Pillar 3a when leaving Switzerland

If you are definitely leaving Switzerland or have already left Switzerland, you can have your Pillar 3a paid out.

But you don’t have to. You can continue to leave the money in the Swiss pillar 3a and thus benefit from the tax exemption of the income year after year.

From the time of emigration, you can withdraw the 3a credit balance at any time, even if you have waived it for the time being. You must withdraw it at the latest when you reach the normal AHV retirement age.

Different taxation before or after moving abroad

If you are still resident in Switzerland at the time of the advance withdrawal* and have not yet deregistered, you will pay tax at your place of residence in Switzerland (capital gains tax).

Have you moved away and already deregistered? Then a different system applies. The tax is then levied at source. The pension fund deducts the tax directly from your pension assets. You only receive the net amount paid out. In this case, the amount of tax depends not on your (former) place of residence, but on the location of the pension fund. The canton of Schwyz charges the least withholding tax in Switzerland, which is why some pension funds have their domicile in the canton of Schwyz.

It may be worth moving abroad first and deregistering in Switzerland before making the capital withdrawal. The withholding tax at the pension fund’s domicile is often lower than the capital withdrawal tax at the client’s place of residence. In addition, the withholding tax may be reclaimed or credited under certain circumstances.

How can you benefit from the low withholding tax?

Are you considering temporarily transferring your pension assets to a pension foundation in Schwyz in order to benefit from the low withholding tax? As it is a time-consuming and risky process, most providers do not actively advertise this service (payout with residence abroad). finpension also offers this service primarily for existing customers and charges significantly higher fees if the foundation is used purely to process the payout. But there are also other providers. Liberty Vorsorge, for example. It offers a special emigration service in order to benefit from the low withholding tax in the canton of Schwyz when drawing pension benefits while living abroad.

Clarify possible tax consequences abroad

Before you deregister in Switzerland to benefit from low withholding tax at the foundation’s domicile, you should, however, have the tax consequences of the withdrawal at your new place of residence abroad clarified by a tax advisor. There are countries in which such withdrawals of assets from the Swiss pension system are regarded as income and are therefore taxed at a very high rate. If this is the case, it may be better to withdraw the pension assets before you move abroad and pay tax on them as normal at your place of residence in Switzerland.

*A withdrawal before moving abroad is possible, for example, in the context of retirement (+/- 5 years to the ordinary retirement age). In this period, you have the choice over the tax system by coordinating the withdrawal date with the change of residence (before or after the departure). If one is younger than 59/60 years, the departure must of course have taken place first, before a withdrawal can take place with the justification of the definitive leaving of Switzerland. In this case, therefore, you cannot influence the type of taxation and you pay the withholding tax at the place of the foundation.

Pension fund can be drawn only conditionally

In the 2nd pillar, things look a little different. You cannot withdraw the entire credit balance without further ado. It is always possible to withdraw the extra-mandatory part. You can only withdraw the mandatory part if you

either move to a country outside the EU/EFTA or
if you move to the EU/EFTA but are no longer subject to mandatory insurance for the risk of old age, death and disability.

Another option for withdrawing the mandatory pension is a WEF advance withdrawal. People who become self-employed can also draw the mandatory PF.

If none of these cases apply or if you do not wish to withdraw at all, you must transfer the assets to a vested benefits institution. There, both the mandatory and the extra-mandatory can be left until you reach the regular AHV retirement age. Up to five years before or after the regular AHV retirement age, the money can finally be withdrawn.

Anyone who waives a withdrawal at the time of leaving the PF, although they could have withdrawn the money, is not bound until retirement. These persons can withdraw the money they had transferred to a vested benefits institution at any time (provided the conditions for withdrawal are still met).

It is not possible to transfer the pension fund assets to the new pension fund in the new country of residence.

Entitlement to AHV pension may remain

You do not save any personal retirement capital with your AHV contributions. Nevertheless, the entitlement to an AHV pension remains if you:

have paid AHV contributions for at least one year and
emigrates to an EU/EFTA country or to a country with which Switzerland has concluded a social security agreement.

If you emigrate to another country, you forfeit your entitlement to an AHV pension. However, it may be possible to have the AHV contributions paid refunded.

Any claim to an AHV pension must be registered with the compensation office itself.

Pillar 3a when leaving Switzerland