I’ll part ways with my employer end September and go traveling for around 6 months, while remaining a French resident. I’m pretty much at my FIRE number, but the future looks so wide open that I’m very (very) slowly getting more comfortable with it.
So I come to you with a question on 2nd and 3rd pillar, upon leaving Switzerland.
Here’s the situation:
- there’s about 120 K in my 2nd pillar and 64K in my 3rd pillar.
- my 2nd pillar provider has changed and rules as well, so they’re telling me I can buy-back up to 140000 (I’ve already done 2 smaller buy-backs in the past)
- I could withdraw a part of the 2nd pillar, leaving for an EU country
- It’s likely I will live in France for a few years but really not sure for the future: I might be in Europe, maybe in France, maybe in Switzerland, or even out of Europe. So I’m inclined to keep the funds in Switzerland and thus move the 2nd pillar funds to a vested benefits account
Here’s where it gets more interesting:
- I was looking into Liberty foundation and VIAC for the vested benefits account
Liberty tells me that below an account of 250000chf, I can use a LPP fund solution (0.4% fixed pa + fund fees, with some in the range of 0.2-0.5, so a total of fees of around 0.7-0.8% pa, but with investments being very heavily built on Swiss supports and less diversified internationally and only 5 funds possible). Above 250000 chf, I can use a Multi-fund solution (0.45% pa + transactions fees, let’s say no more than 600-700chf if I plan to keep a small number of funds for the next 20-25 years + fund fees, in the range of 0.15-0.3%, so total of fees of around 0.6-0.7%, but with much larger possible diversification outside Swiss supports).
Liberty is in Schwyz so will get taxed around 4-5% at capital withdrawal, before taxation in another country.
VIAC tells me they’ll release their vested benefits account in winter, with costs similar to their 3a. Assuming a high equity solution, costs would be in the range of 0.5-0.6%.
VIAC is in Basel, so capital withdrawal taxation will be a bit higher, around 6-7%, before taxation in another country.
I was looking whether to cash out the 3a and I’m undecided
I can do so, with CH taxing me then France taxing me at 6.75%, then getting back the CH tax. I have a real estate investment in France that allows for a tax reduction this year and the next, so I can probably get 70-80% of that back from the FR tax (around 3000 chf).
Now, this is time consuming and a lot of paperwork and…I could send the 3rd pillar funds to the 2nd pillar instead, which allows the vested benefit account to be above the 250000chf so invest in the better Liberty solution.
I’m trying to understand what is best for future taxation.
I cannot know what the future holds (especially in 10-20 years time) in terms of cross-border taxation and cross-border withdrawal of 2nd pillar pensions in Europe, though I see more and more countries getting a 2nd pillar structure. But since I don’t need the money now, I’m thinking that keeping them in 2nd pillar/vested benefits tax exempt, in a safe haven like Switzerland, invested with 0.6-0.7% fees is not a bad deal. And there is a possibility that 2nd pillar taxation will be more favorable in the future across Europe, where the EU is trying to develop a pan-european pension solution (PEPP).
On the other hand, if I affiliate to FR social security system (I’m currently in Lamal), withdrawals are taxed at 6.75% + 9% of charges sociales. Therefore, the possibility also exist that withdrawing in the future in some place where I’d wanna buy a house for instance, might result in higher taxes than if I withdraw now.
There’s my dilemma.
If you have any words of wisdom, I’d be infinitely grateful.