Tax saving tip 1: Payment into the 2nd pillar

19 November 2020

To the extent of the pension gap, voluntary payments can be made into the 2nd pillar, which can significantly reduce taxable income. You still have time until the end of the year!

You can usually see the extent to which this is possible on your pension statement. We recommend confirming the relevant amount by your pension fund provider before making any payments. At the same time, you can also request the correct payment details. We also recommend to clarify whether your pension fund offers a refund on the voluntary payments. A refund option would eliminate the risk of loss of purchases in the event of death before retirement. If you have other gaps (e.g. from divorce), it is important that the voluntary payments are made into the correct gap.

Since this payment is fully deductible from your taxable income, we recommend that you spread it at best over several years, in order to ensure progressive taxation and to make sure that your taxable income does not end up being too low in one year.

Usually, you will achieve the greatest tax savings with a payment between the age of 50 and 60. This is when the money is least likely to stay in your pocket for a long time. Bear in mind that a capital withdrawal is only possible three years after the last payment respectively that an earlier withdrawal would lead to unpleasant tax offset.

Capital can be withdrawn from the 2nd pillar in the following cases:

  • Reaching retirement age (depending on the pension fund already as of the age of 58)
  • Change to self-employment (not when using your own limited company or public limited company)
  • Buying or investing in your own home
  • When leaving Switzerland permanently - but not to a EU/EFTA state (partial withdrawal at most)

While a capital withdrawal is sometimes taxed very privileged depending on the canton, a pension is taxed normally. In addition to the tax burden, various other criteria have to be considered for the decision.

Lisa Piller will gladly help out for further questions:

+41 41 226 30 54
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Agira AG _ Pilatusstrasse 26 _ Postfach _ CH-6002 Luzern
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