Leaving Switzerland - Moving 3a to 3b and continue investing?

Visas, Permits, Passports and Naturalization
1

Hello everyone,

This year I have used a 3rd party service (supposedly professional) to do my 2023 tax declaration. They also provided a custom consultation on pension planning, under which I explained my situation: I will probably leave Switzerland by end of 2024.

No problems there: I am a EU national, I could come back in the future. From what I understand, whatever pension I leave here (1, 2, 3a) will stay here and be available to me whenever I reach a certain age. In the case of 3a, I could entirely withdraw it.

However, this is what my consultant suggested:

  • a different 3a pension provider (Swiss Life), I use Finpension for now
  • moving the 3a to a 3b (Swiss Life allows this) and keep contributing from abroad
    From what I understood, the 3b can be kept when moving abroad, and after 10 years you can withdraw without any tax on (except the one from your country).

Now just reading online and on reddit, Swiss Life is shi**ed upon due to being an insurance fund. So I am not sure what my counsellor is referring to. Here is an image she used:
Screenshot 2023-12-23 at 00.43.21.pdf

Here are some questions I have: maybe Swiss Life is not so bad and the table she provided is actually true? anyone suggesting to keep a 3b and to keep depositing there even after leaving? is withrawing a 3a when leaving a good decision? I was thinking to keep it there, let mature, withraw as pension if Swiss Life is not as great as portraited, what 3b could I use? Swiss Life allows to move a 3a to a 3b, wondering it this transition is important
I probably have more questions, but this is the highest priority.

Cheers!

2
Do NOT mix (life) insurance with investment.

In other words - send the "advisor" to eat dust.

Not sure how these borderline scams are still legal.

3
3b is your non tax preferred (*) savings towards retirement. This can included life insurances, but also includes all your other investments. So, to say finpension cannot be converted to pillar 3b is a lie. (* Pillar 3b has some tax prefferences, as Switzerland has no capital gains tax (exception apply), and pillar 3b life insurance pension payouts are taxed at a reduced rate)

In general, be careful if someone approaches you about a life insurance offer. Often they get a huge commission and you will pay it with your money! Therfore, they have a huge conflict of interest. As you intend to leave by 2024, a life insurance very likely does not make any sense, as it would have 0 surrender value (Rückkaufswert) at that point. 0 Because the payments are used for the comission.

Next, having a Swiss pillar 3b life insurance while you do not intend to return to Switzerland, or will not be a Swiss tax resident for a prolonged time, has to be considered very carefully. Such a life insurance might not be tax exempt in your new country of residence, you could something better abroad.

Finally, to the comparison table. Very interestingly, or better annoyingly, or actually non surprisingly, the actual products compared are not mentioned. Swiss life has many different pillar 3a products, and finpension has also countless. One can always pick a SwissLife product which will perform better than a finpension product (and vice versa). You would have to look at the past performance of your current finpension product and then compare it with the suggesed SwissLife product. Also regarding risk etc. But in the end it is just an estimate how well the product might perform.

4
Hi,

A personal comment on Swiss life. We recently moved our 2nd pillar to Swiss Life (employer decision) and the fixed costs have increased a lot. They were not clearly mentioned in the prospect that was presented initially or at least I was not able to highlight them. So the capital that end up in the fund is by far less and it counterbalances the higher interests they promised. My personal view is that it was not a good move.

Pls be aware that if you are EU you can still withdraw the non compulsory part of your second pillar and all your third. Get a consultant from your own country to advise you. You might be surprised how different the points of views are. My personal opinion is that the 3rd party consultant that advices you is trying to sell you more products.

5
The chart assumes, roughly,

31 years runtime

5% net return for Swiss Life

4% net for Winterthur

3.5% net for finpension

and the mentioned 1.05% for Cler and 0.05% for UBS.

How that's supposed to make sense is anybody's guess.

