Capital withdrawals from pension plans (incl. partial withdrawals)

Case 1: Capital withdrawal after purchase

1.1 Facts of the case

X., partner in a law firm, made a purchase of CHF 500,000 into the 2nd pillar on 15.12.2024. He reaches the normal retirement age of 65 on 15.02.2025 and retires as an equity partner on 31.12.2025. He is now working for the firm as senior counsel with a reduced workload.

On 03.01.2028, he receives a capital payment of CHF 10 million.

He already had his pillar 3a paid out on 15.3.2025.

His wife drew her retirement assets on January 3, 2025.

1.2 Questions

• What effects do the capital withdrawals have on the purchase of 15.12.2024?
• How are capital withdrawals taxed?
• How would the capital benefits be taxed according to the Federal Council's proposal of 29.1.2025?

1.3 Variant 1

X. reduces his gainful employment as of 01.02.2025 and transfers his released pension assets to two vested benefits institutions on 03.02.2025. He ends his employment on 31.12.2025 and devotes himself to his hobbies from then on. (Sub-variant: He still occasionally gives a lecture at an ISIS seminar and writes specialist publications, which earns him CHF 10,000 p.a.).

On 03.01.2028 he withdraws CHF 5 million from the first vested benefits institution and on 03.01.2029 CHF 5 million from the second vested benefits institution.

1.4 Question

How are FC benefits taxed?

1.5 Variant 2

X. divorced in 2015 and had to pay his ex-wife pension compensation of CHF 2 million. In December of each of the years 2022-2025, he makes purchases of CHF 500,000 into the 2nd pillar. (Sub-variant: in order to have sufficient liquidity for the purchases, X. increases the mortgage by CHF 1 million in 2023).

X. retires as of 30.06.2026.

On 03.07.2026, he makes a capital withdrawal in the amount of CHF 10 million.

1.6 Question

How is the capital benefit of 10 million taxed?

Case 2: Deferral of retirement benefits

2.1 The facts of the case

Helgo Schmidt is employed 100% by C-Consulting AG. At the age of 62, he reduces his employment at C-Consulting AG by 50%, but leaves his retirement assets in their pension fund. The pension fund regulations provide for this option.

One year later, he leaves C-Consulting AG and ends his working life. He has his retirement assets from the pension fund there transferred to two vested benefits institutions.

2.2 Questions

• Is it permissible to leave the retirement assets in the pension fund of C-Consulting AG?
• What are the tax consequences of this?
• Is the transfer of termination benefits from the pension fund of B-Consulting AG to a vested benefits account permissible under pension law if employment is terminated completely? 
• What are the tax consequences in this case? 

2.3 Variant

Helgo Schmidt remains employed at C-Consulting AG beyond the reference age and continues to be insured in its pension fund. He retires completely at the age of 68 and transfers his retirement assets to two vested benefits institutions. He would like the benefits to be paid out in stages over the next two years. 

2.4 Questions

• Is it permissible from a pension law perspective to transfer the assets of C-Consulting AG to vested benefits?
• How are the benefits treated for tax purposes?
• What happens when Helgo Schmidt retires from C-Consulting AG at the age of 68, but continues to appear as a speaker at various events? 

Case 3: Partial retirement 

3.1 Facts of the case

Sandra Weber is self-employed and voluntarily affiliated to an occupational pension scheme (2nd pillar). At the age of 62, she makes an early withdrawal to finance the installation of a new kitchen.

At the age of 63, she cuts back a little and reduces her insured income from an average of CHF 200,000 to CHF 180,000 without drawing any benefits. 

One year later, at the age of 64, she takes a further step towards partial retirement. From then on, she insures an income of CHF 150,000. In the same year, she plans to make a gift to her daughter to buy a property and enquires whether she can withdraw a quarter of her retirement assets in the form of a lump sum.

At the age of 65, she takes another partial retirement step: She withdraws half of her retirement assets totaling CHF 1,000,000 in the form of a lump sum. At the same time, she reduces her insured income to CHF 75,000 as she continues to work to a reduced extent.

At the age of 66, Sandra Weber stops working for good and has the remaining retirement assets paid out in full as a lump sum.

3.2 Questions

• How should the reduction in insured income at the age of 63 be assessed from a pension law and tax perspective? 
• Is partial retirement also possible for self-employed persons and is it recognized for tax purposes?
• Is it permissible to continue pension provision beyond the reference age if you are self-employed, and what are the tax consequences?
• Is a WEF advance withdrawal included in the calculation of the maximum permissible number of lump-sum withdrawals pursuant to Art. 13a para. 2 BVG?
• Does the same apply if it is not a WEF advance withdrawal but a withdrawal from a vested benefits account?

