In addition to the difference in tax deductions between the 2nd and 3rd pillars, we need to know the impact on AHV contributions if we choose one of the two systems.
What is this impact?
The 1st pillar, and in particular the AVS, is compulsory for everyone, while the self-employed are free to join a 2nd pillar pension scheme.
In its ruling ATF 133 V 563 of October 11, 2007, the Swiss Federal Supreme Court ruled that voluntary purchases made by self-employed people (contributions and purchases) are deductible up to 50% of gross income.
To do so, however, three conditions must be met:
- The possibility of a buyback must be provided for in the bylaws or regulations.
- In order to avoid abuse, the amount of the purchase must not exceed the limits stipulated by the law governing occupational benefits.
- The purchase must also be tax-deductible. If all these conditions are met – which may need to be checked in advance with the pension fund concerned and the tax authorities – a purchase of CHF 50,000, for example, will reduce income subject to AHV by CHF 25,000.
While the legal and fiscal vehicle of the second pillar is often more attractive to the self-employed than individual insurance, is your retirement money as secure as possible?
Not necessarily! If a spouse is entitled to a survivor’s pension, you need to choose a pension fund that does not use your savings to finance the risks that may arise. In addition, you need to choose a pension fund with solid financial statements to face both longevity risk and market risk, since your money is invested in the stock market.
Argos Group is here to advise you on all these issues. Don’t hesitate to contact us!
