Emigrating from Switzerland: Checking Finances and Making Provisions

Reading Time: 9 minutes

In today’s globalized world, the decision to emigrate from one’s home country is not uncommon. It is no different for the Swiss. Emigrating from Switzerland is a life-changing event that requires thorough planning, including financial security and retirement planning.

The Swiss pension system is designed to provide financial stability. However, moving to another country can raise questions about the future of these benefits. What happens to AHV when I emigrate and how do I safeguard my pension fund assets?

This guide focuses on AHV and pension fund when emigrating from Switzerland. You can use it to draw up your own personal checklist of what you need to bear in mind to safeguard your pension assets abroad.

The most important facts in brief

• Leaving Switzerland requires sound retirement planning.
• Depending on your future citizenship and the country of emigration, different regulations apply.
• Switzerland has concluded social security agreements with many countries in order to secure the retirement provisions of the Swiss even after emigration.
• If there is no social security agreement with Switzerland, the previous contributions can be paid out if necessary and the old-age provision can be completely rebuilt.
• Voluntary insurance in the AHV is possible in certain cases.

Leaving Switzerland: Clarify finances with these questions

There are many financial aspects to consider when emigrating from Switzerland. The most important questions you should clarify before you take the step abroad are:

Emigrating or another temporary center of life?

Depending on whether the move is permanent or temporary, this will affect pension rights, health insurance and taxes. For temporary stays, different rules may apply than for a permanent move abroad.

What happens to real estate and household effects?

Depending on the living situation in the destination country, selling or renting out the real estate you previously used yourself may be an option. Whether you are a tenant or an owner, consider whether it makes sense to sell or give away parts of your household goods. It is advisable to draw up a plan for dealing with the various valuables at an early stage. Finally, space constraints as well as a different climate may necessitate the purchase of new furnishings.

What are the future financial needs?

Determine your financial needs for moving and living in your destination country. Consider ongoing living expenses, rent, insurance and possible unforeseen expenses. Detailed financial planning will help you get a realistic estimate of your needs and be financially well prepared for your move abroad. Important: The cost of living and housing expenses vary from country to country. Furthermore, there are higher costs for mobility in territorial countries such as Norway.

What is the composition of income in the country of emigration?

Research job opportunities and find out about local salary structures. If you are continuing your life in another country, you should also be informed about employment opportunities if employment is currently fixed. In this context, check whether you may be able to draw on income from assets or inheritances.

How is pension provision organized in the new home country?

Not all countries organize pension provision for life in old age in the same way as Switzerland’s 3-pillar principle. In the USA, for example, occupational pension provision is voluntary and investment in the stock market is widespread. In Germany, for example, the tax treatment of occupational pension provision is organized, but the employer is not generally obliged to contribute to it. Furthermore, there are various implementation channels. A pension system comparable to the 3-pillar principle in Switzerland exists in Sweden.

Swiss pension plan: Use options for early withdrawal or continue?

This fundamental question can only be answered once the retirement provision options in the country of emigration are known and compared in detail. The tax implications both in Switzerland and in the destination country must also be taken into account.

Essential: What health insurance options are available in the new home country?

It is essential to check the health insurance options in the destination country before emigrating from Switzerland. In some countries there is compulsory insurance, while in others private or voluntary insurance is available. Furthermore, there are mixed systems, such as the insurance of civil servants in Germany.

It is therefore important to understand the insurance coverage in the destination country to ensure you are adequately covered. Often, private health insurance is required to ensure comprehensive coverage.

Emigrating to an EU or EFTA country

Switzerland has signed agreements with several countries. These regulate the social security status of people who move their residence or employment from Switzerland to one of these countries and vice versa.

The most comprehensive in this context is the Agreement on the Free Movement of Persons with the EU, which regulates social security with all EU member states. There is also a corresponding agreement with EFTA, which, in addition to Switzerland, consists of the member states Iceland, Liechtenstein and Norway.

Switzerland has concluded further bilateral social security agreements with the following countries:

• Australia
• Bosnia
• Herzegovina
• Brazil
• Chile
• China
• India
• Israel
• Japan
• Canada
• Kosovo
• Macedonia
• Montenegro
• Philippines
• Republic of San Marino
• Serbia
• South Korea
• Tunisia
• Turkey
• Uruguay
• United States

Social security agreements with destination country: AHV and emigration from Switzerland

The aim of the social security agreements is to maintain the state pension scheme for people who leave Switzerland. You are therefore entitled to a pension if you have paid contributions to the AHV for at least one year and move to a country with which there is a social security agreement.

Two cases must be distinguished:

• Posting by Swiss employer: persons who are posted by a Swiss company to an EU or EFTA country and are paid by this company remain compulsorily insured in Switzerland as Swiss abroad. In the case of a posting of longer than 24 months, the employer must apply for an extension.
• Leaving Switzerland for good: If you emigrate to a country with which Switzerland has concluded a social security agreement, you are covered by the social security system of the country of emigration. As a result, when you retire, you will receive an additional pension from the social security system of the destination country in addition to the AHV pension (corresponding to the contributions paid in).

The Swiss Compensation Office (SAK) is responsible for applying the social security agreement. This is also where the pension is determined and paid out. An advance pension withdrawal is also applied for at the compensation office.

Social security agreement with destination country: What happens to the pension fund assets?

The obligation to contribute to the second pillar ends with the termination of the employment relationship in Switzerland. If there is coverage against the risks of death, disability and old age in the countries with social security agreements, only the non-compulsory portion can be withdrawn. The compulsory part remains in a vested benefits account Vested benefits account and can therefore be withdrawn no earlier than five years before the regular retirement date.

