Currently the average pensioner choosing Rente pays more taxes than those doing capital withdrawal.
I believe the taxes for Kapitalbezug would rise to the amount of taxes that you would pay (over your average lifetime) if you chose Rente instead of withdrawal (not quite sure how this is calculated for pillar 3a … I suspect they’ll just take the calculated pillar 2 Kapitalbezug tax raised percentage and apply it to pillar 3a as well).
I will personally be negatively affected as I intend to do Kapitalbezug, but … honestly IMHO it indeed seems a bit unfair as people with lots of money and choosing Kapitalbezug pay less tax in the current setup than those who can only choose Rente due to limited means?
I personally anyway don’t expect this to be a huge tax increase for Kapitalbezug as for all of Switzerland this would cause additional taxes of about 300 million in a given year.
the rationale for this tax increase is not adding up . If the main reason is that Capital withdrawals are taxed at lower rates than someone claiming annuity, then what is the reason to bring 3rd pillar in scope? 3a is always taxed as lumpsum. Isn’t it?
This provision seems a bit counter productive. Capital withdrawals relieve the pension funds from annuity liabilities. On one hand there has been a discussion that pension funds don’t have enough money to provide the regulated withdrawal rate. And then we are saying let’s discourage the capital withdrawals. If capital withdrawals and annuity would be taxed at same rate, wouldn’t it encourage more people to claim annuity?
Yes, but they get guaranteed payments, you have to pay wealth taxes and taxes on income earned on that capital. These all add up too and create a higher effective tax rate than the headline capital tax.
They also made a table showing what is higher tax burden that pensioners have on annuity depending on what are their other sources of income. If this were to rationalise, we are talking about significant increases in lumpsum taxes. Looks like rental market in Zug would do very well in future for retirees. Relocate for 5 years and enjoy lifetime benefits
Interesting enough, people who have higher impact of annuity tax tend to be the ones who have higher basic income as well.
If I understand this correctly , for ZH it is saying that advantage of lumpsum tax vs. Annuity tax is not very high i.e less than 5% (looking at top row which should ideally equate to the tax difference purely arising from annuity vs capital withdrawal and excluding impact of other income)
Maybe there’s a middle ground where you can tax as income, but allow flexible withdrawal so you can withdraw as much as you want and as many times as you want so that you can slowly draw down as much as you need instead of paying tax upfront.
I am not saying it’s right or wrong. I am still many years away from retirement , so perhaps it would impact more folks who are closer to retirement because their retirement planning goes for a toss.
I am just trying to understand what the reason provided is and if it is in sync with reality.
I hear you, but understand that this proposal is a political compromise – it needs to appeal to the entire political spectrum represented in the parliament (and the voters, eventually) … your opinion and mine aside, this makes complete sense to some, no sense at all to others and yet – at the end of the day – the government needs a balanced budget.
If I was in the expert group, I’d probably – just like them – not propose a higher income tax for everyone, or save lots of money in the agriculture sector as the farmers somehow manage to have a huge lobby, but instead propose measures like the one we discuss here, where only a small percentage of people will cry foul, or increase taxes through VAT where the numbers look small.
Anyway, as mentioned, this is mostly a political discussion – as in “what is possibly acceptable” --, not a rational discussion – “what makes sense” --, IMHO.
No
Not fully taxes as income because that would mean very different numbers depending on what your annual income (from other sources like dividends etc) is.
I believe they are proposing to tax at same rate as if you would have chosen for annuity.
For example -: if conversion rate is 5% and pension amount is 2 million. Then you can either have 100,000 annual income or withdrawal of lump sum 2 million
Today annual income of gross 100,000 CHF might have an effective rate of X% (cantonal + federal) and lumpsum is taxed at Y% where typically Y < X . The proposal is to make Y similar to X.
In some cases Y might already be higher than X. For example in Zurich city it seems like that (Y is 15.6% and X is 12.2% for this example). I read that Zurich already uses the principle of taxing both schemes similarly
I am not completely sure if logic to compare is for gross or taxable income but I guess the principle holds
I can’t help but think that they looked for the most convoluted ways to save money, so that it is not directly evident to the public what the consequences could be. E.g. many either have no idea about taxes in the pillars, or they are already retired and won’t be affected.
It’s probably the only way you can get these things through, as otherwise opposition would form much quicker.
Personally I would prefer more of a US approach (increasing debt, rather than saving at each corner), but I also have no clue about the macroeconomic implications of this.
We rewrote our constitution in 1999 and amended/changed it multiple times a year since then. Thankfully, and contrary to the USA, we understand that a constitution must be developing over time. Which is not to say, that I would support the removal of the debt brake.
And Switzerland has among the lowest government debt to GDP of developed countries (roughly 40% gross and 20% net last I checked). The UK was/is close to 100%, was in self-inflicted economic crisis and had a woefully incompetent prime minister that suggested just as bad of mini-budget as you can.
In short: Yes, Switzerland could most definitely increase its debt and not save. Some countries, like Germany, would be very well advised to not foolishly uphold austerity measures while both the infrastructure and industrial production is crumbling.
Personally, I believe searching and politically negotiating for savings is always beneficial, and should be done irrelevant of the current economic perspective or structural loss/gain of the annual budget.
But let’s not forget it is Switzerland after all: This thing as a package seems dead on arrival to me, the question is simply, which elements will survive?
I think it‘s blown up and misunderstood. They are talking about 300 million in additional tax income. 13-14 billion are currently getting withdrawn from the 2nd pillar every year. I don‘t know the number for 3rd pillar, but it should be around 3-4 billion yearly. So 16-18 billion yearly in total.
An increase in withdrawal taxes by ~2% would be enough to get to those 300 million. So increasing it from 3-8% to 5-10% for example.
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