There is also the risk that the „Deckungsgrad“ of your pension fund falls below 100%. This will then trigger recovery/restructuring activities, which affects you.
Recent study showed that 57% of all pension funds fall below a coverage of 100% in a scenario of: stocks -20%, bonds -10%, foreign currencies -5%.
Also the hidden risk of cash-flow problems even if degree of coverage is sufficient. Do you know what PF do in such cases? They just redirect inflows directly to pensioners.
are these issues for you if you will anyway just withdraw your capital?
No
Unless your fund go bust and employer refuse to fund it in another way. And all this happens between now and when you retire
Big companies typically will infuse cash on top to avoid issues
Once the funds are in VB - you are on your own. Nothing to do with previous employer and their fund
If we are talking about a pension fund and not VB then yes, this can be a problem. Its then very like that part of funds profits and employer/employee contributions go into fund „recovery“.
If you leave the fund during that time, they will take part of your voluntary bvg part for the „recovery“.
This could be a risk, but it would be quite extreme as it would:
I don’t think it’s something you need to worry about. You are retiring in one year
I hope to retire in 2028, but under the current US administration, a lot could happen in 3 years!
I am staying as far away from any additional contributions to pillar 2 as I can. Too much uncertainty and I get better returns managing assets on my own even after taxes.
I only max out pillar 3a because I can fully control the investments, but even there the tax uncertainty when withdrawing made me doubt this again. Not sure how much I will have left from pre-tax accounts when I retire so having as much as possible post-tax gives me more predictability and makes me feel more secure about my retirement.
yep agree I would never buy additional contribution infact trying to get the stash out instead as its just wasting away doing nothing. It all depends on your own expected return and your risk free rate
Well for me, I don’t want to go all in on stocks so need a bond component, so I treat pension a bit like that.
Plus, if I manage to retire in 3 years, the funds will be transferred to VIAC and Finpension where I have more control/flexibility over investments and hopefully not just the 1%.
While in the past decade, I would not have wanted my money in PF instead of the stock market. Over the next decade, I think a 1%-2% CHF return might not be so bad. YTD, you’d be up 11% compared to S&P500.
That’s also what I do. But what makes it difficult for me is that the bond component is normally the stable predictable part. And I don’t know if I will get only 95% of it, or 90% of it, or 80% or 60% of it when I retire. It will depend on any changes made in the taxation until then. I will just get some amount that I cannot predict and it makes it very difficult to plan my retirement. That feels more like stocks to me.
I would prefer to get the regular pension and pay income tax on it because it’s more predictable. But we can only get this option if we still have a job at 60. If we don’t, then there is no way to plan anything in advance.
That’s why I feel so insecure about my retirement and feel the need to plan it myself in a way that I can control. So the little that I manage to save extra, I prefer to keep it post tax rather than put it in pillar 2.
An interesting interview
That’s the issue, with increasing job uncertainty, you can’t rely on having a job at 60. Heck, holding a job after 50 is challenging and getting a new one after losing a job once you’re over 50 is an even greater challenge. That’s why I don’t bank on getting an annuity.
Current annuity rates are pretty poor, but there’s a chance that this changes in the future, so we might want to keep our eyes open for good luck too.
By the way, I read somewhere that annuities are taxed differently than regular income. So maybe there is some value in private annuities from tax perspective
I make the assumption that overall, retirement tax advantaged schemes should at worst have a neutral taxation balance when compared to equivalent taxable alternatives for most people (that is, tax saved at the moment we put money into the scheme and while the scheme was active should at worst be equivalent to the taxes paid when withdrawing).
I think it falls from common sense and political changes to taxation that could be made would at least try to adhere to this principle.
For what it’s worth, we don’t know how much taxable assets we will have by retirement either, not even bonds or cash, as that also can be subject to changes in taxation.
For me its rather funny the set of assumptions we have
For taxable account -: we know the expected return, we know the future tax regime & we know the final amount we will get. None of this is true.
For 2nd Pillar -: we assume worst case where Govt take all our money to give to someone. This will be done by cross transfer, raising taxes and every bad thing that is possible. None of this is also true
Reality is the purpose of 3 pillar system is to enable good retirement for all. That is all. If Govt really want to screw the high earners, they can easily apply high wealth tax or capital gains tax and it would bring much more money to the coffers. But I do not think that is the goal anyways.
I am pretty sure CH will feature in one of the top 10 pension systems in the world. It is already one of the top income country & also very favorable tax regime for rich or super rich.
Thus I try to assume the current rules will be valid until I retire, do a couple of scenarios & add money to different pillars accordingly. Trying to guess future tax regime is practically impossible.
Are we talking about the rich and super rich here? I am more interested to what will it be for someone like me (above median salary, 1.5-2X median) after spending a decade plus in uni and academic work earning below median and barely median salary.
Raising retirement age should be part of the solution. It preserves intergenerational fairness and has a double effect: people contribute for a longer period and receive benefits for a shorter time compared to keeping the retirement age at 65. For example, we could spend half of the additional life expectancy we gain in retirement and work the other half longer.
Ah yes, the old “well when pensions were instituted people retired at 62 and died at 65” argument 
I said rich & super rich because normally taxes are higher for richer people in some countries. In CH they are still reasonable.
Taxes are anyways lower for people who make less money.