Also I would have thought that this year, people realize the 5% return is at best an average over very long time period, and there can be high volatility.
It would be a burden to society if it had to shoulder all those people with a failed 100% equity bet for their retirement… (because in practice they’d end up using social benefits). That’s the reason why pension funds have regulation on the kind of risk they’re allowed to take.
Hm, I found a maybe-good angle for sourcing the salary. The invested 20000 CHF should have some returns. If we assume 5% we can pay out nearly a 100 CHF per Month. Someone needs to do the investing, so someone can also get paid?
As far as I understood the tax authorities prefer salary paying over dividends. I heard they even force you to take a salary instead of dividends if you are not employed enough elsewhere.
The disadvantages are:
I don’t understand your proposed scheme, you want to create a company that would allow for you to be considered self-employed (so would require to give you enough returns to make it a living wage for you) even though you would be gainfully employed by another employer “on the side” with a much higher salary derived from that activity?
I’m not a specialist and may very well be wrong but the only way I can see that work is if either your company sells services and your other employers would be clients of your own company (you have to have several different clients or the AHV office won’t accept that as self-employment) or your company “lends” you, as an employee, to your other “employers” (which is basically the same).
I don’t see how you are expecting to pull this off, but maybe I’m short sighted. It sounds like the usual being a consultant rather than an employee deal, with its usual advantages and limitations.
No, I would be a normal employee at my own company (with low hours). Every time I switch main employers the pension fund money goes to the pension fund of my own company.
It sounds to me overly complicated for what you are trying to achieve. Let us know how this goes for you if you manage to pull it off.
Thank you for your input.
We disagree on the intent of the second pillar and the morality in this instance.
If the company has their own employee benefits unit the money stays in the unit or is paid out to its beneficiaries. I found multiple collective foundations providing this. At least some of them have minimum sizes. I didn’t find minimums for Gemini, but references to having less than some number.
| Provider | Product | Employees | CHF |
|---|---|---|---|
| Gemini | Collective Foundation | ? (<10) | ? (<10m) |
| Noventus | Typ G | 30 | 5m |
| Previs | Arbeitgeber Vorsorgewerke | 50 | – |
| Transparenta | – | ? | ? |
| Swisscanto | Flex individuell | 10 | – |
You are right that I can’t set the interest directly. But the employee benefits committee can. They would be choosen by me (company and sole contributor).
Regarding reserves: As far as I understood the employer can add to them voluntarily.
That was somwhere in the back of my head. Was it you who explained it first on this forum? I don’t understand this mechanism very well. I am not able to make a good prediction. I try to invest in things I understand well. Do you have some predictions with numbers?
I once investigated such possibilities on behalf of my employer. I had complete freedom to find creative but compliant solutions to reduce the tax burden for all our employees. Your proposal is interesting but the costs of maintaining a company are too high.
Your best option is to redirect your pension capital to a Freizügigkeitsstiftung every time you switch employers.
Yes, you are supposed to redirect it to the pension fund of the new employer. But there is no fine or other punishment if you send it to a Freizügigkeitsstiftung instead. For this reason, many people do so. There is simply no legal consequence whatsoever.
It is not a matter of lacking enforcement. The civil code is unambiguous in that it does not provide any means of enforcement. Swiss law is based on a civil code, unlike Anglo-American common law. If the code does not specify a fine, there cannot be a fine. The Swiss system is crystal-clear.
Occupational pensions are subject to a special legislation. The sanctions are set by the art. 75 to 79 from said law. Important to note is that we are talking of penal sanctions and not only civil offenses:
In French (LPP): Fedlex
In German (BVG): Fedlex
In Italian (LPP): Fedlex
The terms and conditions of the pension funds can include further limitations/penalties.
I’ll not dive much further on the topic because the swiss legal system is complex and relies for a large part on previous judgments by courts, most of which I, like most of us, have no knowledge of. Legal advice provided on the internet has great chances to be incomplete and can lead to great harm to the person trying to apply it if doing so without consulting a professional specialised in this specific legal field. Stating that no sanctions whatsoever can be applied to people trying to dodge their obligation to contribute previous pension assets to their new pension fund upon getting new employment is reckless at best.
Disclaimer: I am not a lawyer, I am not specialized in swiss pension laws in any kind, I have no knowledge of previous judgments by swiss courts on the matter.
The obligation to transfer vested benefits assets to the new pension fund in case of new employment comes from the federal law dedicated to vested benefits (LFLP/FZG), art. 4, al. 2bis
In French (LFLP): https://www.fedlex.admin.ch/eli/cc/1994/2386_2386_2386/fr
In German (FZG): https://www.fedlex.admin.ch/eli/cc/1994/2386_2386_2386/de
In Italian (LFLP): https://www.fedlex.admin.ch/eli/cc/1994/2386_2386_2386/it
Since there is a requirement toward the insured person to announce their vested benefits assets to the new pension fund and their entry into a new pension fund to their vested benefits fundation, I’d argue that that behavior enters the field of “not declaring information”. Undue benefits could be gathered if, on top of that, benefits for death/disability end up being paid by the new pension fund.
I leave to people with real legal knowledge to assess whether the two laws are linked and if the penalties envisioned in the LPP/BVG apply to informations that were required to be transmitted by the LFLP/FZG.
