What is a pension buyback?
A pension buy-back is a mechanism that allows you to close gaps in your second pillar. These gaps can result from missing insurance years or salary increases. By making a purchase, you increase your retirement capital, which can translate into higher retirement benefits and, in some cases, better risk coverage.
The benefits of buyback
1. Improved retirement benefits: A buyback increases your retirement capital, which can mean a higher pension or more capital at retirement.
2. Tax benefits: Amounts paid for a buyback are generally tax-deductible, which can significantly reduce your tax burden.
3. Protection of next of kin: In the event of death before retirement, the amounts purchased are paid to the beneficiaries in the form of a lump sum (in accordance with the provisions of the pension plan).
Points of attention
1. Restrictions: There are limitations, particularly for people who have recently arrived in Switzerland or who have made early withdrawals for home ownership.
2. Lock-in period: Benefits resulting from a purchase cannot be withdrawn as a lump sum for three years. Although legally only the amount purchased is concerned, the tax authorities extend this restriction to the entire retirement savings capital.
3. Tax considerations: Tax deductibility is reviewed by the relevant authorities. We recommend that you consult your tax advisor before making any major redemptions.
How to proceed?
1. Consult your pension certificate to find out how much you can buy back.
2. Ask your pension fund for a non-binding quotation.
3. Evaluate your tax and financial situation to determine the optimal buyback amount.
4. Make the payment before the end of the tax year to benefit from the deduction for the current year.
Buying a pension is a powerful tool for optimizing your financial situation in retirement. However, it’s important to understand the implications and take your personal situation into account before making any decisions.
Don’t hesitate to consult a pension advisor to guide you through this important step. Argos Prévoyance SA is here to help you.
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