Originally Posted by
illargi
Accessing your Swiss Pension before Retirement - While in Switzerland
Another nice thing about Swiss pensions versus the UK pension is that the money is not “untouchable” until you retire. It is possible to access the funds directly by withdrawing the money for certain permitted uses, including buying or renovating you main home and starting up a business. If you do this you will pay a withholding tax on the amount extracted and will have to pay the withdrawal back into the pot before you can make further additional contributions.
Unfortunately you cant buy a home abroad with the pot, although there may be work-arounds if you have a word with a friendly bank manager.
It is also possible to access the funds indirectly by using them as security (via a pledge) against your mortgage loan, and this is generally much more tax efficient than direct use since there is no withholding tax and the capital will continue to grow tax free. Some lenders will even allow the deposit to be paid indirectly.
Accessing your Swiss Pension before Retirement - On leaving Switzerland
If you leave Switzerland permanently for a non EU country you can be paid your whole pension pot minus a relatively modest withholding tax which varies depending on your canton of residence but is almost always much lower than the tax you would have paid on the income had it not been paid into your pension pot.
If you leave Switzerland for an EU country then the same goes for the over-obligatory contributions ie you can have them paid out. However, the obligatory contributions must stay in a vested benefits account until you reach retirement age. In theory it is possible to have the amount transferred to another EU pension, however the law is not very well drafted (specifically the Pensions law only allows transfers to Swiss and Liechenstein funds, but the law that enacts the bilateral agreement with the EU allows free movement!) and as at the time of writing I am not aware that anyone has managed to do this in practise.
If you plan to leave your pension pot untouched for a while once you leave Switzerland and you live in a cheap tax commune/canton you should consider carefully where to place it. Once you leave Switzerland you will be taxed based on where the vested benefit account is located, in the case of UBS and the Cantonal Banks, this is the not so cheap Basel. Again read thread Freizuegigkeitskonto [vested benefit account]
Cross border issues
I will only add a few point on cross-border issues.
All EU/EEA/Swiss countries have totalisation arrangements and all or most of them have totalisation arrangements with the USA and some (not Britain) with Canada. (Britain's with Canada & Québec is for the avoidance of double contributions only.) In what follows, only Canada (Old Age Security) and the USA (Windfall Elimination Provision) and Britain (refusal of COLA to retirees residing in a country without a totalisation agreement) have rules which deny full benefits to certain, or many, expats. That notwithtanding, for those who are eligible to do so and who are middle income or less, it usually pays to make voluntary contributions (voluntary AVS, in principle no longer allowed for residents of an EU/EEA country; voluntary class 3 NICs; for the USA one would have to contrive self-employment income sufficient for 4 "quarters of coverage" (4 x $1,090 in 2009). It is worthwhile doing what you have to, paying US "Self Employment Tax" (15.3% on that $4,360 to get ten years' worth of credits) if you are eligible to do so (by reason of citizenship, green card, work permit, etc.) resident or not, so as to qualify for minimum Social Security pension (despite the WEP which reduces benefits for those who also get a foreign pension unless they have 30 years of "substantial earnings" -- i.e. reducing benefits from 90% of income to 30%. Why? Because you also get free and gratis at age 65 Medicare Part A hospital insurance. And you never know: you might be visiting the USA in retirement when you fall ill.
In general if you have ten years' of credits in a single country you get a pension directly from that country without totalisation (consolidation with another treaty partner's pension). That is usually better than the alternative, and if you have contributions to two countries in a single year the duplicate contribution is otherwise lost (in every case I've looked at).
Some countries forgive contributions once you reach retirement age. The Canadian Pension Plan and the UK plan do; but the Québec and USA plans do not. You can use that to your advantage if you are highly paid, contriving to be paid in a jurisdiction that charges no tax but your being "subject to tax" nonetheless means you don't have to pay anywhere else either.
You can also contrive to benefit under various tax treaties which, while usually allowing only the country of residence to tax pensions, sometimes provides otherwise. (It is UK policy always to tax its civil service and military pensions, and other countries tend to go along with that and so a UK state retiree in the USA will pay UK tax on his UK pension and US tax on everything else, throwing him into the lowest tax bracket in each. (But watch out: US states are not bound by federal tax treaties so there may be state income tax.) This may work as between the UK and Switzerland as well; I haven't looked yet.
It is possible to transfer pensions, Canadian REERs, UK personal pensions, etc. abroad under some circumstances. I almost never advise it. Several reasons, not the least following from the fact that I spent several years as a bankruptcy lawyer. In this economy one never knows, and both state pensions and many (not all) private pensions are unreachable by creditors at least in the country where it is based. I had a number of cross-border bankruptcy cases where the US bankruptcy trustee did not attempt to reach a foreign pension that he might have done. He could not reach an ERISA pension in the USA, but would a foreign pension, transferred to the USA, qualify? If not he could have seized it.
I am retired now and get (admittedly trivial) state pension from four countries including Switzerland. I get an inflation-proofed government service pension that it would have been folly to compromise. Yet I know of cases, in the USA and in the UK, of some who have done so. In the latter case (UK), nasty, greedy, stupid commission salespersons convinced nurses and other civil servants to opt out of inflation-proof civil service pensions in favour of their proprietary ones. Their customers are poor, many of the pension providers are essentially insolvent and judgment proof.
There is little advice to be had that is worth having, except by paying for it. And even then the advice is mixed. Expats are really on their own. The only advice I can give is to be cynical. And assume that, whatever they say, countries currently faced with negative equity (mortgages, etc.) will inflate their way out of the problem rather than continue with unpopular bailouts. And their cost-of-living indexes will be manipulated as they have always been. Still, any asset that you can get (a state pension, etc.) that rises with inflation is something to hold on to.
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Taking money out of Pension Fund
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