Vested benefit account vs. stock account

[pinkyuk]

I am about to return to Switzerland to retire. I am curious what the community thinks about which scenario is the better financial strategy:

1. Get a job for a couple of months, make catch-up contribution/buy-in into company pension fund which I would be allowed to because I have not paid much into 2nd pillar. Then quit the job again, get kicked out of pension fund and transfer to Vested Benefit account where I have investment options with decent returns. The upside is that I pay less wealth tax because the 2nd pillar does not count towards wealth.
2. Keep the money in the US stock account where I have more investment options and potential better returns but have to pay Swiss wealth tax.

I am leaning towards staying with option 2 because the wealth tax is not that high.

[PhilMongoose]

@pinkyuk

Keep the money in the US stock account where I have more investment options and potential better returns but have to pay Swiss wealth tax.

Even after paying withholding taxes etc.?

Are the investment options much better than VIAC and Finpension?

Maybe it makes sense to transfer part to VB for those which VB has the same products and keep only the US parts for those investments with no equivalent product?

[Dr.PI]

AFAIR, first three five years after starting a new employment in Switzerland, you can buy in maximum 5 20% of your income insured salary into a pension fund. Was mentioned in one recent thread. You are not the only clever guy out there.

Is it worth backfilling my first and second pillars?

AXA got back to me. I first asked if I can backfill and pledge. They might’ve translated to german from english and got only a partial answer. This is inline with what you guys suggested of insured salary. I guess stock compensation and bonuses usually are not a part of the insured salary. I pressed on to clarify that I wanted to backfill then pledge.

[pinkyuk]

@Dr.PI

AFAIR, first three five years after starting a new employment in Switzerland, you can buy in maximum 5 20% of your income into a pension fund. Was mentioned in one recent thread. You are not the only clever guy out there.

Thanks. 20% of your income makes more sense, otherwise you realistically would never be able to backfill the hole in your 2nd pillar.

[Dr.PI]

@hanem

in the first 5 years after moving from abroad to Switzerland the purchases are limited to 20% of the insured salary per year

Can change the outcome again if you can pay 20% of insured yearly salary even if you work part of the year. But probably it is prorated and you can’t.

[Abs_max]

Let’s assume you earn X CHF annually in CH. You can contribute max 0.2X annually into pension fund. But you would also increase your wealth by 0.3-0.5X depending on your saving rate.

So you actual wealth in taxable account is not reducing in either options.

This is not about tax savings. This is mainly about if you want to retire or you want to work

[PhilMongoose]

@Dr.PI

AFAIR, first three five years after starting a new employment in Switzerland, you can buy in maximum 5 20% of your income insured salary into a pension fund. Was mentioned in one recent thread.

I always wondered why there was this rule in place. Now it makes sense.

[pinkyuk]

@PhilMongoose

I always wondered why there was this rule in place. Now it makes sense.

I think though that the reason for the rule is more about limiting the income tax deduction resulting from 2nd pillar buy in. In the case I described, the trade-off is no wealth tax vs. having the assets in an account with withdrawal rules tied to retirement. The state has a vested interest that you save for retirement hence the retirement pillars don’t count as wealth.

[nabalzbhf]

@Dr.PI

AFAIR, first three five years after starting a new employment in Switzerland, you can buy in maximum 5 20% of your income insured salary into a pension fund. Was mentioned in one recent thread. You are not the only clever guy out there.

That’s only true for foreigners, not clear which situation OP is in (but I wouldn’t assume they are, since they want to retire in CH )

edit: seems like the criteria is not citizenship, but whether you were ever subjected to 2nd pillar.

since OP says:

because I have not paid much into 2nd pillar.

Then I don’t think the limit applies to them (this implies that they already have one)

[nabalzbhf]

@pinkyuk

I am leaning towards staying with option 2 because the wealth tax is not that high.

Honestly the biggest advantage of 2nd pillar is the tax advantage at contribution time, if you get a job for a couple of month (esp. if you’re not taxed at source), then you probably will have low marginal tax rate anyway, so IMO not worth it.

[pinkyuk]

@nabalzbhf

Then I don’t think the limit applies to them (this implies that they already have one)

Good points. For the sake of the thread:
-If you come to Switzerland and have never paid into a Swiss pension plan, it’s max 20% of the insured income for the first 5 years.
-Otherwise, the limit depends on the difference between how much is in your vested benefit account vs. how much pension savings you could have at your age and your insured income in that year.