Swiss pensions have three parts. The first is a standard payment based on the number of years you have paid social security taxes (AVS / AHV). The second (2nd pillar) is based on a personal pot of money built up from compulsory salary deductions. And the third is a personal pot derived from optional tax deductible savings, known as a 3rd pillar.
All three are designed to come together to provide enough income in retirement. The problem is that a growing number of retirees are finding they don’t have enough. When this happens the government steps in and makes supplemental payments. From 2000 to 2015, the number receiving supplemental payments rose from 202,000 to 315,000, reaching 12.5% of all those receiving a pension, driving the cost of these extra payments from CHF 2.3 billion to CHF 4.8 billion.
A government survey shows that one third of those receiving supplemental payments took capital out of their 2nd pillar pension at the point of retirement. Many in government think that stopping these lump sum capital withdrawals will mean fewer will need a state funded top up.
Such a plan has been approved by the Federal Council (cabinet). And, according to a parliamentary press release, this week a majority of the States Council (upper house) voted in favour of the move – 31 in favour with 12 abstentions. The next step is for the National Council (lower house) to vote on it.
According to the newspaper Le Temps, the restrictions would not apply to all capital withdrawals. Only the part relating to compulsory contributions would be affected. Withdrawals to buy a home or when someone leaves the country would still be allowed. The States Council would like to see the rules around withdrawals for those setting up a business tightened however. Because most business ventures fail, a number of members want only withdrawals related to 2nd pillar contributions before the age of 50 to be permitted.