Choice of the savings option
How do I make better provision for my retirement? Which savings option is most suitable for me? When and how can I change my savings option? How you can make better provision for your retirement and cut your tax bill at the same time.
With the Plus and Extra savings options, you can pay more savings contributions and thereby save taxes while at the same time making better provision for your retirement. However, you should do this only if you can spare that part of your salary in the longer term.
We offer you the choice of three different retirement savings options: Standard, Plus and Extra. They differ in the amount of your savings contributions. The employer’s saving contributions and the risk contributions are the same in all three plans. The more you contribute, the bigger your benefits in old age and the bigger your termination benefit if you move to another job. At the same time, you reduce your income taxes, as the additional savings contributions can be deducted from taxable income for persons taxable in Switzerland. However, because of the higher payroll deductions, your net salary is reduced and so you have less money to spend in your bank or post office account. So you have to be sure that you can live on this lower net salary. You can change your chosen savings option only one every 12 months (with effect from 1 January each year).
Example: You’re 45 years old, have an annual salary of CHF 60,000 and are insured in the Standard savings option. You pay employee savings contributions of CHF 5,160 (CHF 60,000 × 8.6%) per year or CHF 430 per month. Your employer pays savings contributions of CHF 6,240 (CHF 60,000 × 10.4%) per year or CHF 520 per month. You switch to the Plus or Extra savings option with effect from 1 January. If you switch to the Plus savings option, your savings contributions will increase to CHF 6,180 (CHF 60,000 ×10.3% ) per year or CHF 515 per month; if you switch to the Extra savings option, they will increase to CHF 7,200 (CHF 60,000 ×12.0% ) per year or CHF 600 per month. That means the net salary you receive is reduced by CHF 85 or CHF 170 per month. The employer’s contributions and risk contributions remain the same.
Check to see if you’ve already chosen the best possible savings option for you or if an adjustment with effect from 1 January might be helpful to you.
If you don’t do anything to change it, you will automatically save using the Standard savings option, which enables you to provide yourself with a pension well above the legal minimum. If, though, you can manage to live on less than your salary and want to make even better provision for your retirement, you can switch to the Plus or Extra savings options. The savings contributions are higher, and so your net salary is reduced. At the same time, however, your retirement savings increase more rapidly than with the Standard option, so the benefits you get when you come to retire are increased. Your termination benefits would also be greater if you were to move to another job. If you complete and submit a tax return in Switzerland, your tax burden is usually reduced, since the savings contributions are deducted from your taxable income.
The first question you have to ask yourself is whether your current financial circumstances allow you to choose the Extra or Plus savings options, and if it might not be better for you to use the money to put into savings contributions to actually live on. Quite apart from covering your current expenses, you should also build up some reserves for the unexpected, such as repairs, dental treatments or the like. Expenses for a trip around the world or for children who aren’t working, purchases or other major investments are other things you really should take into account when deciding on a savings option.
The Plus and Extra savings options work particularly well if you’re about to retire and want to draw a lump sum on retirement. This is a stage in life in which purchases for old-age provision should be made with caution, as they can’t be taken out as a lump sum for another three years. The Plus and Extra savings options offer you the same tax advantages as a purchase, but without the three-year blocking period. You might find the prospect of a reduced tax burden appealing if you find yourself paying too much tax.
Before deciding on whether to go with the Plus or Extra savings option, check to see if you will still have enough liquidity to finance your lifestyle.
If you don’t do anything to change it, you will automatically save using the Standard savings option, which enables you to provide yourself with a pension well above the legal minimum. If you want to switch to the Plus or Extra savings options, you have to tell us so. The same applies if you’re already using the Plus or Extra savings options and would like to reduce your savings contributions. However, you can make changes only when you join and with effect from 1 January each year.
You can change your savings option between early May and mid-January on comPlan Online. Your choice will then take effect on 1 January. This means that the newly selected savings contributions will first be debited to your January salary payment. From then on, your retirement benefits as shown on your statement of insurance will also be based on the newly selected savings option.
Check your pension situation at least once a year and change the savings option if you want to.