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Step 4: How Can I Optimize My Pension Situation from a Taxation Perspective?

You want to maximize your potential for tax optimization. The best possible pension solution for your needs will help. We'll show you how.

Tax Optimization with Different Pension Solutions

Twice the benefits with your pension. All recognized forms of pension solutions for Pillars
1, 2 and 3 enjoy tax privileges. The following options enjoy particular tax benefits:

  • Extra-mandatory occupational benefits insurance (Pillar 2): Contributions to the pension fund's extra-mandatory occupational benefits insurance can be deducted from income tax to the extent permitted by law.
  • Purchase of additional Pillar 2 benefits:Employees can make one-off or repeated payments to purchase benefits for previous years with missing contributions or to safeguard higher pension benefits. If additional benefits are purchased, this sum can be deducted from your taxable income.
  • Payments into a Pillar 3 account: Up to the annual maximum amount, payments into a Pillar 3a account can be deducted from your taxable income. Your pension account
    3rd pillar is exempt from income tax, wealth tax and withholding tax for the entire duration.

Example

One-income family with two children, protestant, taxable income: CHF 120,000, resident Zürich, tax rate 2010.

Sample Calculation: taxable income
  • Vested benefits accounts and safekeeping accounts: Assets in or income on vested benefits accounts and safekeeping accounts are exempt from income tax, wealth tax and withholding tax for the entire duration.

Tax Burden on Payment of Pension Assets

  • Withdrawal of vested benefits: Lump-sum payments from the pension fund are declared separately from other income and are taxed at a reduced rate at federal, cantonal and communal level.
  • Pensions from Pillars 1 and 2, and Pillar 3b: Pension benefits are added to your income and as such are subject to income tax.
  • Tax optimization through the purchase of residential property: Indirect repayment brings other tax benefits: Your mortgage debt and the mortgage interest payments remain constant. As a result, your tax burden stays the same, and you benefit from higher tax deductions on mortgage interest. In addition, you can deduct your mortgage repayments from your taxable income.

Our pension advisors will be glad to show you how you can also enjoy the tax benefits a pension offers. Request a non-binding consultation .  

Step 5: How Can I Finance Early Retirement?  

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