International pension planning AHV, pension fund and pillar 3a when emigrating
Are you thinking of emigrating? Then start clarifications and precautions for pension planning – AHV, pension fund and pillar 3a.
The most important information at a glance
The most important information at a glance
- Anyone who moves to a country outside the EU or EFTA can continue to pay into old-age and survivors’ insurance (AHV) on a voluntary basis.
- It is possible to make a lump-sum withdrawal from your pension fund when you emigrate.
- If you emigrate to an EU or EFTA country, the BVG proportion of your pension fund assets may have to be “parked” in a vested benefits account.
- Pillar 3a assets can be withdrawn on emigrating.
- Talk to your client advisor at an early stage if you would like to keep your vested benefits accounts, pillar 3a and savings assets or investments in Switzerland.
In 2021, according to the Federal Statistical Office, a total of 114,600 people changed their place of residence from Switzerland to a foreign country, 28,700 of whom were of Swiss nationality. In total, around 790,000 Swiss nationals were registered with a Swiss consulate abroad in 2021, an increase of 1.5% compared to 2020.
Whether before or after retirement, emigrating means embarking on an extensive project. Certain formalities can be taken care of well in advance. This gives you more time during the more intensive phase in the weeks immediately before and after emigration. Last but not least, you will need to clarify and decide on the future course of various aspects of retirement planning – be it AHV, your pension fund or pillar 3a – not forgetting your asset investments.
If you only want to go abroad for a limited period of time, read our article on the topic of Spending time abroadClick here to read the post..
Pillar 1: what happens to AHV insurance when I emigrate?
Pillar 1: what happens to AHV insurance when I emigrate?
If you permanently transfer your place of residence, AHV insurance ceases to be compulsory and you will no longer have to pay contributions. When you reach ordinary retirement age, or when you take early retirement, if applicable, you will receive the pension corresponding to the number of years of contribution and the amounts paid in. The same applies to survivors’ pensions in the event of disability or death. However, with AHV insurance, it is not possible to withdraw a lump sum when you emigrate, except in the following situation.
If you are a national of a country that Switzerland does not have a social security agreement with, you can claim back the contributions you have paid in. This applies to India, Brazil, Australia, China, South Korea, Uruguay and the Philippines.
If you have not yet retired, in certain cases you can choose to remain covered by AHV insurance on a voluntary basis and pay in contributions. This ensures that you will receive a full Swiss pension on retirement and will remain insured against death and disability. Taking out voluntary AHV/IV insurance is individual: each family member must submit a separate application and will be charged five percent of their contributions for administration of the voluntary insurance. Below is a summary of requirements, all of which must be met:
- Swiss citizenship or citizenship of a country of the European Union (EU) or the European Free Trade Association (EFTA)
- Permanent residence outside the EU or EFTA
- Compulsory AHV/IV insurance for at least five consecutive years before leaving the compulsory AHV/IV scheme
- Application submitted within one year of leaving the compulsory AHV/IV scheme
If you move to an EU or EFTA country and take up gainful employment, you will pay into the pension system of that country. You will then receive a partial pension there after retirement, in addition to your Swiss AHV partial pension. As far as your AHV pension is concerned, you can decide whether it should be transferred to a Swiss account in Swiss francs, or to an account in your new home country – in the currency of your new domicile. Payment of your AHV pension must always be requested, preferably three or four months before you reach the official Swiss retirement age.
Pillar 2: withdrawing pension fund capital under certain conditions
Pillar 2: withdrawing pension fund capital under certain conditions
When your employment relationship in Switzerland is terminated, your obligation to contribute to pillar 2 also comes to an end. If you move to an EU or EFTA member state, you can withdraw the extra-mandatory part of your vested pension benefits immediately. In addition to this, you can withdraw the mandatory part (also known as the BVG part), provided you do not have to pay compulsory old-age, disability or survivors’ contributions in your new place of domicile in an EU or EFTA state. If this were the case, you would have to “park” the mandatory portion of your vested benefits in a vested benefits account or vested benefits policy until you are allowed to withdraw it, i.e., once you have valid grounds to request a cash payment, for example five years before reaching the normal retirement age, from the age of 60 (men) or 59 (women).
If you need to “park” your pension fund assets, you may transfer them to a maximum of two accounts at different vested benefits institutions. The solution offered by UBS also allows you to invest the balance in a fund savings plan in a staggered manner to increase your chances of better returns.
Tax is withheld at source when you withdraw your pension fund assets stating “Leaving Switzerland” as the reason for requesting a cash payment. The amount depends on the domicile of the vested benefits foundation. You can reclaim this tax or have it credited against the tax due abroad if you are resident in a country that has concluded a double taxation agreement (DTA) with Switzerland which provides for a refund or credit. That is why it is essential to find out in advance how the payment of your pension assets will be taxed in your new foreign tax domicile.
Pillar 3a assets can be paid out directly if you move abroad
Pillar 3a assets can be paid out directly if you move abroad
When you emigrate, you can choose to liquidate your pillar 3a account, whether it is held by a bank or by an insurance company. Alternatively, you can conserve your pillar 3a assets until you reach Swiss retirement age. Contact the pension fund in good time.
As soon as you stop earning income subject to AHV in Switzerland and are no longer liable for tax, you can no longer pay contributions into pillar 3a. The last contribution into pillar 3a must be made before you stop working.
Your pillar 3a assets must be paid into an account in your name. If you do not want to close your pillar 3a account immediately on leaving Switzerland, and your pillar 3a assets are invested in investment funds, you should check the tax implications in your new tax domicile abroad beforehand.
It is not possible to give a general answer about whether or not it is worth opting for a staggered payout of different pillar 3a accountsRead our article on the subject of multiple pillar 3a accounts here over a period of several years. This depends on the tax system in your new home country. In any case, Swiss tax at source will still be due abroad on withdrawals from a 3a account once you have left Switzerland, and the same procedure applies for obtaining a refund as for pillar 2.
Check your investment strategy in good time
If you withdraw your vested benefits and/or pillar 3a assets when you move abroad, you may find yourself with a lot of liquidity at your disposal. It therefore makes sense to analyze your investment strategy in detail beforehand. How much of your liquidity do you want to and could you invest? To answer this question, you must consider not only your financial needs, but also the political and economic environment. It is best to discuss the relevant issues with a professional early on.