3.3 Variant

Sandra Weber is the owner and at the same time an employee of her own limited company. One year before reaching the reference age, she reduces her salary from CHF 150,000 to CHF 120,000. When she reaches the reference age, she further reduces her income to CHF 9,000. In both cases, she postpones the withdrawal of her retirement assets. Her total pension assets amount to CHF 1,000,000. 

Between the ages of 66 and 68, she plans to reduce her salary by CHF 3,000 a year and at the same time withdraw a third of her retirement assets in the form of a lump sum.   

3.4 Questions

• Under what conditions is the staggered withdrawal of retirement benefits permitted under the occupational pension plan?
• How are staggered lump-sum withdrawals from occupational pension plans between the ages of 66 and 68 taxed?

Case 4: Unlawful withdrawal of pension assets?

4.1 Facts of the case

Max Minder is employed 100% by the Canton of Berne. 1.5 years before his retirement, he discovers an attractive motorhome in which he would like to travel through Europe after his retirement. As he currently has no liquid funds at his disposal, he decides to reduce his level of employment to 60% for one month in order to draw a corresponding lump-sum benefit from his pension fund as part of this partial retirement step. He then increases his level of employment back to 100%.

4.2 Question

What are the consequences of this temporary partial retirement in terms of pension and tax law? 

Case 5: Moving abroad 

5.1 Facts of the case

Guy Leroy, a French citizen with a C permit, already lived and worked in the canton of Neuchâtel from 2014 to 2016 and again from 2018 to 2023. From 2016, he lived in Switzerland with his cohabiting partner and their child. From this point onwards, he made annual occupational pension purchases of CHF 20,000 to CHF 60,000.

In the year of his departure (2023), Guy Leroy made two further purchases into the pension fund - totaling CHF 240,000. He made the last purchase four weeks before his return to France.

After moving away, he transferred his entire termination benefit to two vested benefits institutions in the canton of Schwyz. 

In 2025, Guy Leroy - who has since returned to the canton of Neuchâtel with his family and bought a property - will draw on one of the two vested benefits accounts as part of a WEF advance withdrawal. 

5.2 Question

What are the consequences of this situation in terms of pension and tax law?

Case 6: Severance payment 

6.1 Facts of the case

Sabine Lohr is a member of the Executive Board of M AG. Due to an internal restructuring, her employment will be terminated at the end of February at the age of 58. In the previous year, she earned a gross annual salary of CHF 200,000.

Sabine Lohr initially resists the dismissal, but accepts it after negotiations with her employer. The agreement is recorded in a written agreement. On the one hand, this provides for an immediate transfer to another Group company, T AG. On the other hand, she is awarded a one-off payment of CHF 200,000 gross, which is described by both parties as "severance pay due to dismissal" - without further specification. The payment is made at the end of February, on the last day of her employment relationship with M AG.

Also on the last working day, the previous pension fund confirms that Sabine Lohr has an ordinary pension gap (employer and employee contributions including interest) of CHF 245,000 for the period between the ages of 58 and 65.

Sabine Lohr starts her new job at T AG on March 1. There she earns a gross annual salary of CHF 100,000, which is half of her previous salary.

6.2 Question

How is the "redundancy payment" of CHF 200,000 gross received by Sabine Lohr to be taxed?

6.3 Variant 1

Due to her dismissal at the end of February, Sabine Lohr is leaving the company permanently and taking early retirement. Following negotiations in connection with the termination of the employment relationship and to close the pension gap between the age of 58 and the regulatory reference age of 65, the employer undertakes to pay a severance payment of CHF 245,000.

This compensation will be transferred directly to Sabine Lohr's pension fund in January 2025.

6.4 Questions

• How is the "severance payment due to dismissal" received by Sabine Lohr in the gross amount of CHF 200,000 to be taxed?
• Is the tax treatment of this settlement the same if Sabine Lohr receives part of her retirement benefit as a pension and part - for example CHF 200,000 - as a lump sum?

6.5 Variant 2

As part of the restructuring of P1 AG, which constitutes a mass redundancy in accordance with Art. 335d of the Swiss Code of Obligations, a social plan with compensation arrangements for all redundant employees is agreed.

6.6 Question

What are the tax consequences?

Case 7: Repayment of a WEF withdrawal 

7.1 Facts of the case

A., a resident of Bassersdorf (ZH), made an advance withdrawal of CHF 950,000 from an occupational pension plan (WEF advance withdrawal) on 24.10.2017 to purchase residential property, on which a special tax of CHF 93,755 was levied in accordance with § 37 StG ZH.

On 24.12.2020, A. repays the full WEF advance withdrawal of CHF 950,000 to the pension fund (variant: A. makes a partial repayment of CHF 250,000).

7.2 Questions

• How is the WEF advance withdrawal from 24.10.2017 taxed?
• What are the tax consequences of the repayment from 24.12.2020?