Pillar 2 - specific questions

Hi there

My spouse and I have been here for 7 years. Sadly we need to exit and head back in 2025 (unexpectedly due to family reasons). We relocate back to our non EU asian hometown, which does not have an equivalent pension arrangement with Switzerland. We understand this means we can withdraw our pillar 2 in full.

Thanks to excellent resources here, we have a good understanding of what needs to be done. However, we have 2 specific questions.

1. We have purchased or bought in to our Pillar 2 in 2022 and 2023. At that time we clearly had no plan to leave Switzerland this early. Anyway, as we leave in 2025, what are the options for this? We know that the basic rule is that we are not allowed to withdraw the purchased pillar 2 amount for 3 years. Could we a) split each of our pillar 2 to 2 different vested benefit accounts and leave 1 in Switzerland, but withdraw the other (i.e. we do not withdraw the purchased amount); or b) contact the tax office and offer to pay the taxes that we originally saved on the purchased amount?

2. For a high value pillar 2 account (>800k chf), does canton Schwyz still have the lowest ccapital ithdrawal tax? The capital withdrawal tax calculators of UBS and Postfinance indicate that other cantons (e.g. Graubuenden) have lower taxes when the amounts are this high. Please could you let us know if you are aware.

Thanks very much.

Answer to question 1:

The waiting period applies to your entire Swiss pillar 2 pension fund benefits (per person), not just to the voluntary portion. In other words, if you make a voluntary contribution, you cannot withdraw cash from the whole pillar 2 until 3 years after that time.

The pension fund or vested benefits foundation may still pay out the money, but the Swiss tax office will annull the tax deductions you've received for the voluntary contributions made less than 3 years ago. You will then be billed for the income tax, wealth tax, etc. in arrears in your final Swiss tax bill.

That also applies if you withdraw early becuase of leaving Switzerland. I'm not completely sure how the Swiss tax would be charged in arrears if you were to withdraw after you are no longer a tax resident, since it could be very difficult for them to bill you and collect on the debt. For that reason, I assume it would be deducted from your money along with the withholding tax when it is paid out (but I don't know that for a fact).

Answer to question 2:

Schwyz (still) has the lowest withholding tax for withdrawals from the pillar 2 and pillar 3a due to emmigration. That is true across all constellations AFAIK. Next in line are Nidwalden, Uri, Schaffhausen, and Zug.

Possibly you are mixing up the withholding tax (that applies to emmigration) with the retirement capital withdrawal tax (that applies to early withdrawals in Switzerland, like buying a property). Schwyz is not necessarily the cheapest for the capital withdrawal tax, but it has the lowest withholding tax rates.

Vermögenszentrum has a good comparison of withholding taxes here:
https://www.vermoegenszentrum.ch/vergleiche/quellensteuern-auf-vorsorgebezuegen

It could also be worth checking whether the country you are moving to has any tax breaks for foreign retirement benefits that could help you avoid paying tax there on top of the Swiss withholding tax. Or maybe the country has a double-taxation agreement with Switzerland so you only pay tax in one country. In any other case, you would pay the Swiss withholding tax, plus taxes in your new country on top.

There is also no law that says you have to withdraw your Swiss pension benefits when you leave Switzerland. You can just as well leave them in a Swiss vested benefits foundation until the 3-year period ends. You could put them in Swiss vested benefits savings accounts or invest them with pillar 2 robo advisors or retirement funds.