Ask for the guaranteed final amount, and compare that to the final amounts from Cler and UBS, that's a fair comparison as both are deemed to be safe (guaranteed). Given the risk premium costs and the agent's cut, SL's guaranteed amount is probably 5-10% less than these two.

Also ask how much you'd get back if you wanted out after a few years, say in a) 2027 and b) 2030.

6
All financial products are targeted to meet certain needs of the Swiss public. As you are exiting the country, I doubt very much that any of the products suggested would be the best option for you and you'd be better served by seeking advice in your new host country.

7
Also: The tax deduction won't apply abroad as it's a different tax regime.

Plus, the insurance includes payment of the monthly pay-in (presumably for a limited time only) in the case of you losing the job. Does that apply to your job abroad, and how is that checked?

8
For everyone responding: thank you. But also keep in mind:

1) I am not expecting any tax deduction from 3a when going abroad

2) I cannot keep contributing to a 3a when abroad, that's why I have been considering 3b

3) I often change country and most countries require you pledging 10-15 years in the social system to be eligible to their pension, while Switzerland merely looks at your age ( true ...right? ). Since I have been told 3b after 10 years can be withdrawn tax free (and I would only pay tax in the country where I am at), that would mean that I am not bound to a specific country and I can be smart enough to plan my pension withdrawal where it is less taxed.

4) Yes, I could start a complementary pension in my next country, but who tells me how long will I be there?

5) The Swiss Life policy she suggested has a flexible pay in system: you put in every month what you want and you can adjust this amount. Rings any bell?

With that said:

She never said this is an insurance product. I suppose she is referring to an investment product from Swiss Life

Really? How can this be done? I do not see a finpension 3b product... so it would mean moving it to a different 3a provider first, which has also a 3b product..

Hmm but if Swiss Life has higher costs for the guaranteed amount, and therefore the amount is much less, it does not tell us their product performance is worse, but just that they have a worse guaranteed product, right?

What does this mean? Anyone in the world would want from a financial product a good return with lower risk. Having a 3b in Switzerland makes me think might be a good decision for all the points above, except taxation part.

I already know this answer: she said this product is only convenient if I plan to contribute to it for more than 10-15 years.

So I got another email with more info. Quoting the email here.

Suggestions? Questions I can ask to verify your thoughts?

In general, would you suggest me to keep the 3a as is in Switzerland, and then evaluate if after moving it makes sense to liquidate? I think I read it can be liquidated way after you left the country...

9

When leaving Switzerland (e.g. deregistering) you can alway withdraw your 3a and the non -obligatory part of the 2nd pillar.

https://myjourney.packimpex.ch/en/gu…utions%20there .

10
Pillar 3b is a very generic label. It has nothing to do with mandatory or tax-qualified retirement plans and any product can be sold as such.

From the individual perspective, any savings in any form, that are available at the time of retirement are part of your retirement planning.

Pillar 3b is any product that you can put your money, voluntarily into, and preserve this until retirement (or not). It has no criteria or requirements.

If you put your money in a savings account and let it sit there until retirement, it is also a 3b

Given that, you cannot deduct anything from taxes while paying in; any in-payments come from your already taxed income.

The value of the money in 3b is subject to the annual wealth tax (if you are a Swiss tax payer) and returns are subject to income tax/withholding tax when earned.

As all the money has already been taxed, there is no tax upon payout in CH.

Switzerland does not have capital gains tax for non-professional investors on financial investments.

The other aspect to consider though: Tax impact in the other country. Do they tax capital gains? Do they tax interest/dividends etc. Is there any risk of double taxation?

Note : One special sub-category is life insurance, which may have some tax benefits during the course of contributing to it; to a limited extent.

11

“Protection” == insurance.
Run like hell, but before you do, ask her how much commission does she get on you if you do and do not cancel within 1-2 years.
And search for experiences with these “great solutions” on e.g. https://forum.mustachianpost.com/t/3…t-of-here/4940

12

The lack of tax deduction is the issue. If you cash-in your 3a you will have to pay an exit tax. If you pay into pillar 3a while you are abroad, you will not get the tax deduction, but you still have to pay the exit tax (to some extend, depending on double tax agreement with the other country, see ESTV Rundschreiben 202 ).

