Understanding the impact of early retirement or expatriation

Expatriation: What are the legal and tax implications?

Many Swiss retirees choose to move to sunnier destinations in search of a gentler lifestyle, a pleasant climate, and greater purchasing power. However, before packing your bags and leaving the country, it is essential to consider several important legal and financial aspects. ​‌ 

The bilateral agreements on the free movement of persons between the European Union and Switzerland state that Swiss nationals without gainful employment have the right to reside for at least five years in any EU or EFTA member state, provided they have sufficient financial means and adequate health insurance. The residence permit is automatically renewed as long as these conditions continue to be met.

Many countries outside the EU also grant residence permits to older immigrants who possess substantial assets.

To avoid delays in receiving your pension, it is important to notify both your pension fund and the OASI compensation office of your change of residence.

Retirees receiving only a Swiss pension are generally required to obtain health and accident insurance from a Swiss health insurer. You can find a list of insurers operating in various countries at www.priminfo.ch.

By considering these elements, you will be better prepared to plan your retirement abroad and fully enjoy this new stage of your life.​‌ 

In general, anyone who leaves Switzerland permanently becomes taxable abroad on all of their income and assets. However, businesses and real estate located in Switzerland, as well as the income they generate, remain subject to taxation in Switzerland. The income from these assets continue to be taxable in Switzerland.

The applicable tax rate is determined based on the taxpayer’s total worldwide income and wealth. If no income or wealth declaration is submitted 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 be subject to a 35% withholding tax on dividends and interest.

However, you may be able to recover all or part of this tax depending on the double taxation agreement between Switzerland and your country of residence. A full refund of the withholding tax can be requested if the country in which you reside has a double taxation agreement with Switzerland.

By taking these tax considerations into account, you will be better prepared to manage your financial situation once you leave Switzerland permanently.​‌ 

Early retirement: how to prepare for it? ​‌ 

Whether by choice or circumstance, some people decide to retire early. With proper planning and enough time to prepare, early retirement can become an achievable goal, and even allow you to enjoy a very comfortable pre‑retirement lifestyle. The key is simply to prepare wisely.

A crucial first step is to bridge the pension gaps created by retiring early. Drawing your OASI benefits and pension fund assets earlier than usual can help, as can using bridging pensions or taking on supplementary part‑time work to ease the transition.

Most pension funds allow early withdrawal of retirement benefits from age 58 or 60. However, early withdrawals will result in a lower retirement capital than if you retired at the statutory age. 

Some pension funds do offer the option to offset this reduction through voluntary buy‑ins. 

Personal savings, such as Pillar 3a, savings accounts, liquid investments, or real estate, are often the best way to cover the income gap that arises with early retirement.

If you are considering early retirement, our experts are here to help you find the best solution for your goals.​‌ 

Staggered retirement

Another alternative is staggered retirement, meaning gradually reducing your level of employment. Pension funds generally allow insured members to take early retirement benefits.

Since the introduction of Article 13a of the Occupational Pension Act in 2023, all pension funds are required to allow staggered retirement.​‌

 Article 13a – Withdrawal of part of the retirement benefit ​‌ ​‌

• The insured person can receive their retirement benefit in the form of an annuity in up to three stages, although your pension fund may allow more stages. A “stage” includes all capital withdrawals made within the same calendar year.

• If the retirement benefit is taken as lump sum, the withdrawal may also be made in up to three stages. This rule applies even when the salary earned with a single employer is insured across multiple pension funds.

• The first partial withdrawal must generally represent at least 20% of the retirement benefit, although your pension fund may allow a lower minimum percentage.

• Mandatory full withdrawal in certain cases: if the remaining annual salary falls below the minimum amount required for coverage under the fund’s regulations, the pension fund may stipulate that the entire retirement benefit must be withdrawn.​‌