Realising the potential of the client's pensions on leaving Switzerland

Jamie Tulip - International Advisor
Smiling man with mobile phone and laptop

The Client's Challenge

As an expat working in Geneva, Switzerland, our client had built up a CHF 3,000,000 Pillar 2 Pension. On leaving Switzerland in 2022 he was aware that these funds would be moved into a ‘vested benefits account’ which would generate negligible growth, and that if he transferred the funds abroad he could be liable to pay Geneva Cantonal Withholding Tax of 8.7%.

The client was repatriating to the UK, so he was also concerned about paying Capital Gains Tax [CGT] on the growth of the capital invested, once back in the UK.

Finally, he was conscious that in the event of his death the funds would form part of his estate for Inheritance Tax [IHT] purposes, and their value when passed on to his family would therefore be greatly reduced, having been subject to IHT at up to 40%.

Our Solution

We were able to confirm that because he was leaving Switzerland permanently, he could withdraw all of his Swiss Pillar 2 Pension funds, and we drew up a solution for him to:

  • minimise the amount of withholding tax he incurred when moving the funds from Switzerland;
  • optimise the tax-efficient growth of the funds whilst they remained invested;
  • access the funds and make ongoing tax-efficient withdrawals; and
  • ensure the funds passed to his family in the most tax efficient way, in the event of his death.

The Result

  • Because we moved the client's funds from their vested benefit account [domiciled in Geneva] to a regulated Swiss pension plan domiciled in the Swiss Canton that would charge the lowest rate of Withholding Tax when they subsequently made the lump sum withdrawal, instead of paying Withholding Tax of CHF 262,938, they paid just CHF 143,838, reducing their tax liability by 45% and increasing the value of their retained pension assets by CHF 119,100.
  • By moving the capital into an investment strategy aligned with the client’s risk profile - in this case a diversified portfolio of investments, the 'Morningstar Next Generation Growth Fund' [one of Forth Capital’s award-winning, low-cost, risk-rated investment strategies], we were able to generate a 11.2% return for the client in 2023.
  • We structured the client’s investments in the most tax efficient manner to maximise the value of the funds that would be passed to his beneficiaries in the event of his death, addressing his concerns about IHT and providing peace of mind.

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