3a and even if my current investments end up not having been optimized when looking them in the mirror 30 years from now, Iâm confident theyâll be in the âgood enoughâ window.
SRF are making a fool of themselves by claiming, without proof or source, that lump-sum withdrawal of pillar 2 happens at the expense of tax payers, because that lump-sum is âoften used up at old ageâ before oneâs death and then the government has to pay your retirement home fees.
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âoftenâ can be many things. But if you have numbers that clearly arenât âoftenâ anymore, there is an ombudsman office:
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I agree, this is disturbing.
The statement coming at this time of the political discussion around the tax hikes from SRF doesnt seem neutral.
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I hope Iâm not breaking any rules by posting this: https://www.impot-prevoyance-non.ch. In case I am, please remove my post 
If I believe them for argument sake. What they are saying is
- If you take lump sum then tax payer pays the bill (which ideally should be younger generation who pays tax)
- If you take annuity then the younger generation pays the bill (as money will come from their pension contributions) because conversion rate is not easy to deliver
Not sure why #2 is better than #1
Whatâs the recommendation? Make mandatory BVG annuity only ? And thus, merge with AHV?
My opinion is that people who want to reduce lump sum withdrawals (by reducing incentives) donât realise that the main problem is that annuity payments with 6.8% are not possible anyways. So whatâs the point of having even more people draw annuity?
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Apparently:
33% of the people who benefit from complementary AHV payments have, at some point, withdrawn something from their 2nd pillar.
Now:
33% of retired people had no 2nd pillar at all.
of the 67% who did have some 2nd pillar, 56% have withdrawn something at some point which means 37.5% of retired people have at some point withdrawn something from their 2nd pillar.
It seems to me the two statistics are aligned and there would not be a significant bia toward people who have at some point withdrawn part or the whole of their 2nd pillar among beneficiaries of complementary payments.
I havenât found statistics allowing to link the amount received between the two categories.
Sources (2 links):
[FR]:
https://www.bfs.admin.ch/asset/fr/28786988
[DE]:
https://www.bfs.admin.ch/bfs/de/home/statistiken/kataloge-datenbanken.assetdetail.28786988.html
[EN] (only the statistics from the federal administration): https://www.bfs.admin.ch/bfs/en/home/statistics/catalogues-databases.assetdetail.28786988.html
[IT] (same): Statistique des nouvelles rentes: résultats 2022 - | Comunicato stampa
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Come on, did we read the same article? It does cite some spokespersons, seems to refer to some statistics (like the one @Wolverine posted) and could be read as a cautionary warning to people with small pension pots that that they might live longer or underestimate the cost of elderly care.
Numbers above might confirm that itâs actually a thing, although I donât care enough to form a conclusion whether it actually is or these examples are just anectodal evidence.
You can disagree on the focus of the article here, but thereâs nothing disturbing or sketchy about it, at all.
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The second sentence of the lede is misleading IMO:
Immer mehr Leute nehmen bei der Pensionskasse alles aufs Mal statt der lebenslangen Rente. Die Kosten tragen die Steuerzahler.
Translation:
More and more people are withdrawing everything from their pension fund in one go instead of taking a lifelong pension. Taxpayers bear the costs.
The article itself is a bit more neutral, granted.
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They are quoting (and linking to) the research paper by Publica. If you read that, Publica comes to the conclusion that the majority of pensioners that take the cash are acting responsibly:
Die langfristigen Konsequenzen der Zunahme des Kapitalbezugs wird man erst in Zukunft abschliessend beurteilen können. In der Momentaufnahme der Umfrage scheinen die Personen mit (Teil-) Kapitalbezug ihre finanzielle Situation eher besser einzuschĂ€tzen als Personen mit einem reinen Rentenbezug. Wie sich dies im Verlaufe des gesamten Ruhestandes entwickelt, bleibt eine Frage fĂŒr zukĂŒnftige Analysen.
Thatâs buried quite deep under SRFâs rhetoric. I expect more from journalism funded by tax money.
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For argumentâs sake it is probably reasonable to assume there is a (small) percentage of people who take the lump sum, burn through it, later need care, with the cost of that care exceeding their income out of remaining sources (AHV), resulting in a liability to the commune.
So if this indeed is the problem statement, politics may have a motivation to act, possible remedies likely restricting liberty for the majority in order to minimize that problem caused by a minority.
