Marriage or common-law partnerships: Who gets the best deal?

Marriage or common-law partnerships: Who gets the best deal?

As soon as two people begin co-habiting, they are living in a common-law partnership. A couple in a common-law partnership, however, do not enjoy the same protection as a married couple. We explain why.

While there may be no disadvantage to common-law partnerships in the affection and love they provide, compared to married couples, the law deems common-law partners to be individual persons. This can be disadvantageous in the event of separation or death, as shown in Switzerland’s three-pillar system:

First pillar: No benefits for the surviving partner

Common-law partners cannot count on each other’s benefits from the first pillar, for instance following their partner’s death: There is no widow’s or widower’s pension in a common-law partnership. At least the surviving children receive an orphan's pension, because children out of wedlock are treated as equivalent to children in wedlock.

Second pillar: Benefits are not guaranteed

Benefits are by no means guaranteed from the second pillar either. The payment of benefits depends very much on the rules of the pension plan. Each individual should check with his or her pension fund whether a partner pension will be paid out. Many pension plans make the second-pillar benefits dependent on the duration of the common-law partnership.

TIP

Find out what directly from your pension fund what their rules are. If you are part of a common-law partnership, check whether you have a choice on who can receive the survivor's benefits from your pension fund.

Separation: no entitlement to pension assets

Common-law partners who separate are in a worse position than couples who divorce. In the event of separation, there is no entitlement to a mutual splitting up of the respective pension assets in the pension fund that were saved in the second pillar during the time spent as a couple. This is especially problematic for the person who mainly took care of the household during the relationship.

Third pillar: Common-law partners as beneficiaries

The extent to which common-law partners can benefit in private pension plans is dependent on whether it is a restricted pension plan (pillar 3a) or an unrestricted pension plan (pillar 3b). Restricted pension plans have strict, statutory rules governing beneficiaries, while with unrestricted savings methods, beneficiaries can be chosen at will.

Discuss your pension provision together

The benefits arising from the Swiss three-column system show that it is especially important for common-law partners to include not only an inventory and a break-down of household and living costs, but also their pension provision in the agreement: How do we divide our assets? How do we cushion the loss of the benefits from the first and second pillars??

Common-law partnership agreement – more than advisable

A common-law partnership agreement is strongly recommended for any unmarried couples. This is especially important when children are involved, and a partner is only working part-time or is a child cargiver full-time. In the event of the death of a partner, the househusband or housewife has no statutory protection – unlike married couples. But there are also advantages for unmarried couples.

Advantages for common-law partners

Common-law partners in the first pillar receive two individual pensions of a maximum of CHF 2,350, thus totaling CHF 4,700. Married couples, on the other hand, receive a shared pension of a maximum of CHF 3,525 (150 percent). Common-law partners also enjoy tax advantages, as their incomes are each taxed individually. The incomes of married couples, on the other hand, are added together and taxed jointly. The income is higher from a tax point of view and the tax progression system consumes quite a bit of additional cash.

Couples between a rock and a hard place

Today, there are many different partnerships and patchwork families who under law are between a rock and a hard place. Partners share equal responsibility for taking care of the children or household chores and decrease or increase the amount of work they do in certain phases of their lives. For partnerships like this, it can be complicated to establish which type of partnership provides them with more financial benefits, in terms of security, protection and wealth. Personal values often play a more important role here. Such couples may often find assistance from professional advisors helpful.