3rd pillar Reform

[MilesB]

Hello all,

I wanted to discuss the news about the federal council discussing the possibility of removing the tax benefits for the 3rd pillar (raising taxes at withdrawal, making it dependent on your income)

(https://www.tagesanzeiger.ch/altersvorsorge-keller-sutters-angriff-auf-den-mittelstand-851869694654)

Regardless if this would pass though or not, the mere discussion about such a drastic change equates to a huge breach of trust, for millions of people that rely on the system to keep its word. Personally, this adds a new level of complexity about risk-reward of the 3rd pillar versus self managing and investing the money my yourself (I have not started to invest in the 3rd pillar yet, and am only at the beginning of my investing / FIRE journey). This would ensure that I have control of my money, and won’t stay at the mercy of the various changes that could occur to the system in the next 30-40 years. On the other hand if nothing comes to pass, the risk of losing out on the withdrawal tax advantages as well as the opportunity to reinvest the year on year tax savings is a big price for more control and freedom.

What is the community’s opinion regarding this subject?

Thank you.

 

[Baptiste Wicht]

Hi Miles

I agree with the breach of trust. We have been investing for years (and decades for many) into the third pillar, with the belief that we would get a preferential tax treatment. So, if this preferential tax treatment goes away, they have breached their promises.

Even if they slightly touch the withdrawal taxes, I think it will dramatically reduce the trust in the 3a system. I hope this is blocked.

There is one thing that is important about this reform: it only concerns the federal taxes. If only federal taxes will go up, it is not too bad. The worst would be if cantons are following then the same rule. And then we are screwed.

Also, they may not remove all tax advantages, but simply reduce them.

In the worst case, if 3a withdrawal are treated as income and cantons follow the same rule, it will be the end of 3a because it will be worse than free assets. I do not think the federal government can do that.

 

[Max]

There is a comment from expert Iwan Brot on LinkedIn (in German):

Taxation of pension assets - media reports

In the last few days I have read a lot of outraged articles about the announcement of the adjusted taxation of pension assets. In some cases, I even had the impression that this had already happened, preferably with retroactive effect ;-).

As I have often been asked for my opinion in the last few days, I would like to share it here and perhaps provide some reassurance and relief.

The one-off taxation of pension assets is calculated in accordance with Art. 38 DBG.

https://lnkd.in/eU7NbGvv

A parliamentary resolution is required for the adjustment. From today's perspective, I cannot imagine that parliament will approve an amendment to the law that would place an excessive burden on citizens when pension assets are paid out - even in comparison to current taxation.

Even if Parliament approves the amendment, there is still the possibility of a referendum. I would be surprised if no party, institution or even private individual were to take this step.

I am therefore very relaxed about this issue at the moment, but remain vigilant.

Translated with DeepL.com (free version)

PS @Baptiste does this topic rather refer to Investing or Switzerland?

 

[Baptiste Wicht]

Thanks for sharing, @Max . I also think that the likelihood of this passing is very low. However, the simple fact that this is being considered is sad.

I have moved the topic to Switzerland, since it's very specific. But the 3a is also about investing, so it's always a little in the middle.

 

[OxygeN]

Klarstellung

In verschiedenen Medien wurde über Erwägungen des Bundesrats, die Besteuerung von Kapitalbezügen aus den Säulen 2 und 3a an die Besteuerung von Rentenbezügen anzugleichen, berichtet. Dabei wurden zum Teil auch Annahmen getroffen, wie stark die steuerliche Mehrbelastung im Einzelfall ausfallen...

www.efd.admin.ch

Reading the above, it looks like the tax advantages won't be touched. But what might change is the taxation for people who choose to be paid out from the 2nd pillar vs the others who decide to get a monthly pension. Or am I reading it wrong?!

 

[Baptiste Wicht]

The way I read is that they say that you can still deduct the contribution from your taxes, which is apparently something people have been saying wrong. However, currently, you get a reduced tax rate when you get the money out and this clarification documentation does not claim the contrary. So, what will change is when withdrawing a lump sum from the 2nd and 3rd pillar.

However, if they remove the reduced tax tax rate at withdrawal, it becomes pointless because you save on one end but you are fully taxed (on even more money) on the other end. It would still defeat the entire purpose of voluntary contributions to the second and third pillars.

And the document also says that nothing is set in stone. So, we have to wait and see

 

[OxygeN]

The way I read is that they say that you can still deduct the contribution from your taxes, which is apparently something people have been saying wrong. However, currently, you get a reduced tax rate when you get the money out and this clarification documentation does not claim the contrary. So, what will change is when withdrawing a lump sum from the 2nd and 3rd pillar.

This is what I understand as well from that text. It's not about the immediate tax benefit (which will most probably remain), but it's more pointing towards taxation at withdrawal.

However, if they remove the reduced tax tax rate at withdrawal, it becomes pointless because you save on one end but you are fully taxed (on even more money) on the other end. It would still defeat the entire purpose of voluntary contributions to the second and third pillars.

This, if and when the decision will be final, has to be put into a calculator so that everybody can see how much he/she will be taxed at withdrawal and if it is still ok to contribute voluntarily to 3A. At some point, it is eventually better to just use 3B (where the private pension plan is unrestricted).

And the document also says that nothing is set in stone. So, we have to wait and see

THIS!