Leaving Switzerland. What happens to old age and survivors' insurance, pension funds, and tied pension provision.
If you're moving away from Switzerland, you'll have a lot to think about. A key item on the list will be your retirement provision. Find out the rules that apply to old age and survivors' insurance, pension funds, and the tied pension provision if you're leaving Switzerland – and how to best proceed.
The consequences for retirement provision if you leave Switzerland
Workers in Switzerland pay into the mandatory retirement provision scheme. Contributions are automatically deducted from the worker's salary, whether the person resides permanently in Switzerland or works in Switzerland for only a few months or years. Many people pay voluntary retirement provision contributions on top. But what happens to the accrued capital if a person moves back to their native country or emigrates to another country? What are they entitled to? The following article outlines what funds you can take with you and how to go about getting them.
Receiving old age and survivors' insurance contributions if you leave the country
All employees in Switzerland have a joint obligation to pay old age and survivors' insurance contributions. These funds do not represent a personal source of retirement capital, but all employees who have paid at least one year of old age and survivors' insurance contributions are entitled to a retirement pension. In many circumstances, this entitlement is retained even if people leave Switzerland. On the other hand, they are not entitled to a refund of any past contributions they have paid into the old age and survivors' insurance scheme. This rule applies to all citizens of Switzerland, EU and EFTA countries, and countries with which Switzerland has concluded a social security agreement (PDF in German).
The circumstances are different for citizens of a country with which Switzerland has not concluded a relevant agreement. In this case, persons affected will lose their entitlement to an old-age pension the moment they leave Switzerland. Under certain conditions, however, they may be entitled to a refund without interest of past contributions they have paid into the old age and survivors' insurance scheme. On the other hand, any entitlement to supplementary old-age pension payments or to an allowance for people who are dependent on assistance, care, or maintenance is forfeited either way when a person leaves the country. These payments are available only for people living in Switzerland, regardless of nationality.
When a person reaches the age of entitlement for old-age pension payments, they must submit an application to the relevant compensation office. Employees can find out which office to contact through their employers. The local compensation office will pass the case file on to the Swiss Compensation Office.
Leaving Switzerland and receiving pension fund payouts
Employee benefits insurance savings represent personally accrued retirement capital. In principle, foreigners and also Swiss nationals can receive payouts from these pension funds if they leave Switzerland. However, a distinction is made between the mandatory portion and the extra-mandatory portion. People moving to an EU or EFTA country can usually receive only the extra-mandatory portion of the pension fund payout. Mandatory pension fund contributions, on the other hand, are paid into a vested benefits account. The balance on the vested benefits account becomes due when a person reaches the normal AHV retirement age and can be drawn no earlier than five years before this date. There are exceptions for financing owner-occupied residential properties or if a person becomes self-employed. By contrast, people who emigrate to a country outside the EU or EFTA can receive the entire pension fund savings if they leave Switzerland.
People who intend to leave Switzerland must inform their employer's pension fund or the vested benefits institution. It is important to provide proof that they are leaving Switzerland permanently by submitting a confirmation of departure. Only then can the pension fund or vested benefit credits be paid out. However, tax at source is due on the lump-sum payout. The amount varies greatly from one canton to another, with the taxation based on the canton in which the vested benefits foundation is located. However, Swiss tax at source can be claimed back within a period of three years if there is a double taxation agreement in place. For any Swiss tax at source that cannot be claimed back, persons affected should check whether this can be credited under local law in their new country of domicile.
What happens to the tied pension provision if you leave the country
The voluntary Pillar 3a retirement provision is usually paid out in the event that people leave Switzerland. A person's nationality and the country they are moving to do not play a role in the decision. As with the early payout of pension fund assets, Pillar 3a funds also require the pension fund to be notified of the person's plans to leave Switzerland permanently and proof must be submitted. Tax at source is also due on the lump-sum payout, but this can be claimed back under a double taxation agreement or may be credited in the new country of domicile.
Think about pension provision if you're planning to move away from Switzerland
The three-pillar Swiss pension system makes its provisions to ensure that pensioners have sufficient financial means at their disposal. However, if they choose to leave the country, they – like everyone else – are responsible for asserting their entitlements. That is why it is imperative to inform the pension funds about the move. Otherwise, they won't know where to pay the funds.
At the same time, it is also up to the people leaving Switzerland to make sure their retirement provision is sufficient. Moving away can leave gaps in pension provision that have to be offset with private means. That is why it is vital to be informed about the pension system and the options available in the future country of domicile so as to ensure that your finances are taken care of in old age.