But as you say:
However,

It looks like you do not fully understand the Swiss retirement system based on the three pillars: Please see here https://www.ahv-iv.ch/p/890.e
Pillar 1 is state pension, pillar 2 is your occupational benefit plan, and pillar 3 are your private savings toward retirement. They are all independent from each other and separate. Further pillar 3 is divided in pillar 3a and pillar 3b. Apparently you know what pillar 3a is. Now, as jjake has said (and I did as well before), pillar 3b are all your other savings towards retirement: bank accounts, stocks, funds, real estate, life insurances, etc. Doesn’t matter if in Switzerland or abroad. Now, none actively advertises bank account, stock deposits, or real estate explicitly as “pillar 3b”, but they still are, if it is for retirement. On the other hand, insurance companies actively advertise their non pillar 3a life insurance products as pillar 3b. But in the end, it just means a life insurance which is not pillar 3a and is actually nothing special. Therefore, if you read pillar 3b it usually means a life insurance of some form, but could be any savings or investments you make towards retirement.

If you understand what I have written above, you realize that this is technically also pillar 3b (or “pillar 3a” if income tax deductible).

So like a bank account, an ETF, your trading portfolio, but with the lack of flexibility to withdraw the funds? Rings a bell too? Do you see why they might want to do that? Answer: To lock you in.

She did, right here:

That would be an ETF of your choice you hold with SwissQuote, Interactive Brokers, yuh, or any other (low cost) trading platform or with your bank. Finpension is not in this business and focus itself on pillar 2 and pillar 3a products. Once again, anything you invest regarding your retirement is pillar 3b.

The interest and dividend of certain pillar 3b life insurances are free from Swiss income tax, but the pension at maturity will be taxed at a reduced rate. These type of insurances only make sense if you are a Swiss resident or if they are taxed similar in your country of residence. In the worst, the Swiss pillar 3b life insurance is not only subject to tax on dividends and interest in your new home country but also to capital gain tax, and on top of all that to Swiss payout tax on maturity. Also there is no inherently lower risk with a Swiss life insurance. Specially not with a Swiss based portfolio. as the risk are the underlying securities which consists of foreign and Swiss investments such as stock, bonds , funds, and real estate.

It doesn’t look like you really know that answer. Why does it need 10 - 15 years? This does not make really sense. Think about it: Take for example a simple bank account. Zero interest. You pay each year 6k into it. How much could you get back after say, 1, 2, 5, 7, 10, or 15 years? The calculation is simple right? Just multiply the annual amount with the number of years. Now get these numbers for your SwissLife product (really ask her for this calculation). They will look like this:
So, what the heck is happening here? Simple in the first two years half of your contribution will be used to for your agents commission. Gone. Lost. Not yours. That’s 6k plus all future interest down the drain. This is also one of the major points, why everybody and their grandma says to stay away from those pillar 3a and 3b products which combine life insurance with investments.

Once you are no longer a Swiss resident cash-in the pillar 3a. Then invest it in an good performing ETF, with a overall low fee, of your choice. In addition get separately (if actually needed) a pure life insurance covering disability, unemployment, death, etc. as needed. This can be a Swiss product which you might get before you move abroad. But as other have said, keep investment and life insurance separate. Also do not go via an “independent” broker, but get in contact with insurance company directly. Cut out the middle man/woman pocketing a high commission.

13
This is an important consideration: If you take the money out of 3a and put it in the proposed 3b, you will first need to pay the exit tax.

Depending on the Finpension plan, you could also leave the funds there and withdraw later.

Or, if you decide to withdraw, you can invest it in any way you want; no need to put it in a "formal" 3b offered by an advisor who receives a commission.