Switzerland is often described as quite a transient place, where expats live and work over the medium term before moving elsewhere.
An important question we often get asked by clients is, what happens to your pension benefits when you leave Switzerland permanently?
When you leave a company in Switzerland, your occupational Second Pillar pension will usually move with you to your new employer’s pension scheme. However, if you leave employment without a new role, take a sabbatical or leave Switzerland altogether then your pension cannot move to a new scheme.
In this instance your pension would move into a deposit account, known as Libre Passage in the French-speaking area of Switzerland.
Can you access your pension as cash when you leave?
The answer to this is yes, you should be able to access at least part of your occupational pension funds when you leave Switzerland. However, you will be required to pay a withholding tax, the value of which depends on the Canton where the pension is held in Switzerland.
Planning opportunities in a new country?
When moving to a new jurisdiction, with new tax rules and regulations, you will be presented with new planning needs and fresh opportunities. Appropriate advice and guidance can help you to be tax efficient as you continue to plan for the future.
For example, clients returning to the U.K, relocating to France or Spain could reinvest their pension funds in very tax-efficient structures for residents of those countries.
As an international worker, what happens to your pension if it is left in Switzerland?
If you leave your pension in Switzerland, it will remain within the Libre Passage deposit account, often with limited investment opportunities.
Having your pension fund sitting in cash paying a nominal investment return is not going to help the pension fund grow or offset the impact of inflation. Your long-term goal should be to have the pension fund invested in line with your risk profile.
Though some clients prefer to keep their pension assets in CHF because it has historically been viewed as a safe currency, this may not be the best solution to your circumstances when you leave Switzerland.
For those with a longer-term perspective, the power of investment and compounding returns cannot be underestimated. This will help you grow your pension and benefit from the increasing value of markets. This should at the very least, allow you to avoid your pension funds being eroded through inflation. For those with shorter term views and perhaps looking at retirement options, the correct help and advice is imperative.
Thankfully, this is not a situation you need to accept, wherever you move to in the world. Whether your time frame is short, medium or long term, receiving the correct advice is crucial in helping you make the correct decisions for the next chapter in your life.
If any of these scenarios are relevant to you, please reach out for a review of your Swiss pension.