I would guess that the heaviness of any penalty that could occur as a result of such behavior would depend on both the intent of the perpetrator and whether any actual harm came out of it. I wouldn’t go so far, however, as to assume that a dedicated pension fund fundation/federal-/cantonal office willing to dedicate ressources to enforce the obligation to inform the new pension fund of existing vested benefits assets couldn’t win in a legal litigation and enforce penalties if they really put their mind to it.
Edit:
I can imagine a tax office diving deeper if unwarranted pension buybacks were to be made as the result of hidden vested benefits accounts. I could also imagine a civil litigation between a married/soon to be divorced couple getting more complicated in case some of the pension assets end up being hidden (which they theoretically couldn’t be).
The advantages and disadvantages of moving pension capital to Freizügigkeitsstiftungen was recently discussed in Handelszeitung (Vorsorge: Eine Lücke in der Pensionskasse liefert Rendite | Handelszeitung) and in NZZ (Freizügigkeitskonto: Die Rettung vor der Umverteilung im BVG?).
The articles describe that the practice is highly advantageous, wide-spread and perfectly legal.
The penalties are on the vested benefits fundation and the pension funds involved. The requirement to transfer assets is on them. On the insured person is the obligation to inform them so that they know they have to transfer/request assets. Legally speaking, informing just the new pension fund isn’t enough, you should also inform the vested benefits fundation, on whom the obligation to transfer the assets lies, of the new situation.
As often in such situations in Switzerland, there is the law as written, the law as intended and the law as applied. Some “loopholes” are maintained willingly and sometimes openly. They’ll stand until someone wins a court case against the authority applying the loophole, which would require time, money and a willingness to go through all of this awful process for very fringe personal benefits…
There actually are federal court judgments regarding what happens when the authorities don’t apply the law. It states that people should be treated equally even when it comes to illegal processes as long as the authority doesn’t show a willingness to start following the law (it protects the citizen, not the authorities). The equal treatment principle doesn’t apply anymore if the authority shows a willingness to start applying the law going forward, and consequently does so reliably. In this case, they don’t have to allow new requests to benefit from the previous loophole and it becomes subsequently closed.
So, yeah, for the time being, the situation is pretty open and probably on purpose. Things can change, though.
Sorry but you have it completely upside down. It is the Anglo-American common law that relies on judgements. The Swiss legal system is based on a civil code, meaning that it relies on the code rather than previous court judgements. As a result, the law is not overly complex and even laypeople can understand its principles. Even a layperson can obtain a reasonable understanding of specific issues. Especially useful are NZZ newspaper articles written by lawyers.
I’m sorry, but are you of legal background? I am not, though as an environmental engineer I get to deal with it occasionally.
My understanding is that the Swiss legal system relies on:
Edit: the name of the game is to understand how a judge would rule a specific case. If the law is clear on the topic, there’s no debate. If there’s room for interpretation, then previous court decisions can bring some light on how a similar situation would be handled in court.
Hello nabal
How can you know what part of my 2nd pillar is mandatory? I have the annual pension certificate sheet here but I cannot see what part is mandatory.
What I can see is that from my “Monthly contribution”, half of it is paid by my employer, half of it is paid by me (but transparently since I didn’t know about this until I read this thread).
My pension fund certificate (axa) has two columns, mandatory and extra-mandatory.
And is it labelled literally like that? I cannot find anything similar to “mandatory” on mine.
yes, just like that.
In my pension fund certificate it is also stated how much of the contributions are paid into the mandatory part, how much paid into the extra-mandatory part and how much is for risk. Each one divided by me and my employer.
Depending on your pension fund, it could also be that you don’t have any extra-mandatory part.
There are many issues with your idea, the most important being that it’s insanely complicated.
You seem to be starting from a point of high employability.
I can’t but think that targeting the 2nd pillar return is the wrong variable to maximize in your situation.
Ask yourself the following questions:
Is this really the best use of your time?
Keeping a company alive that essentially does nothing is still going to cost you time, nerves and money. There’s no free lunch here.
If all goes well and you find a way to pull off your plan with little ongoing cost, you may get an extra 100-200k CHF. Which sounds nice. But there are other ways to get that amount.
How about using that time to add marketable skills that transform into higher compensation which will automatically increase your 2nd pillar contributions?
Other ways:
Why not just push for higher salary?
As a true Mustachian you’ll want to keep the 2nd pillar to a minimum.
Separating investing from insurance should be the way to go. You don’t get an intransparent bundle as in the 2nd pillar, but you get to pick what you actually need.
Pick the minimum contribution and invest the rest. Get insurance for the part where you fall short with low 2nd pillar contributions.
Some insurance you might want to look at: insurance in case of inability to work (Erwerbsunfähigkeit, incapacité de gain), life insurance if you have dependents
Wouldn’t earning 20k per year more, consistently, have a much higher impact on your net worth?
I did not do the math, but if you increased your monthly income permanently by 800-1600 CHF, you’d get:
If you have multiple job offers with equal pay, push for a higher salary if pillar 2 is bad. Negotiate inclusion in a Kaderplan or 1e plan. In theory, employers can also create a special 2nd pillar plan tailored to your needs. Some will do it if they really want you.
So… you‘ll be a newly founded one-man company that employs one person (yourself) on a minimal - or nominal - salary.
Doesn’t sound like a great proposal for a pension fund, does it?