Tax benefits for pensions to be abolished "The system is reaching its limits" - expert warns

The Federal Council is planning to reduce the tax advantages of the 2nd and 3rd pillars of the pension system, which would place a particular burden on the middle classes and high earners. An expert and politicians weigh in.

The Federal Council is planning to reduce the tax advantages of the 2nd and 3rd pillars of old-age provision. This would mean significantly higher taxes for many people.

A new calculation method envisages that the tax burden will depend on income, which will primarily affect the middle class and high earners. For example, taxes for high earners could quadruple, as reported by the Sonntagszeitung newspaper. The newspaper cites the following example: Anyone who earns CHF 140,000 and has CHF 350,000 paid out will in future pay CHF 17,800 to the state instead of CHF 6,580.

People with low incomes would be better off with the new rule, depending on their situation. Example: If you earn 60,000 francs and have 250,000 francs of capital paid out in retirement, you previously paid 3940 francs - now it would be 3650 francs.

The 3rd pillar incentive system is a discontinued model

Tashi Gumbatshang is Head of the Competence Center for Asset and Pension Advice at Raiffeisen Switzerland. For him, it is clear that the pillar system in Switzerland is a good and highly coordinated pension strategy.

But the system is now reaching its limits. The reason for this: "Demographics in Switzerland have changed. People are getting older and fewer children are being born." This is unbalancing the pension schemes.

In addition, the federal government's plan is not entirely unproblematic: "The 3rd pillar contains a so-called incentive system. You pay into an account and the money multiplies through interest and capital gains as well as dividends on securities." However, if you pay in in the future in the belief that the money will multiply and you then have to give some of it back in taxes, the incentive to invest in the 3rd pillar dwindles, says Gumbatshang.

If the incentive to invest in a system were to be reduced, there is a possibility that people would reorient themselves and use the money elsewhere.

Trend is shifting more towards personal responsibility

The trend is shifting more and more towards personal responsibility. "The system is reaching its limits. People in the middle class in particular should now organize themselves," says Gumbatshang.

He questions whether the state could raise much more money with the Federal Council's new proposal. "This change would have effects that cannot be properly anticipated. Experience has shown that such tax interventions can lead to changes in behavior, meaning that the desired effect cannot be achieved or can even be detrimental," says Gumbatshang.

Real investments: an alternative to the 3rd pillar

People who invest in their retirement provision now should think carefully about how and where they do so. "When it comes to the 3rd pillar, I always recommend looking at investments in real assets. For example, you can invest in a broad equity portfolio.

Of course, you have to keep a sense of proportion," says Gumbatshang. Pillar 3 is still a good investment for retirement provision.

FDP and SVP are critical of the federal government's plan

blueNews asks three FDP politicians. Andri Silberschmidt gets back to us and refers to a LinkedIn post he wrote. It says: "The FDP rejects higher taxation of capital withdrawals in occupational and private pensions."

The FDP argues that such taxation would reduce the incentive to save for retirement and that "anyone who has paid in in the belief that this would bring them tax advantages would feel cheated", says Silberschmidt.

SVP National Councillor Diana Gutjahr is also critical of the Federal Council's plan. First and foremost, she says, we need to look at expenditure rather than income.

She also emphasizes the importance of legal certainty: "It must be worthwhile to earn well and make provisions for old age. The bill undermines this principle." She also criticizes the unequal treatment of taxpayers, as many high-income earners already contribute disproportionately to tax revenue. "The bill would make them pay even more," says Gutjahr.

And it's not just high earners who would put their money aside in this way. "If this were introduced, it would be a sign that saving is no longer worthwhile."

Gutjahr also emphasizes the complexity of the regulation: "The implementation is not useful for me." Instead, she wants it to stay as it is. "There should be even more incentive for people to want to save for old age, to make work worthwhile."

SP welcomes closure of the "tax loophole"

The SP argues differently to the SVP and FDP. National Councillor Céline Widmer writes at the request of blue News: "Today, there is an incentive for households with high incomes to avoid taxes via the 2nd and 3rd pillars. This means that the state is losing large sums of tax revenue. I would like to see this tax loophole closed."

Cédric Wermuth, Co-President of the SP, says: "The SP is of the opinion that these tax subsidies of recent years should first be reversed and the fight against tax crime intensified."

The SP has also presented a plan on how additional investments can be made without burdening the middle classes. "In concrete terms, we can of course discuss adjusting the deductions for the 2nd and 3rd pillars. These primarily benefit high earners," says Wermuth. The SP is of the opinion that deductions could, for example, only be permitted up to a certain income.