Swiss pension savings distribution

When someone leaves Switzerland, the question what to do with the Swiss pension savings very often comes up. This article covers the possibilities and options an individual has in this regard from a Swiss perspective. It is strongly recommended seeking individual tax advice in Switzerland as well as in the new country of residence well in advance of the planned move, as the consequences may vary depending on the countries involved.

First Pillar – AHV/OASI contributions

Conditions to apply for a reimbursement of the Swiss 1st pillar contributions

A person may apply for a partial reimbursement of the AHV/OASI (1st pillar) contributions when the person is leaving Switzerland permanently and is moving to a country which has not signed a bilateral social security agreement with Switzerland.

To be eligible for the reimbursement, the following conditions need to be met:

1. The person must have paid contributions for at least one year.
2. The person and family (i.e. spouse/registered partner and children under 25) must have left Switzerland permanently or are intending to do so.
3. In case the person has adult children under 25, who remain in Switzerland, they must have completed their education, i.e. be financially independent.

When can the application be filed and what is the process/consequences

The application for reimbursement of the OASI contributions may be submitted before leaving Switzerland, but only after obtaining the certificate of departure/deregistration from the community. The reimbursement will be made once the person has physically moved abroad and the application has been processed by the Swiss Compensation Office in Geneva. The latter is done by checking that the information, which the person has provided is correct and meets the requirements for the reimbursement. Once the authorities have calculated the amount to be reimbursed, the person will receive a letter stating the amount of reimbursement and when the amount will be transferred into the bank account which was indicated in the application. It should be noted that the 1st pillar contributions are only partly reimbursed as the contributions covering the insurance part will not be refunded.

The application for the 1st pillar contributions reimbursement must be submitted no later than five years after the departure from Switzerland. Otherwise the entitlement is lost. Once the 1st pillar contributions have been reimbursed, the person is no longer entitled to receive a Swiss state pension upon retirement.  

Second pillar – Occupational pension schemes

Conditions to apply for the distribution of the Swiss 2nd pillar savings

A person may apply for the distribution (pay-out) of the 2nd pillar savings when the person is leaving Switzerland permanently, regardless whether a bilateral social security agreement is in place or not.

For persons moving to another EU/EFTA country, the ‘mandatory’ portion of their 2nd pillar pension savings must remain in Switzerland on a vested benefits account (Freizügigkeitskonto/compte de libre passage) until their retirement or subsequent move to a country outside the EU/EFTA region. The ‘non-mandatory’ portion of the 2nd pillar savings may be claimed for pay-out at the time of leaving Switzerland.

When can the application be filed and what is the process/consequences

The application for the distribution of the 2nd pillar savings may be submitted before leaving Switzerland, but only after obtaining the certificate of departure from the community. The distribution of the eligible portion of the 2nd pillar pension savings, after deduction of the Swiss withholding tax (at beneficial rate applicable for capital lump-sum pension distributions), will typically happen within a couple of months after the application has been filed and once the person already may have become tax resident in the new country. In such case, the distribution may also become taxable in the new country of residence. Hence, advice and tax planning should preferably happen before the move takes place.

Third pillar – Private pension schemes

Conditions to apply for the distribution of the pillar 3a pension savings

A person may apply for the distribution of the pillar 3a savings when they are leaving Switzerland permanently. This can be done in any case, irrespective of destination or new country of residence.

When can the application be filed and what is the process/consequences

The application for the distribution of the pillar 3a savings may be submitted to the relevant bank or insurance company before leaving Switzerland, but after obtaining the certificate of departure from the community. The reimbursement of pillar 3a saving funds, after deduction of the Swiss withholding tax on lump-sum pension distributions, will typically happen within a couple of months after the application has been filed and once the person already may have become tax resident in the new country. In such case, the distribution may also become taxable in the new country of residence.

Hence, it is recommended that proper advice and tax planning preferably happens before the move takes place and the person becomes tax resident in a new country.

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