Tax on Pension annuity

I was told that if you retire and take an annuity from your 2 pillar (instead of a lump sum) the tax authorities capitalise the the annuity for wealth tax purposes

Can anyone confirm or share any resource ?

Example: 100k per year pension from 2P. 5% conversion rate
=> 2 M CHF is added to your taxable wealth

In addition if you are below retirement age then AVS would be payable on the 2M CHF

I wonder if similar applies to Pillar 1 pension or if that is excluded?

I don’t think that’s correct. It would contradict https://finpension.ch/de/rente-oder-kapital-aus-steuerlicher-optik/ and Vermögenssteuern nach der Pensionierung | VZ Vermögenszentrum

How could this even work over the years? The moment the annuity starts, you no longer have capital in the pension fund. I.e. there isn’t any particular value you could declare each year.

Is it possible that whoever told you this was thinking about a private annuity with a surrender/redemption value? Vermögenssteuer bei rĂŒckkaufsfĂ€higen Rentenversicherungen wĂ€hrend der Rentenlaufzeit (Praxishinweis) | Kanton ZĂŒrich

You never pay wealth taxes on your pillar 1 contributions. You pay income taxes on pillar 1 benefits.

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I don‘t think so. Otherwise it would be taxed all along?

This seems surprising and unlikely indeed. Could this be a simple confusion with the way AHV contributions are calculated when you retire early? Indeed, as you mentioned, if you retire before the AHV normal retirement age, you do have to continue paying contributions until then. Specifically, for determining your level of contribution, your assets are considered, but also your pension income multiplied by 20. See here (english version):

https://www.ahv-iv.ch/p/2.03.e

Thanks for the inputs.

Indeed the person I spoke to was talking about wealth for AHV contributions. If you do the maths that results in ~5% of pension income going to AHV contributions in the event of Retiring Early which is significant.

In addition there may also have been a purchase of private annuity involved. In summary I may have put 2 + 2 together and come up with 3


This document has a decent overview on how the contributions are calculated (in german, page 5, ‘NichterwerbstĂ€tige’):

https://sozialversicherungen.admin.ch/de/d/6141/download

Essentially calculate (assets + income x 20) and get yearly contribution to 1st pillar AHV out of the table at bottom of page 5. Afaik dividends do not count as income, but a 2nd pillar annuity would if you get this before 65 years old. 3rd pillar optimisation & exemption if you have a working spouse are still possible, you may also go for the Barista option and count as employed as long as you do at least a 50% part-time.

At least these contributions will count towards the later 1st pillar AHV entitlement.

Where did you hear that?

Im quite sure, that it’s wrong. If you take the annuity/pension then you have no access to the capital anymore. So it’s not “your capital” any more. You have rights on the annuity but not on the capital. If you die early then there ist no capital amount that goes to your heritance.
But your pension is taxed as income.

Also for the first pillar you don’t have any capital taxation. Because also there you don’t have any capital. But your pension is also taxed as income.

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You have to pay this whenever you’re not working (or working less than 50%) while you’re 20-64/65 years old, if your net worth (+20x retirement income) is at least 300k.

https://www.ahv-iv.ch/p/2.03.d

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I haven’t done all the calculations, but is that truly an optimal strategy? You do have to pay AHV contributions when you work as well


Discussed AVS on retire early in this thread. IIRC you need to work >50% and >9 months to avoid AVS contributions based on wealth

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haha! I forgot (from another thread) that you’re apparently not a big believer in social solidarity :slight_smile:

But what would be the difference between paying contributions on money you have earned versus money you are earning? The latter is psychologically slightly more bearable? :wink:

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Depending on your income and wealth you can actually avoid it even with less than 50%. In the detailed conditions it says that you only have to pay the wealth-based contributions if the contributions from work are less than half of what you would have to pay based on your wealth.

E.g. wealth-based contributions for 3 millions are about CHF 7’300 per year. This means that if your gross income is CHF 40’000 or higher, you don’t pay any wealth-based contributions, even if you only work 20%.

Also note that you can deduct the income-based contributions from the wealth-based contributions you have to pay.

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