Get higher returns on 2. pillar, employ yourself

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.

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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.

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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:

  • the federal and cantonal constitutions
  • the civil code and it’s cantonal application laws (customs change from canton to canton and they have some leeway on how they define certain terms and concepts)
  • the code of obligations (which you seem to ignore)
  • the special laws (which you seem to ignore completely too), which usually set a federal framework and have cantonal application laws, though not really in this case
  • ordinances, decrees, regulations and decisions
  • previous court judgments, which are an integral part of a judge deliberation before giving a new judgment. Not all laws work together flawlessly and some contexts can lead to interpretation. Courts have to handle that and they try to maintain things consistent by applying older similar judgments to the situations that end up in front of them. This is an integral part of how things work. If all situations were crystal clear from the start, we wouldn’t need lawyers at all, a robot following a strict process would do.

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.

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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.

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And is it labelled literally like that? I cannot find anything similar to “mandatory” on mine.

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yes, just like that.

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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.

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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:

  • Insist on a Kaderplan or even a 1e plan where you get free investment without insurance.
  • Push management for transfer of 2nd pillar to AXA, Profond, Medpension, Gemini or others that offer high equity.

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:

  • much more money to invest in the stock market
  • you’d get probably included in a 1e plan

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.

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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?

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On some it is apparently labelled BVG.