5 tips for buying into a pension fund in Switzerland

Does the paid-in amount have a positive impact on your pension fund benefits? The important thing here is that your savings objectives and risk considerations should not be undermined by the selected benefits solution.

What happens to the voluntary pension fund buy-ins if you die or need to claim insurance benefits as a result of, for example, invalidity? Does your pension fund take the additional amounts into consideration or does it pay benefits only on the basis of the insured salary?

How is your level of pension fund coverage? If it is well below 100 percent, remedial action may be necessary. The costs for this are paid mainly by insured persons who are in employment—for them, either the conversion rate, for example, or interest, or both, can be reduced.

Voluntary purchases into the pension fund can represent a profitable investment. First and foremost are the tax benefits. But, there are big differences depending on your canton of residence. In order to account for cantonal regulation, it is, for example, worth setting up an individual purchase plan in order to stagger paying in (see tip 5).

Either way, it is important to calculate after-tax returns beforehand, together with an expert.

Anyone who makes voluntary payments into the second pillar, only gets unlimited access to the money they have paid in after three years, at the earliest. Otherwise, taxes which were saved would have to be repaid. This becomes relevant, for example, if you want to use pension fund capital for buying a house. There are exceptions to this rule, but these have to be reviewed individually.

This is particularly important for anyone with greater financial scope: It does not always make sense to pay in the maximum amount all at once. Depending on the canton, it may make more sense to pay in stages. So you can further optimize the tax benefits. In this case, an individual purchase plan is a tried-and-tested aid.

The pension fund is a popular linchpin for financing the dream of one’s own home. But many are unaware of the fact that an advance withdrawal of pension funds must be fully repaid before voluntary purchases in the second pillar can once again be deducted from taxable income.

Pledges are not affected.

Did you know: As soon as you repay the advance withdrawal for buying real estate, the capital withdrawal tax that you must pay upon your withdrawal, is repaid to you. However, take care to plan-in the legal deadlines which must be observed.

You have moved here from abroad and have never been associated with a Swiss pension fund? In that case, your annual buy-in in the first five years may not exceed 20 percent of the insured salary.

Divorces often lead to partners having to split their pension fund assets or pay one another off. That impacts later purchases in the pension fund.

Before normal purchases can be made, any gaps must first be “filled”. 

One interesting difference to normal pension fund purchases is the statutory waiting period: Normally, you must wait three years after a buy-in before you may withdraw your pension benefits as capital. Otherwise, you lose the tax benefits retroactively.

Buying into divorce gaps are excluded from this waiting period.

Anyone who buys into the pension fund benefits from tax privileges and may, under certain circumstances, stop the progressive tax increases. That also applies to purchases that finance your early retirement.

Have you already exhausted your purchasing ­potential for normal retirement at 64 or 65? Further purchases are still possible if you are preparing early retirement via your buy-ins.

Important: Retirement must then occur at the planned age, otherwise, in the worst case scenario, you risk a reduction in benefits. Get in touch with your pension fund or your financial consultant to clarify the details.