Taking your retirement abroad: preparing your departure from Switzerland

Many people insured in Switzerland choose to spend their retirement abroad, whether to improve their quality of life, enjoy a more favourable climate or benefit from a different cost of living. However, retiring abroad from Switzerland requires careful preparation, as it involves administrative, tax and wealth-planning considerations that should not be overlooked.

Understanding the financial impact of retiring abroad

A successful retirement abroad starts with a comprehensive review of your financial situation.

Before leaving Switzerland, it is essential to assess how your departure may affect:

• the payment of your pension benefits,
• the management of your retirement assets,
• the taxation of your income and wealth,
• the structure of your investments in an international context.

Once you become resident in another country, your assets often need to be adjusted to local tax and inheritance rules. In many situations, specific adaptations are required to avoid unfavourable taxation or legal complexity. 

What happens to your retirement provision when you leave Switzerland?

Leaving Switzerland does not necessarily mean losing your entitlement to Swiss retirement benefits. However, each pillar of the Swiss retirement system follows specific rules. 

First pillar (OASI): pension payments abroad

You are responsible for applying for your OASI pension so that payments begin once you reach the statutory retirement age.

The amount paid depends on several factors, including:

• the number of contribution years,

• your average income,

• your personal and family situation.

Swiss nationals and nationals of countries that have concluded a social security agreement with Switzerland may receive their OASI pension abroad. It is essential to notify your compensation office of your departure so your file can be transferred to the Swiss Compensation Office.

Please note that certain supplementary benefits cannot be paid outside Switzerland.

Second pillar (LPP): pay close attention to taxation 

When it comes to occupational pension assets, several points need careful consideration before retiring abroad:

• your choice between a pension, a lump sum or a combination of both,

• your country of tax residence,

• the existence of a double taxation treaty between Switzerland and your host country,

• the canton where your vested benefits foundation is domiciled, which may affect taxation.

If you withdraw your pension assets as a lump sum from abroad, the applicable tax rate will depend on these factors. In some cases, it may be advisable to retain the assets within a vested benefits solution and optimise their management until a later stage.

If your age and liquidity allow, there are tailor-made solutions for managing your vested benefits until you are 70.

Third pillar: withdrawal or retention depending on your strategy

Assets held in the third pillar can either be:

• withdrawn when leaving Switzerland or at retirement age,

• or retained until the latest permitted date, depending on your personal situation.

The most appropriate option will depend on your tax position, your country of residence and your overall wealth strategy.

Insurance coverage and pension payments: leaving nothing to chance

To avoid delays or payment interruptions, it is crucial to inform all relevant institutions of your change of residence, including:

• your OASI compensation office,

• your pension fund,

• your insurance providers (health, accident and retirement insurance).

Depending on your destination country, retirees receiving only Swiss pension benefits may still be required to maintain health and accident insurance coverage, sometimes with a Swiss insurer. The applicable rules vary significantly from one country to another.

Tax considerations when retiring abroad 

In general, anyone who leaves Switzerland permanently becomes taxable in their new country of residence on their worldwide income and assets.

However:

• real estate located in Switzerland remains subject to Swiss taxation,
• the related income and returns continue to be taxed in Switzerland.

If foreign income and assets are not properly declared abroad, the Swiss tax authorities may apply a maximum tax rate, particularly on investment income subject to withholding tax. That said, double taxation treaties often make it possible to recover all or part of this withholding tax, subject to certain conditions.

Pensions (annuities) and fees received as a member of a board of directors are only taxed at source if the right of taxation lies with Switzerland.

Are subject to the withholding tax of 35%:

• dividends from Swiss companies
• interest on bonds issued by Swiss borrowers
• interest on Swiss bank desposits 

What to do with your property?

If you decide to sell your property when you leave the country, capital gains tax will depend on the specific features of each canton

If you decide to rent out your property, the income will be taxed in Switzerland. The tax rate will be determined by considering any income you may have generated abroad.

What about your estate?

• Taxation of real estate assets: real estate is taxed according to the rules and tax rates of the country in which the property is located.
• Taxation of financial and other assets: your assets are generally taxed in your new country of residence. It is therefore essential to assess the potential tax burden your heirs may face upon succession.