Unlike the Pillar 1 (for most people) and Pillar 2 pension schemes, the Pillar 3 pension is the only scheme in which you can continue to contribute to when you leave the country. Although, this opportunity is only available via Insurance 3rd Pillars. If you have a banking 3rd pillar you will not be able to continue contributing once you leave the country.
This is an important aspect to consider for many people. The Pillar 3 provides excellent beneﬁts, normally including strong growth in a hard currency and life insurance protection. For many, it makes a lot of sense to continue contributing into their Pillar 3 accounts when they leave the country.
When you leave Switzerland, if you hold a Pillar 3A account, all future contributions will be treated as if the account was a 3B. That is, contributions are no longer tax deductible (you are not a Swiss tax resident), but all beneﬁts are paid free of any Swiss withholding tax. If you hold a 3B account it will continue as normal. The only beneﬁt that will be lost when you leave the country is any disability cover included in the account. Normally, all life insurance protection remains unaltered, but it is best to check this with your ﬁnancial advisor or the scheme itself.
Practically, when you leave the country you are able to open a speciﬁc premium deposit account, from which you can fund your Pillar 3 account in the future. The deposit account itself can be funded before and after you leave the country, either on a regular or ad hoc basis. This means that you do not need to keep your Swiss bank account open when you leave, which may result in higher non-resident fees.
Normally, whilst resident in Switzerland, you are able to withdraw funds from Pillar 3 accounts;
- At retirement
- For property purchase
- When starting a business
- If you become self-employed
As per the Pillar 2, if receiving beneﬁts from a Pillar 3 account when resident in Switzerland, the tax will be charged at the prevailing rate of the canton that you live in.
If you leave Switzerland, it doesn’t matter which country you may move to, you have the ability to withdraw funds from your Pillar 3 accounts. It is important, however, to ﬁrst consider whether a withdrawal of beneﬁts is in your best interest. Insurance 3rd pillars, for example, will normally have lower surrender values than the investment values shown if withdrawn early. You would also be giving up additional beneﬁts, such as life insurance and the ability to continue contributing to the scheme from abroad.
When you do come to withdraw Pillar 3 funds from abroad, Switzerland will charge a withholding tax at a rate dependant on the canton that the Pillar 3 scheme is registered. Again, it may be possible to move Pillar 3 funds to a lower taxed canton before withdrawal. Double Taxation Agreements (DTA’s) would also apply so that if you pay tax on this withdrawal in your new country of residence you may reclaim the Swiss tax via this DTA. Again, we would always urge that you speak to your ﬁnancial advisor to receive tailored advice relative to your circumstances.