Are you thinking of changing career paths or taking a temporary break? Are you wondering how to maintain your standard of living while preserving your savings?
Career transition is an important stage in life that can be emotionally difficult. We don't always think about the financial consequences other than the loss of income. Your pension fund, for example, is a subject that should be considered.
A career transition is also an opportunity to take stock of your overall financial situation and take the opportunity to optimise it. So, what should you be looking out for?
Before the end of the contract
Before your employment contract ends, there are several things you should bear in mind to ensure that your assets are not lost. First, we recommend opening a vested benefits account to hold your pension fund assets, whether you are planning to return to work, start a self-employed business, retire early, or even move abroad. Each situation is unique, and a strategy tailored to your profile and objectives must be implemented. If a severance package is planned, it's also important to anticipate the tax impact, particularly by considering buying back years.
Depending on the person's age, when this allowance is paid, part of it may be regarded as a provident provision and, therefore, not subject to income tax. You should discuss this with your employer.
When you leave a company, you continue to be covered by accident insurance for 31 days. You can request continued coverage for 6 months by paying the premiums.
After the end of the contract
Continued membership of the former pension fund
If you have reached the age of 58 when you are made redundant, you have the right to request continued membership in your employer's fund. To do so, you must at least pay the contributions linked to the risk (employee and employer share) and cover the administrative costs. You can continue to contribute to the savings component if you wish. This allows you to keep the option of making purchases and choosing a pension at retirement age, which is not possible with a vested benefits account. What's more, these contributions are tax-deductible. So that you know, you have 3 months after the end of your employment relationship to make your request.
Free passage
Once your contract has ended, it is essential to respect the deadline for transferring your 2nd pillar assets to your vested benefits account, usually 6 months. It is also important to opt for splitting your assets, which will give you more room for manoeuvre if you return to work as an employee. You can transfer your assets to the new fund, but sometimes, certain factors mean that only some of your assets will be transferred. If you take advantage of this stage to become self-employed, you can withdraw these funds to start your business. The option of two vested benefits accounts means you don't necessarily have to withdraw everything, opting to pay into a single account instead.
Unemployment
If you become unemployed, you will be covered for death and invalidity but will no longer contribute to the savings component, creating potential gaps. You do, however, have the option of making voluntary savings contributions to the supplementary scheme.
You can also use this period to draw up your wealth balance sheet, work on your retirement planning and structure your assets. If you find a new job, we can also analyse your future employer's pension plan and advise you.
- Keep control of your assets and prevent them from being lost at the supplementary fund.
- Use this period to draw up your wealth balance sheet, work on your retirement planning and structure your assets.
Preparing for the future
At Piguet Galland, we support your career transition by considering your needs, desires, and profile. We'll work with you to build a tailored strategy to help you prepare for your financial future. Career transition is an important stage in your life, so don't hesitate to contact us to discuss it.