I still donât understand how increasing federal taxes on lump sums will fix the problem. Will it indeed deter the people causing the problem now from taking out a lump sum? or will it merely mean they are burning through it faster - given theyâll start from a smaller amount, after tax, perhaps even increasing the communeâs liability (while national government has enjoyed additional revenues that can be assigned to its own pet projects)?
Not advocating it, but wouldnât the âcorrectâ fix be to ban lump sum payments altogether and make annuities mandatory for all pension funds, VBAs, and 3a accounts - or perhaps introducing a mandatory care insurance?
Since the discussed âsolutionâ does not demonstrably fix the problem, why is it being proposed?
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It may but I doubt it can gather a political majority, so would be impractical to implement and probably not be worth the time and resources to study. In order for it to work as intended, it would also require to ban early payouts for home-ownership and independent business ventures. The home-ownership part would probably get massive backlash, as people consider it too hard already now to buy a owner occupied home, in big part because of the downpayment.
That being said, increasing taxation on retirement savings withdrawals seems to also be attracting a lot of backlash so who knows what the better way to handle it is? My own understanding, given the very few data I have on the topic, is that it is a false problem and we donât need to tackle it. Itâs only on the table because the federal government is looking to cash-in more money and Iâd posit itâs not actually a necessity as is.
Given the current international context and with humility because I really donât know much on the topic, Iâd wonder if running a deficit and issuing more debt wouldnât help the SNB with itâs monetary policy, getting the Swiss franc to stay more stable in regards to EUR and USD. The higher SNB interest rates that it would allow, which should also allow for higher interests for savings accounts, should also help pension funds and people handling their retirement money (and it would also generate more taxes).
Edit: that being said, Iâm biased because I really hate the economic distortions caused by negative rates and really, really donât want to get back there.
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You do realize that annuity means that money is only given to the individual and benefits to dependents or survivors are reduced significantly? Switzerland does not have state pension model like EU countries. So what would be purpose to block money of people forever?
Pension funds are already struggling to pay annuities for BVG mandatory portion at regulated conversion rate. And the âfixâ would be to make it even more difficult by making annuities mandatory across the board (BVG Mandatory, BVG extra mandatory, VB, 3a, 1e) ? What problem would be fixed by doing so?
I think all these things are being talked about together, but they are being discussed to solve different problems -:
Problem 1 -: BVG mandatory conversion rate is unsustainable. VOTE was to reject govt plans to make reforms. Reform 2.0 awaited
Problem 2 -: Federal govt need to raise money and one option suggested was to increase taxes on lumpsum withdrawals
Problem 3 -: apparently people burn through their pension funds and cost tax payer later on
What typically happens is that since raising taxes is not popular, politicians come up with some ârationale to justify itâ. For #2, the justification so far has been
a- lumpsum withdrawals are advantages vs annuity , so its only fair
b- people are finding tax loopholes , so its only fair
c- and actually Problem 3 also exists, so it would be best if we de-incentivize such withdrawals
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My conclusion also. And perhaps to demonstrate to the misbehaving electorate how futile it is to vote for proposals the government disapproves of, like 13 months of AHV payoutsâŠ
Not sure how real the burning through money thing is. Maybe the money lasts even longer and they save the government money, otherwise if the annuity was such a great deal, theyâd probably have taken that instead.
In a hypothetical scenario, wouldnât it be more socially acceptable if the CH govt decided to introduce capital gains taxes rather than taxing the 3a (more)? The 3A is a potentially much smaller pot, and itâs already taxed on exit.
From a macro perspective, itâs good for a state to have a rich population, potentially: lower crime, more consumption, lower chance for social unrest.
Agree with the rest of your points in principle.
I wonder how much money theyâd make off that change i.e. are there substantial capital gains being made.
Should it be taxed as income? Do you allow capital losses to be offset by income? If in a separate stream, do you have tax bands and a tax free threshold? Does it replace wealth tax? It starts to get complicated quickly.
Introducing capital gains tax for private investments would be a very big reform & would indeed need other changes to other taxes as well. It is not on the cards & itâs not going to happen.
The only thing I think will happen is higher Federal tax rate for lump sum withdrawals (versus todayâs rate) and perhaps some changes to staggered withdrawals rule. And even this will cause a lot of drama
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