The vested benefits account is designed to hold the capital from your 2nd pillar contributions. It's used during periods of professional transition, when starting a self-employed business, in the event of divorce, or when moving abroad. But did you know that this account also offers attractive tax benefits? In this article, we share the 5 advantages of using vested benefits savings to reduce your tax bill.
Firstly, the return on investment generated by the vested benefits account is exempt from income tax and withholding tax. By comparison, investment returns in interest and dividends are subject to withholding tax if they exceed CHF 200 per calendar year.
The capital deposited in a vested benefits account is not included in your taxable assets. So, as long as the account is not drawn down, your wealth tax will not be impacted.
The drawdown of vested benefit capital is taxed separately. This means the amount withdrawn during the year is not added to your other income (wages, dividends, interest, pensions). It's not included in your tax return, so it will not increase your tax rate.
The capital withdrawn from your vested benefits account is subject to a preferential rate of taxation. In other words, when you withdraw your BVG/LPP capital, the tax rate is more advantageous than ordinary income tax. However, the exact tax rate applicable varies depending on the canton and the amount of capital withdrawn.
Finally, if you know all there is to know about vested benefit accounts, you may be familiar with "splitting" or staggered payments. This allows you to separate the payments from your 2nd pillar assets into two distinct vested benefits accounts in two separate pension trust structures. This offers a considerable tax advantage when using part of your capital. You can withdraw your capital in two different tax years, reducing the tax rate applicable upon withdrawal. Moreover, the second account, which has not been drawn down, continues to benefit from the tax advantages described above.
If you structure your pension assets carefully, you can benefit from the security and advantages of the BVG/LPP. As you know, making the right choices regarding your 2nd pillar is essential. The team at the bank Piguet Galland is here to help you make the right choices.
Together, we'll define the solutions that best meet your needs. Find out more about our Pensions offering and feel free to book an appointment with one of our advisers.
We aim to help you make a smooth financial transition at every stage of your life.