Quite a few insured persons in the 2nd pillar have their pension fund assets paid out before or at retirement. This can backfire, because many people underestimate the time they will spend as pensioners, and thus the costs.
The occupational pension plan was created so that insured persons could save a small amount of money that would earn good interest compared to conventional savings accounts and help them not to have to make too many sacrifices of their accustomed lifestyle when they retire.
Early withdrawals and lump-sum payments have far-reaching consequences
The second pillar does not provide for a generational contract with capital flows from young to old, as is the case with the pay-as-you-go system of the first pillar or AHV. However, many pension funds have to reallocate funds from the non-mandatory area in order to still be able to keep their pension promises. In addition, it is becoming increasingly clear that the capital saved in the pension fund is not sufficient to fully cover the needs of the insured in old age and in the event of death and disability. "Against this background, it is astonishing that the early withdrawal of pension fund assets is permitted by the regulator and favored by the tax authorities," criticizes the Swiss Broker Center. The insurance brokers also question the withdrawal of capital at retirement, because both an early withdrawal and the withdrawal of retirement assets have far-reaching consequences.
Early withdrawals lead to lower benefits
Withdrawing pension fund assets to purchase a home is particularly popular. However, an early withdrawal significantly reduces the risk benefits, retirements pension benefits and for some pension funds, also affect death and disability benefits. "Many early withdrawers are not aware of this, or not aware enough," the brokers say. That's why they're calling for PF early withdrawals to be limited to the non-mandatory amount or 25% of the available pension capital. They also want early withdrawals to be limited should persons become self-employed. This is because the risk of losing your retirement savings is high. In all too many cases, people would end up with debts and no pension provisions at the social security office. Also, very few self-employed people would pay the possible 20% of their net salary into their third pillar.
Choosing an annuity a lump sum has far-reaching consequences
The decision whether to take an annuity or the lump sum upon retirement also has far-reaching consequences that could affect the public, they warn. According to the law, pension fund members are allowed to withdraw at least a quarter of their pension assets upon retirement, and some funds even permit the withdrawal of half or all of the capital, they explain. And they add: "Since a lot of money is usually involved, the advantages and disadvantages of the various withdrawal options must be carefully weighed up."
Annuities provide security
According to the brokers, the annuity has tangible advantages - first and foremost security and predictability. Those who opt for an annuity receive a guaranteed monthly payment for life. In the event of death, the surviving spouse receives a widow's or widower's pension. However, the capital not used up for (widow's) pension payments remains in the fund and does not go to the descendants, they concede.
Lump-sum withdrawals allow flexibility
The most important advantage of a lump-sum withdrawal, in their opinion, is greater flexibility. The person withdrawing the capital can decide when and how much of it to use, and the amount of the withdrawal can vary and be adjusted according to the respective needs. Since the money is part of the private assets after a lump-sum withdrawal, any remaining capital is transferred to the heirs in the event of death. In addition, the lump-sum withdrawal is attractive from a tax perspective. The brokers also point out the fact that the lump-sum withdrawals are a must for many insured persons: "Due to the strict requirements of commercial banks regarding affordability, mortgages often have to be paid off at retirement. Many new retirees are not even able to do this without a pension fund withdrawal."
Precise financial planning for retirement is essential
In view of the risks involved, the withdrawal of capital goes hand in hand with a great responsibility for financing retirement. Accurate financial planning is essential. Even if more restrictions and regulations on the part of legislators and regulators are fundamentally undesirable, securing retirement provisions should take priority over individual wishes. After all, many people underestimate the length of their lives and the costs involved.
The bill provides that the Federal Council shall determine the effective date.