Last update: 17.09.2024 08:32
Many people withdraw their vested benefits account at normal retirement age. But how can you save tax on withdrawals from a vested benefits account? Discover important changes with the AHV21 reform in the article.
Withdraw from a vested benefits account and save taxes on withdrawals
As with pillar 3a, you can still withdraw your assets from a vested benefits foundation before or after the normal AHV retirement age. This means that you can withdraw vested benefits from the age of 60 (for men and women from the age of 59). However, you can also legally postpone the withdrawal until you are 70 at the latest (men, or 69 for women).
It is now even possible to defer the withdrawal if you are no longer gainfully employed. Each account must be closed as a whole. Partial withdrawals from the account are therefore not possible.
But, why the heck should I withdraw my vested benefits account later than possible? 🤨 Well, you guessed it: the taxes. It may be worth withdrawing your vested benefits account later so that you can save on taxes when you withdraw it. This is because you do not have to pay tax on the income from your vested benefits account or vested benefits custody account as income or assets. Capital tax is only payable on withdrawal. So why not collect tax-free income for a little longer?
You can also break the tax progression with a staggered withdrawal. I have shown you how you can save tax on withdrawals by staggering them in this article in the section “How many pillar 3a accounts make sense?”.
Deferring the withdrawal of your vested benefits account was therefore previously a very smart and legal way to withdraw money from your pension in stages.💪
Withdraw vested benefits account with AHV reform 21
However, as part of the AHV21 reform, the Federal Council decided to amend the Ordinance on the Free Movement of Persons. Outch. At its meeting on December 9, 2022, the Federal Council decided that the AHV reform will enter into force on January 1, 2024. The deferral in the Ordinance on the Free Movement of Persons (Article 16 para. 1) will be adjusted to the same date:
“Retirement benefits from vested benefits policies and vested benefits accounts may be paid out at the earliest five years before reaching the reference age. They fall due when the reference age is reached. If the insured person can prove that he/she is still gainfully employed, he/she may defer the payment of benefits for a maximum of five years after reaching the reference age.”
Okay, so? This means that a deferral beyond the reference age is now restricted to people who actually continue to work after 65. 🛠️ So now you really have to keep ironing so that you can defer your pension.
The good news is that this change will only come into force after a transitional period of five years on January 1, 2030. This means that if you reach your regular AHV retirement age between 2024 and 2029, you can postpone the withdrawal of your vested benefits account for a maximum of five years, even if you are not gainfully employed. However, you must withdraw your vested benefits account by December 31, 2029 at the latest.
Our tip: Part-time job allows further deferral of payment
You can also defer vested benefits in the future if you provide proof that you are still effectively employed. Proof can be provided in the form of a salary statement, an employment contract or confirmation from your employer. In this way, you can continue to save tax on your withdrawal.
Incidentally, the law does not stipulate a minimum level of employment – a small part-time workload is sufficient. And as a self-employed person, you can provide proof very easily, e.g. with a business account.
Obtaining a vested benefits account abroad
Some people enjoy the warmth of retirement and emigrate. One moves to Portugal or Greece, the other to Thailand or Bali. What impact does this have on the payment of your vested benefits?
Instead of capital tax, a withholding tax is then payable. The amount of this tax depends on the domicile of the pension foundation – and not, as with capital tax, on your place of residence when you receive the benefit.
If there is no double taxation agreement (DTA) between Switzerland and the country in which you have taken up residence, the withholding tax deduction is definitive. In this case, it makes sense to transfer your vested benefits account to a foundation in a canton with low withholding tax. You only draw on the account once you are resident abroad and the transfer has been completed. Note that some foundations don’t like it when you bring money in and take it out again straight away. They charge a fee if money is withdrawn after a few months. So a little tax planning in advance won’t hurt. That way, you minimize the withholding tax deduction on payout.
If your country of residence has concluded a DTA with Switzerland, it can generally tax your lump-sum payment itself. You can then reclaim the withholding tax paid in Switzerland.
Summary of vested benefits account withdrawals and tax savings on withdrawals
You can withdraw your vested benefits account 5 years before and after the normal retirement age. You are very flexible under the current law. The AHV21 reform will amend the Vested Benefits Ordinance. From 1.1.2030, you will only be able to defer your pension beyond the reference age (currently 65 for men and women) if you are actually in gainful employment.
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Disclaimer
We have taken great care with the content of this article. Nevertheless, we cannot rule out errors and cannot guarantee that it is correct and complete. This article does not replace tax advice. We do not offer tax advice and recommend that tax issues are always clarified with a tax expert and/or the relevant cantonal tax administration. Any liability is rejected.
