Lump-sum payment – in these cantons, you save the most taxes when withdrawing your retirement benefit – 3rd pillar guide
Save 34 percent in taxes, that quickly sounds too good to be true. It will be possible from next year. At least in the canton of Zurich and when withdrawing pension funds. By far the most populous canton in Switzerland will lower its capital payout taxes on January 1, 2022.
With a withdrawal of 500,000 francs, a married person will pay just 32,212 francs from next January instead of the previous 41,410 francs. The difference is 22 percent. If someone draws one million francs, the savings amount to 34 percent, as current figures from the consulting firm Vermögenspartner show.
Tax savings for married people in the canton of Zurich
Basis: Non-denominational, place of residence in the city of Zurich / All data: Vermögenspartner AG.
A single person also saves 34 percent, and then already from 500,000 francs withdrawn capital. As Vermögenspartner notes, the tax reduction is noticeable for single people from around CHF 200,000, and for married people from CHF 500,000.
Tax savings for single people in the canton of Zurich
Basis: Non-denominational, place of residence in the city of Zurich.
The tax savings in pension provision are easy to explain: In Pillar 3a, the payment – a maximum of 6,883 francs for people living in Switzerland with a pension fund – can be stated in the tax return. Depending on the canton, you can save between 1000 and 2300 francs in taxes a year. A capital payout tax is due upon withdrawal.
The disbursement of the 3a funds has a preferential tax rate, so the actual savings with 3a savings are that. This applies to pillar 3a savings accounts as well as pillar 3a plans with securities savings. It works in a similar way in the pension fund.
Withdrawal of money saves taxes
One should avoid high salaries in one year. A common method is to start early on with multiple pillar 3a accounts. This can then be obtained. It is recommended not to fill a 3a account with more than 50,000 to 100,000 francs, depending on the canton and tax progression. Several accounts can be kept without any problems and the maximum annual amount can be distributed over several accounts.
In pillar 3a, you can invest between CHF 300,000 and CHF 350,000 over a period of 45 years – i.e. roughly the time you work. It depends on the savings, but also on the interest. If the 3a funds are invested in securities, the amount can of course be even higher, depending on financial market returns.
500,000 francs payout is realistic
However: A withdrawal of 500,000 francs as in the above examples is not unrealistic. For many Swiss residents, pension fund assets are the largest asset. “In connection with early retirement and a lump-sum withdrawal from the pension fund, funds withdrawn can quickly turn out to be that high in a tax year,” says Florian Schubiger, pension specialist at Vermögenspartner.
Even those who have vested benefits paid out quickly get high amounts drawn. The pension fund money of people who die before retirement age is no longer employed is stored in vested benefits accounts.
The canton of Zurich is creating a better place for itself in terms of the attractiveness of the cantons by lowering capital payment taxes. However, it is still not one of the most tax-efficient cantons. According to Schubiger’s calculations, Zurich has moved from 21st to 8th place for married people due to the tax cut – always with a withdrawal of 500,000 francs, age 65 and place of residence in the city of Zurich. For single people, Zurich moves up from 24th place to 11th place.
Taxes in 2022 with a lump-sum withdrawal of CHF 500,000, according to canton capital
Canton | location | Married | Canton | location | Alone- standing |
GR | Chur | 24,412 | AI | Appenzell | 26,432 |
AI | Appenzell | 26,112 | NW | Stans | 28,198 |
NW | Stans | 27,878 | UR | Altdorf | 29’157 |
UR | Altdorf | 28,837 | GR | Chur | 29’432 |
TI | Bellinzona | 29,312 | ZG | train | 29,734 |
ZG | train | 29,615 | NS | Schaffhausen | 29,937 |
NS | Schaffhausen | 29,617 | BL | Liestal | 33,732 |
ZH | Zurich | 32,212 | GL | Glarus | 33,732 |
BL | Liestal | 33,412 | OW | Sarnen | 36’228 |
GL | Glarus | 33,412 | TI | Bellinzona | 36,604 |
size | Schwyz | 34,429 | ZH | Zurich | 37,088 |
GE | Geneva | 35,873 | SO | Solothurn | 38,326 |
OW | Sarnen | 35,908 | SG | St. Gallen | 15,510 |
SG | St. Gallen | 35,912 | GE | Geneva | 39,389 |
TG | Frauenfeld | 36,412 | LU | Lucerne | 41,700 |
SO | Solothurn | 37,537 | AG | Aarau | 41,707 |
BE | Bern | 38,404 | TG | Frauenfeld | 41,952 |
AG | Aarau | 38,499 | BE | Bern | 42,243 |
JU | Delémont | 39,660 | NE | Neuchâtel | 42,928 |
AR | Herisau | 39,912 | size | Schwyz | 46,288 |
LU | Lucerne | 40,560 | VS | Manners | 46,291 |
NE | Neuchâtel | 42,137 | BS | Basel | 47,382 |
VS | Manners | 45’258 | JU | Delémont | 48’461 |
BS | Basel | 47,062 | AR | Herisau | 50,099 |
NS | Freiburg | 55,852 | NS | Freiburg | 56,712 |
VD | Lausanne | 57,196 | VD | Lausanne | 63,490 |
Basis: Non-denominational, age 65 / data: Vermögenspartner AG.
For residents of the canton of Zurich who are close to retirement age, however, it is worth considering waiting until next year to withdraw pension funds. This is especially true if at least a mid six-digit amount is to be paid out.
On the one hand, this affects those who are planning early retirement and want to have their pension fund capital paid out. In any case, men are flexible with Pillar 3a funds: women can draw it from the age of 59, men from the age of 60 up to the regular retirement age. Those who continue to work beyond retirement age can only partially, theoretically, wait until the age of 69 or 70.
The center of life is important
It is even more worthwhile – at least in theory – to change cantons. In Chur or Appenzell you would pay a third less tax on 500,000 francs than in Zurich, and more than half less than in Friborg or Lausanne. Changing cantons upon retirement is not unreasonable: at the beginning of a new phase of life, changing everyday surroundings is an obvious choice. The proximity to a place of work no longer plays a role.
However, one must be aware of two limitations with such a request. On the one hand, real estate prices are often high in those parts of Switzerland where taxes are low: Zug and Schwyz are typical examples. On the other hand: his second home z. B. you cannot simply state your main residence.
Really “live” and thus pay taxes in the place where the center of life is. And this is not (only) meant philosophically. The center of life is the place where you spend a large part of the time, go shopping, take part in social life and – yes, considerably – also consume the most electricity or water.
This cash article first appeared on May 14, 2021.