In this case it really doesn’t make sense to save in 3a. Because in this case the capital gain would be also taxed as income when you withdraw. (Except your salary is basically close to zero). Well the last trick of the federal council would be to introduce capital gain taxes.
Yes, it does. Capital / 20 to determine the tax rate, compared to full capital but tax rate / 5 for current federal tax.
Seems fair in a progressive sense. On the other hand, there’s a small minimum % to be paid (4% on average).
Agreed. That’s where the higher tax on this propsal come in, assuming there is still an additional income.
If they keep considering the fictive income seperately, changing to a ZH-like model would benefit anything below 2.3M withdrawal.
We’re still talking 3a, right? This sounds bad, also noting the point below that reducing income for the reference year/renovating a home and other such moves would be prevented. How does this play with withdrawing the 3a from lower tax Cantons like Schwyz?
Sealing the staggered withdrawal loophole is something I’d imagined would be done before long hence I’m not even trying personally.
Based on info shared so far by @jay and @capmac , I came up with following calculations. I will need to read through this again to ensure I understand correctly.
I do not see many people who will pay lower tax versus today unless there is some sort of exclusion.
Please note this is only FEDERAL tax. The cantonal taxes are separate and not part of proposal.
For calculations -: i just used Single person, no kids. But i think similar calc will be valid for other scenarios
Other taxable income = Net taxable Income from all sources as reported in tax return at time of making capital withdrawals
Absolute gain/loss
5 Likes
I moved the discussion to other post.
But it is not only for 3a. It is for any capital withdrawal from pension assets
It kinda does look like that doesn’t it? Not exactly, but close? Or are we missing something? Can it be that bad?!
I too am wondering if in this scenario the restrictions outweigh the benefits of the 3a for a high earner.
@Abs_max I don’t understand the Fictitious Income column in the Proposed Federal Tax table, but do get the overall point that taxes can, no, will be higher (what’s new under the sun?) 
In new proposal there is calculation which goes like following
Let’s say your income is 100.000 CHF and you withdraw 300,000 CHF from pension assets.
So your federal tax rate for capital withdrawal would be calculated as follows
- fictitious income of 300,000 * 5% = 15000
- Other income = 100,000
- Total assumed income = 115000
- For 115000, what’s the applicable federal tax rate as per current law? Let’s say X%
Now this X% would be your “new “ capital withdrawal tax
In today’s law , there is no real relevance of your current income but in future it would be relevant
2 Likes
Retired people living of their savings, with low capital income, and with no pension income yet. State pension usually starts with 65.
2 Likes
So basically the first column and few rows in my table . That’s true.
This article is deceptive. I don’t have access to the full Zontagszeitung’s article, can someone tell me if they provide more data, including more salary ranges and if they precise that/if the part of taxes presented (CHF 6580 current, 17800 future for 350k withdrawal and 140k income) is indeed federal only?
This is the name of the article:
Now the Federal Council wants to hit the middle classes in the wallet
Note the focus on the middle class.
A new calculation method envisages that the tax burden will depend on income, which will primarily affect the middle class and high earners. For example, the tax for high earners could quadruple, as reported by theSonntagszeitungnewspaper.
But hey! It’s actually middle class AND high earners (no big surprise). And the example they provide of quadrupling the current withdrawing tax? For high earners. What gets anchored in my mind is x4 but if I am middle class, that’s not the number that should affect me (don’t take me wrong, x2 or x3 would have a significant impact but the article is written deceptively anyway).
The newspaper gives the following example: Anyone who earns CHF 140,000 and has CHF 350,000 paid out will pay CHF 17,800 instead of CHF 6,580 in future.
I have no information on those numbers. There are cantonal and municipal taxes on 3a withdrawals, is that number only for federal taxes? Is there an impact expected on cantonal and municipal taxes? Is the income considered by person or is it family income in the case of married couples? I don’t know.
On top of that, an income of 140k CHF isn’t middle class for single people. The Federal Office for Statistics defines the middle class as earners of between 70% and 150% of the median equivalized gross income of the previous year: Middle income group
For 2022 (last data I’ve easily found), the higher limit for single people was 110k (118k if the monthly salary is based on 13 salaries). It is solidly middle class for couples with 2 children, though.
All in all, I don’t have usable data and the numbers presented only partly apply, in the best case, to the category of people they draw attention on in their title.
2 Likes
So how does it work if I retire at 55 and start withdrawing 3a accounts at 60 with no other income than dividends from investments?
1 Like
@Wolverine sensationalist journalism aside, the essence still is higher taxes on the 3a which makes it more gray with regard to how much it’s actually worth it considering it is not liquid. I’d estimate tax saving vs projected growth vs salary + tax upon withdrawal. If the numbers are above ~5000CHF in the negative I may even consider stopping funding the 3a… Edit: to be fair, given I’m pessimistic on pensions anyway I already consider the 3a and the 2nd pillar a bonus, not to be counted on, so anything gotten after tax will be good.
@Cortana doesn’t it stand to reason they will most likely consider your dividend income…as income as they do already and tax you accordingly when you withdraw?
2 Likes
Dividends are also income. Whatever goes into your tax return as income is “other taxable income” in table above
But one can argue if you retire at 55 , then your dividend income should be substantial . Or else how are you going to cover costs?
This might be more problematic for dividend portfolio investors vs . Folks who have higher portion of income coming from capital gains
Looking at pension assets in Switzerland , they are worth 1.2 trillion. I think for lot of people , pension accounts are their biggest assets
Switzerland has always attracted high earners. So it’s not wise to call “high earners” as somewhat easy target.
Tax increase is a tax increase. Where this ends up ? Time will tell
But I think the calculator would become more interesting because effective lump sum rate would increase 5-10% with this change
And once again, I am getting even more certain that staggering would also disappear at some point
1 Like
Well obviously, but we’re not most people here. The law needs to work for the many, we’re the few.
Anecdotally I haven’t met a single person into investing who doesn’t look at pensions as “If I get it, great, if I don’t, oh well”.
3 Likes
If you retire at 55 , then your wealth should be substantial. You could argue that this new tax provides an additional reason why one should focus on capital gains instead of income from dividends or interest payments. At least for the period when this tax is relevant for the individual.
4 Likes
Wow…
that is strange.
Not a single person you know have sizable amount in 3a / 2nd pillar ?
On average, 7.2 Million people above age of 18 exist in CH. This means 167,000 CHF per person on average is their money. Higher the age, higher this amount. I do not understand how come this is not substantial.
2 million in taxable accounts (generating around 40k in yearly dividends) and the rest in retirement accounts for example. Income would only be 40k (taxable income even lower), so this change of policy wouldn‘t really affect FIRE people?
3 Likes
who knows future version of this would also start including overall wealth