Impact of expatriation or early retirement

Many Swiss choose to retire to sunnier climes, seeking a gentler quality of life, pleasant weather, and higher purchasing power. However, before you pack your bags and leave the country, it is crucial to consider some legal and financial aspects.

Bilateral agreements on the free movement of persons between the European Union and Switzerland stipulate that Swiss nationals without gainful activity have the right to reside for at least five years in all EU and EFTA states, provided they have sufficient financial means and health insurance coverage. The authorization is automatically renewed if these conditions are met.

Many countries outside the EU issue residency permits to immigrants of a certain age who possess significant assets.

To avoid any delay in the payment of your pension, it is important to report your change of residence to your pension fund and the AVS compensation fund.

Retirees who receive only a pension from Switzerland are generally required to insure themselves against illness and accidents with a Swiss health insurance fund. You can consult the health insurance funds operating in various countries on www.priminfo.ch.

By taking these factors into account, you can better plan your retirement abroad and fully enjoy this new stage of your life.

Generally, anyone leaving Switzerland permanently is taxed abroad on all their income and wealth. However, businesses and real estate located in Switzerland, as well as the income they generate, remain subject to tax in Switzerland. The income they produce remains taxable in Switzerland.

The tax rate is determined based on the total income and wealth of the taxpayer worldwide. In the absence of a declaration of income and wealth abroad, the Federal Tax Administration may apply the maximum tax rate. This means that if you reside abroad and hold a securities portfolio in Switzerland, you will have to pay a withholding tax of 35% on dividends and interest. However, you may be able to recover all or part of this tax, depending on the provisions of the Double Taxation Treaty between Switzerland and your country of residence.

The reimbursement of the entire withholding tax can be requested if the country where you have taken up residence has a double taxation agreement with Switzerland.

By considering these tax aspects, you can better manage your financial situation when you leave Switzerland permanently.

Anticipated retirement

By choice or necessity, some people opt for early retirement. If addressed early enough, early retirement can become a feasible project and allow for a comfortable pre-retirement life. However, it requires careful preparation.

The first crucial point for the success of this project is to fill the providence gaps that early departure will cause. Early withdrawal of benefits from the AVS (Old Age and Survivors Insurance) and the pension fund helps achieve this. Transitional pensions or a supplementary job are also solutions that facilitate early retirement.

Most pension funds accept early withdrawal of retirement benefits from the age of 58 or 60. If these benefits are accessed prematurely, the retirement capital will be lower than that received in the case of ordinary retirement.

Some pension funds allow for the offsetting of reduced benefits in the case of early retirement through voluntary buybacks.

Personal savings such as the third pillar, funds in savings accounts, liquid securities, or real estate are often the best way to compensate for the financial shortfall in early retirement.

If you are considering early retirement, our experts can guide you in making the best choices. Do not hesitate to contact us to find the best solution for your project.

Gradual retirement

Another alternative is phased retirement, which involves gradually reducing one's work rate. Normally, pension funds allow their insured members to take early retirement benefits.

Since 2023, Article 13a of the Occupational Pension Act (LPP) was introduced, requiring all pension funds to allow phased retirement. The conditions to be met are as follows:

Article 13a - Partial withdrawal of old-age benefits:

• The insured may receive the retirement benefit in the form of an annuity in no more than three stages.
• The pension fund may authorize more than three stages.
  The insured may receive the annuity in a maximum of three stages.
• The plan may authorize more than three stages.

You have now completed our 360 series on retirement. We hope you have found all the information you need to prepare for your retirement with peace of mind. Our team of experts remains at your disposal should you require any further information.
We look forward to hearing from you.