Access to Vested Benefits Will Be Restricted

The legislative revision and implementing provisions of the AHV 21 reform came into effect on 1 January 2024. One of the changes concerns the withdrawal of vested benefits (second pillar pension assets). Now is a good time to review your retirement planning.

Under the previous rules, vested benefits could be withdrawn no earlier than five years before and no later than five years after reaching the statutory retirement age. This allowed women to defer withdrawals until age 69 and men until age 70. Until the funds were paid out, they were excluded from income and wealth taxation. Once withdrawn, however, they became taxable.

Capital withdrawals from pension funds are taxed separately from ordinary income and at a preferential tax rate.

Reference Retirement Age

As part of the AHV reform, the retirement age for women is being gradually aligned with that of men. From 1 January 2029, the reference retirement age in Switzerland will be 65 for both women and men.

The legislation now uses the term "reference retirement age" instead of "ordinary retirement age."

The entitlement to an AHV retirement pension begins in the month following the individual's 65th birthday.

No More Automatic Deferral

Under the new rules, vested benefits can no longer be deferred automatically. They must generally be withdrawn upon reaching the reference retirement age of 65.

A deferral is only possible if the individual continues to be gainfully employed. Unlike many employment-related rules, no minimum workload is required.

This brings the rules for vested benefits into line with those governing Pillar 3a. Under those provisions, retirement savings in Pillar 3a can only be withdrawn after the reference retirement age if the individual remains economically active. Otherwise, Pillar 3a assets must also be withdrawn by age 65.

Significant Tax Consequences

Capital withdrawals from retirement savings are subject to a special tax rate.

Although this taxation remains privileged, it is highly progressive in many Swiss cantons and at the federal level.

If pension capital is withdrawn from multiple sources during the same calendar year, the combined amount may push the taxpayer into a higher tax bracket, resulting in a disproportionately larger tax bill.

For married couples, the tax impact can be even greater if both spouses receive capital withdrawals in the same year.

Transitional Period

To allow insured persons who had already reached—or were close to reaching—the reference retirement age on 1 January 2024 to adjust their retirement planning, the reform includes a five-year transitional period.

From 1 January 2030, it will no longer be possible to defer the withdrawal of vested benefits without continuing gainful employment.

Plan Ahead

Whether you intend to withdraw your occupational pension as a lump sum, continue working after reaching the reference retirement age—perhaps on a small part-time basis—to qualify for a deferral, or even consider early retirement, careful planning is essential.

Understanding the new rules and reviewing your retirement strategy well in advance will help you make informed decisions and avoid unnecessary tax consequences.

Source: Treuhand | Suisse