Exceptions to the early withdrawal of the pension fund balance exist for the following cases:

• Financing of owner-occupied residential property
• Taking up self-employment

Early retirement: The earliest retirement age for most pension funds is 58. At this age, insured persons can access their retirement assets, either as a lump-sum payment or as a monthly pension. From this point on, residence no longer plays a role. It can therefore be either in Switzerland or in another country.

Emigrating from Switzerland: Emigration country not a country of the EU or EFTA

If you emigrate to a country without a social security agreement with Switzerland, you must consider the following consequences:

• There is no entitlement to an AHV pension.
• In certain cases it is possible to get back already paid AHV contributions without interest.
• The entitlement to supplementary benefits or to unemployment assistance for persons who are dependent on help, support or care will cease. Only persons with permanent residence in Switzerland are entitled to these benefits, regardless of their nationality.
• If necessary, there is the possibility of voluntary insurance in the AHV to close gaps in contributions.

Financial start in the new country: payment of AHV contributions

If you have the nationality of a country that has not concluded a social security agreement with Switzerland, a refund of your AHV contributions is possible when you leave Switzerland permanently.

Furthermore, social security agreements with certain countries also allow for the refund of contributions. These include Brazil, Australia, China, India, South Korea, Uruguay, Tunisia and the Philippines.

The following conditions apply for reimbursement:

• You have made contributions for at least a one-year period.
• You have left Switzerland permanently with your family members (spouse as well as children under the age of 25) or demonstrably intend to do so.
• If children between the ages of 18 and 25 remain in Switzerland, they must have completed their education.

Provided that confirmation of departure is available, you can submit the application for reimbursement before you leave. As soon as you are living abroad, the payment can be made.

Important: The application for reimbursement must be made within five years of reaching retirement age (alternatively death).

AHV refund when emigrating from Switzerland: Taxes

Withholding tax is calculated on the refund of AHV contributions. The total amount of the refund is considered as income. The tariff code D is used for taxation. The tax rate is determined by the Canton of Geneva and can be viewed on its website.

Pension fund payout after emigration

If you emigrate to a country outside the EU/EFTA and there is no social security agreement with this country, you can also have the compulsory part of the second pillar paid out.

Withdrawal of pension fund capital upon emigration: taxation

When you withdraw your pension fund assets, capital gains tax is due in Switzerland. If you have emigrated, however, as a Swiss national living abroad you will pay withholding tax on the paid-out assets, as capital gains tax can no longer be levied.

Your advantage: the withholding tax is usually lower than the capital gains tax, but it also varies from canton to canton.

It is therefore worthwhile, before deregistering from Switzerland, to transfer the capital to a pension fund that is domiciled in a canton with the lowest possible tax rate. In addition, there are double taxation agreements with various countries which provide for the reclaiming of withholding tax. In these cases, the described detour via a tax-friendly canton is not necessary.

Caution: Not all double taxation agreements provide for the reclaiming of withholding tax. In some agreements, the right of taxation is assigned to Switzerland. This means that the withholding tax paid is not refunded.

Continue to pay AHV after emigration: When voluntary payments into the AHV are possible and make sense

If you want to ensure that you receive your full Swiss pension after retirement, you may be able to take out voluntary AHV insurance and pay contributions. This way, you will continue to be covered against the risks of death and disability. The voluntary AHV/IV is individual. This means that the declaration of membership must be submitted by each family member.

The following requirements must be met:

• Citizenship of Switzerland or a country of the EU or EFTA.
• Residence not within the EU or EFTA.
• Contributions must have been paid to the AHV/IV for at least five consecutive years prior to termination of the compulsory AHV/IV.
• Voluntary membership must take place within the first year after compulsory AHV/IV has ended.

Since five percent of the contributions are charged for the administration of the voluntary insurance, voluntary membership must be well considered. However, it can make sense, especially for protection , depending on the personal family situation.

This is to be considered with the assets from the pillar 3a

As a rule, individuals receive their credit balance from the voluntary third pillar paid out when they leave Switzerland. The payout is independent of the nationality or the country of destination. Similar to the early withdrawal from the pension fund, the final withdrawal from the third pillar must be reported and proven to the pension fund.

A withholding tax is levied on the lump-sum payment, which may be reclaimed under a double taxation agreement or credited in the new country of residence. Here, however, it depends on the details of the double taxation agreement.

Take advantage of tax benefits and choose the right time to emigrate

Often opportunities arise spontaneously and the time to leave Switzerland cannot be freely planned. However, if this is possible, the right time can also help to optimize the financial situation. Therefore, below are a few more tips that you should consider depending on your personal situation:

• Deregister your residence: Deregister your residence in Switzerland to ensure that you are no longer eligible for Swiss capital gains tax.
• Tax advice: get professional help from a tax advisor to make sure you know and take into account all the necessary tax aspects for the country you are emigrating to.
• Pre-draw pension fund assets: Many pension funds allow lump sum withdrawals starting at 58 or 60, which may be the start-up capital you need.
• Withdrawingcapital after emigration: If you plan to cash out your pension fund or other investments, the withholding taxes due after emigration are often lower than the Swiss capital gains tax.

Advance pillar 3a assets: Similar to pension fund balances, withholding taxes due after emigration are often more favorable than taxation in Switzerland, even though Pillar 3a withdrawals are taxed at a privileged rate.