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Swiss gov't to keep lump sum pension tax advantages

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  • Swiss gov't to keep lump sum pension tax advantages

SWITZERLAND - People who choose to take lump sum payouts at retirement get tax advantages under the Swiss mandatory second pillar compared with those who choose regular pension payments. And it is going to stay this way, according to the government.

A government report (in German) into the tax treatment of second pillar contributions and payouts has found "lump sum payouts get more tax advantages in all cantons".

The report - compiled after a general parliamentary enquiry into second pillar tax issues  - also argued these lump sum payouts "can endanger the retirement provision goal" as people are more likely to spend it on something other than as a pension.

Furthermore, market and inflation risks are being transferred to the individual which could eventually lead to the state having to support these people, the report added.

But there are no plans to change the tax treatment, a government spokesman told IPE.

"The Swiss government wants the people to develop a certain responsibility and for some people a one-off payment might be the better solution than a lifelong pension," said Markus Küpfer from the Swiss tax administration.

In the report, officials also argued some people might be using Pensionskassen as a tax evasion vehicle rather than a retirement plan, given the tax advantages.

However, Küpfer explained people who "buy into" a Pensionskasse shortly before retirement are then not allowed to take out any money for three years.

The tax experts sees no need for a change as this is considered to be "long-lived praxis" and "widely accepted" among the population and poltiical parties.

Market participants also noted that a lump sum payment can help other financial institutions which sell pensioners' investment and insurance products.

According to the report, the number of lump sum payouts has been increasing steadily since 2005 as the conversion rate had been continuously lowered since then.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

 

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