The high purchasing power of the Swiss currency makes it financially attractive to emigrate to another country after retirement. However, such a step also has disadvantages.
A couple on the beach at Saltburn By The Sea: With the strong Swiss franc, England has also become cheaper for people wanting to emigrate.
Around 35 percent of the pensions from the AHV flow abroad. According to the Federal Social Insurance Office (BSV), 948,000 AHV pensions were paid to people who do not live in Switzerland last year.
With the even stronger franc, this number could increase further. After all, pensioners here have more purchasing power in many countries than in Switzerland. At the same time, the pension conversion rates have fallen at many pension funds in recent years. The predicted pension from AHV and occupational pensions has shrunk for many.
Some ask themselves whether they can even afford to retire in Switzerland – and whether it might not be worth moving abroad after retirement. Others are looking for adventure, warmth or a better standard of living in the third phase of life. Many of the OASI pensioners living abroad are also former immigrants to Switzerland who returned to their original home country after retirement.
However, one should not underestimate such a step. When moving permanently from Switzerland, the following points must be observed:
1. Familiarize yourself with the country of emigration
In order to avoid surprises, it is of course advisable to deal with the planned emigration country in depth. The Federal Department of Foreign Affairs (FDFA) recommendsto visit it several times for a longer period of time – i.e. two to three months – and at different times of the year before deciding to move.
Financial advisors also advise familiarizing yourself with the country at an early stage – i.e. five to ten years before you plan to emigrate. The exchange with people who have taken this step is particularly important. “Emigration often fails because of the soft factors,” says Tashi Gumbatshang, pensions specialist at the Raiffeisen banking group. This includes the climate or the mentality of the people.
It is also important to get an idea of the possible cost of living. You should familiarize yourself with the local conditions particularly well if you want to buy or build a property. Some countries have restrictions on foreigners. Of course, these points are less applicable to former immigrants to Switzerland who are now “emigrating” again and may even still have their old passport from their country of origin.
2. Find out about the entry and residence conditions
The FDFA points out the differences in entry and residence conditions in different countries. Some countries are very reluctant to grant permanent residence permits to retired immigrants. In other countries, investing in the country improves the chances of getting a permit.
Some states have a special retiree visa that is valid for several years and can be extended. In order to receive one, you usually have to show that you have a certain income that you will receive for life. According to the authority, other states require a certain amount of money to be deposited in a bank account, often 50,000 francs or more. In general, retirees must also have health insurance.
3. Precise (tax) planning is very important
“You have to clarify the tax regulations very precisely,” says Gumbatshang. There is a risk of double taxation. It is therefore necessary to check whether there is an agreement between the emigration country and Switzerland that avoids double taxation. Raiffeisen advises contacting the cantonal tax administration or the State Secretariat for International Finance (SIF) and the responsible tax administration in the new country.
After emigrating, you are generally liable for tax at your new place of residence. But that doesn’t mean that you no longer have to pay any taxes in Switzerland. Raiffeisen points out that Switzerland still levies a withholding tax on lump-sum withdrawals from the pension fund and Pillar 3a, for example. According to the FDFA, there is also limited tax liability for immovable assets located in Switzerland – for example real estate – and business income. It can get tricky if you want to inherit assets. Here it is important to deal with the relevant laws in the country of emigration and the countries in which the descendants live. Good advice and planning is also very important here.
According to UBS, some countries offer preferential tax schemes for retirees who move permanently. These tax benefits have taken the form of flat tax rates or tax credits – but they may be conditional on a minimum income or wealth or on a property purchase. This is the case, for example, in Portugal, Malta, Greece or Italy. The tax advantages are sometimes limited in time.
4. Expats should Calculate currency risk
According to Gumbatshang, AHV pensions as well as money from work and private pensions can generally be transferred to any place of residence. In order to avoid delays and ambiguities, it is advisable to inform the compensation fund or the pension fund of the planned move at an early stage. Supplementary benefits (EL) can now only be obtained in Switzerland. The same applies to helplessness allowances.
According to UBS, Swiss nationals have the right to draw OASI pensions abroad – this is not always the case for people without a Swiss passport who have worked in Switzerland.
In a study, the big bank points out the currency risk that exists when income and expenses are in different currencies. For example, if you are based in the USA and have a financial plan in dollars, an appreciation of the dollar against the Swiss franc could significantly disrupt this plan. One way to prevent this is to use financial instruments for currency hedging. However, these often have their price. The Swiss franc has appreciated in value against most currencies over the past few decades.
5. Check voluntary AHV in the event of early retirement
Raiffeisen points out that if you deregister in Switzerland, you are no longer subject to the mandatory AHV. If the target country is within the EU or EFTA, the host country’s compulsory social security coverage – which often provides for lower benefits – applies and you can no longer pay into the AHV. If you emigrate to a non-EU country before the normal retirement age, you can join the voluntary AHV in order to avoid gaps in contributions.
6. Early withdrawal of BVG pension assets and Pillar 3a possible
Benefits from occupational pensions are regulated in the pension regulations of the relevant pension fund. Many regulations provide for early retirement. If gainful employment is given up after the age of 59 or 60 and the statutory retirement age has not yet been reached, according to the FDFA, the retirement assets from the occupational pension plan are transferred to a vested benefits institution. This can then be withdrawn in capital form at any time. Pillar 3a benefits can be drawn from the age of 59/60 regardless of where you live.
7. Health and accident insurance: inform and plan
According to UBS, when drawing a pension from Switzerland and living in an EU or EFTA country, basic insurance must be taken out in Switzerland. This is provided for in the health agreements that Switzerland has with these countries. In some of these countries, however, there is the possibility of opting for the local health system. However, medical and hospital costs abroad can be expensive in this case. Therefore, it is important to deal with appropriate insurance coverage.
According to the FDFA, statutory health insurance is no longer possible in Switzerland if you move to a country outside the EU or EFTA. In this case, emigrants must take out international insurance. After a certain age, this can get very expensive.
In addition, according to the authorities, you only have compulsory accident insurance if you work in Switzerland. For all other people, accidents are covered by health insurance. Consequently, it is necessary to clarify whether continued insurance in accordance with the Health Insurance Act in Switzerland is possible after emigration, for example with a settlement in an EU or EFTA country. If you opt out of basic insurance, you have to organize accident insurance yourself.
9. Swiss banks are sometimes strict with Swiss abroad
In recent years, many Swiss banks have dissolved business relationships with Swiss abroad or made the conditions stricter. The reasons for this are related to the changed regulatory environment and tax law requirements, as the FDFA explains. Other financial institutions charge higher fees for account management and tighten the conditions. Those who want to emigrate should take this into account and contact their bank at an early stage.