It’s that time of year again. Don’t forget to maximise your tax relief for 2023
Christmas will soon be upon us which means we are approaching the end of 2023. With this in mind we have a limited time left to maximise our Swiss pensions in order to reduce our income tax liabilities and increase our future income. Additional contributions to both 2nd and 3rd pillar pensions will benefit from tax relief and this will be received next year.
It sounds rather simple but as there are so many options for a third pillar pension it can be a bit of a mine field. With your bank and life companies both offering very different solutions, which is right for you? Here is some guidance to help you understand the basic differences. Should you wish to speak with one of our trained advisors we will happily be able to help you decide which option is best suited to fit your personal circumstances.
Second Pillar Buy Back
Request a statement from your HR department and on this it will inform you how much you are entitled to buy back. This is normally a very significant sum and as a result many of our clients will make a partial contribution. Getting the balance right between locking capital away till retirement and benefitting from the tax relief is challenging and will be different for everyone. We recommend you repeat this process each year.
Benefits;
- Receive tax relief on your contributions
- Increase your future retirement income
- Benefit from growth (Most scheme’s are invested and benefit from additional returns)
- Contributions can also be used to aid the purchase of a primary residence (after 3 years of buy back)
Third Pillar A Contributions
You can contribute a maximum of 7,056.00 to your Third Pillar this year and contributions must be received by your bank or insurance company before the end of December. As we are approaching year end, we would recommend that you contribute the full amount in one payment for 2023. Then setup a monthly payment starting January for next year. You will notice 7,056.00 missing from your bank account but you will not miss 588.00 francs each month. This is a more disciplined approach and when combined with investing your contributions into a portfolio you will also reduce risk and maximise your returns.
Employed individuals can pay a maximum of CHF 7,056 into their 3rd pillar; those who are self-employed have a maximum of CHF 35,280.
Benefits;
- Receive tax relief on your contributions
- Increase your future retirement income
- Benefit from growth (Most scheme’s are invested and benefit from additional returns
- Increase your life cover
- Life insured amount can be pledged when purchasing your primary residence
Which provider should you use?
We recommend that you speak with your financial advisor before committing to any third pillar solution. However, if you are unsure how long you intend on staying in Switzerland we would suggest that you open your third pillar with your bank. This is the most flexible option as you will not be contracted to contribute each year and will not be penalised should you decide to stop payments.
Third Pillar B Contributions
This is simply an additional account where you can continue to save for retirement. However, unless you live in Geneva or Fribourg, there are not any additional tax benefits. There are no restrictions to this account and you can contribute as much or as little as you like.
Benefits;
- Limited tax relief on your contributions (Geneva and Fribourg residents only)
- Increase your future retirement income
- Benefit from growth (Most scheme’s are invested and benefit from additional returns
What To Do Next
If you are unsure you have maximised your entitlements or confused to which providers to use, then speak with one of our advisors who will be happy to guide you. Simply complete the form below and we will contact you in due course.
