For many people in Switzerland, the retirement assets saved in their pension fund are the most important component of their retirement provision. On retirement, this capital is either paid out in its entirety, converted in full into a lifelong pension, or paid out partly as a lump sum and partly as a pension.
The decision to make a full or partial lump-sum withdrawal usually has to be made several months before the actual retirement date – although this varies from pension fund to pension fund. Check which deadline applies to you so that you don't miss it.
Under certain circumstances, it is also possible to have the pension fund capital paid out earlier, e.g. for owner-occupied residential property, when starting your own business or if you leave the country for good.
Whether a pension, the lump-sum option or a hybrid form is the best solution depends entirely on your personal situation.
One of the advantages of drawing a pension is that it provides stable and predictable income after retirement – and is guaranteed for life. In addition, the pension fund assumes the investment risk, and the existing conversion rate at the time of the first payout applies permanently. In the event of the death of the retired person, the surviving spouse receives a widow's or widower's pension: Amounting to 60% as a rule.
One of the advantages of the lump-sum option is that it offers optimum flexibility, for example, to fulfill lifelong dreams or pay off a mortgage. In addition, private investments can potentially generate a higher return. There is also the option of investing the capital in a lifelong private pension or of investing it in a payout plan. The funds can also be bequeathed in full. However, with the lump-sum option there is a risk that the money will be used up before the end of your life.
The decision between a pension or a lump-sum payment has far-reaching consequences for your financial situation in old age, which is why you should definitely seek advice from a specialist.
Tax issues play a major role in any decision about the withdrawal of your pension fund assets. It is not the gross payments that should be compared, but what remains after the deduction of taxes. All other income, i.e. money from the 1st pillar, investment income or rental income, must be taken into account. This is another reason why it is worth seeking advice from a specialist.
Because tax rates can vary greatly from canton to canton, changing your canton of residence when you retire may even be of interest from a tax perspective. However, sufficient time would have to be allowed for such a change to be accepted by the tax authorities.
Anyone moving abroad permanently should also check in advance what tax regulations apply there. Taxes on lump-sum payments may even be lower there than in Switzerland.
The staggered payment of pension fund assets offers a further opportunity to reduce the tax burden. This is because the payments are spread over several years, which is beneficial given the progressive nature of taxation (partial retirement).
And once again: To obtain the maximum benefit, a specialist should calculate taxes precisely in advance, for example, as part of financial and pension planning.
Most employees not only save in their pension fund in accordance with the statutory minimum; their pension fund assets also include a non-mandatory portion. This could, for example, be drawn as a lump sum, while the mandatory portion under the BVG is paid out as a pension – one of the many options for splitting pension fund assets.
Whether a lifelong pension, a lump-sum payment or a combination of the two is the best solution for you when drawing your pension fund assets depends on various factors. These include your need for security, your financial flexibility, your health, and your dreams and plans for the period after retirement. Tax and inheritance law aspects should also be taken into account.
It is almost impossible for private individuals to be familiar with all the information in connection with the withdrawal of pension fund assets. But the decision in favor of a pension or a lump-sum payment is irreversible. It is therefore highly recommended that you seek comprehensive advice from a specialist.
Pension or financial planning gives you an overview of your current and future financial situation. If you are married or cohabiting, it is best to seek advice together. This gives you all the information you need to make informed decisions and optimize your financial future.
