Withdraw 2nd pillar when leaving Switzerland to go to UK (post Brexit)

Hi there,

I hope you can clarify some couple of points on taxation of 2nd pillar if moving to UK post brexit. To specify I’m Italian living in CH and not a Swiss citizen.

My understanding is that I can withdraw the whole capital and CH will apply a withholding tax at source, which is not a huge percentage apparently.

Now I have two options:

1) They will transfer the capital (taxed) in my current Swiss bank account (which I would like to keep, discussion with bank about the fee will happen soon).

2) Get the transfer to a new bank account that I will open in UK.

First question will be: in Switzerland, the capital will only be taxed once right? With the tax at source. Or it will undergo further taxation?

Second question will be: if I keep them in my swiss bank account, will it be taxed further somehow even if I won’t be leaving and working in Switzerland anymore?

Third question would be: if I keep it in my Swiss bank account, do I have to notify UK that I have this money in another country?

Fourth question: will UK apply taxation in any case on my capital (whether they are in CH in a bank account or I move them to a UK one)? If yes, there is a double taxation agreement between the two countries? 

What would be the best way to go to save some money and not pay a lot of taxes?

Thank you for your help, this place is so helpful :) 

Ok. Let me clarify the system for you.

When you leave Switzerland, you have two options:

1. Leave your pension fund benefits in Switzerland

Transfer your Swiss pension benefits to a Swiss vested benefits foundation (a vested benefits savings account, asset management service, or retirement fund) and leave them in Switzerland. A possible advantage of this is that, as far as I know, Swiss vested benefits enjoy tax-privileges in the UK (and other European countries), with regards to wealth and capital gains taxes.

As long as the benefits remain vested in Switzerland, they should not affect your UK income tax.

2. Withdraw your Swiss pension benefits

The Swiss pension fund or vested benefits foundation will deduct a withholding tax. The size of this withholding tax depends on which canton the pension fund or vested benefits foundation is domiciled in. But in the long-term, the Swiss withholding tax is irrelevant because Switzerland has a double taxation agreement with the UK. This agreement lets you reclaim the Swiss withholding tax by proving that you have tax residence in the UK.

If you are a legal resident of the UK at the time that you make the withdrawal, then you obviously have to declare the withdrawal and pay possible UK taxes on it. Where the money is held is irrelevant, and Swiss banks are required to share information about UK residents' accounts with His Majesty's Revenue & Customs. So you pay taxes in the UK, but you reclaim the Swiss tax. It may be worth consulting a UK tax advisor as to the best approach to withdrawing foreign benefits. It may be possible to make a tax-neutral transfer to a UK pension scheme or other tax-privileged instrument.

You can have the money transferred to either a Swiss or UK bank account when you withdraw. This will make no difference from a tax perspective. However, many Swiss banks either do not let you keep your Swiss account when you move away, or charge you special high account fees for non-residents. Unless you need a Swiss bank account for other reasons, it may not be worth keeping a Swiss bank account. Check with your bank about possible rules for non-residents.

Thanks Harold for your feedback.

however I’m still confused.

in the document below from the UK gov, page 21 regarding pensions, it says 

(1) Subject to the provisions of paragraph 2 of Article 19, pensions and other similar remuneration paid to an individual who is a resident of a Contracting State, shall be taxable only in that State.
(2) Notwithstanding the provisions of paragraph 1, a lump sum payment derived from a pension scheme established in a Contracting State and beneficially owned by a resident of the other Contracting State shall be taxable only in the first-mentioned State.

so apparently I should only pay taxes in CH and not in UK, therefore I cannot reclaim the tax at source ? Or I can still reclaim them as I will be living in UK? 
please consider that I will be there in UK under 5 year sponsorship.

I hope my question make sense ?

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/868917/1977_UK-Switzerland_Double_Taxation_Convention_as_amended_by_the_2009_and_the_2017_protocols_in_force.pdf#page21

I'm not a UK tax expert, but the DTA does seem to indicate that your benefits would be taxable in Switzerland. If that is the case, kudos to you, because if your Swiss pension fund or vested benefits foundation is in a low-tax canton, the Swiss withholding tax should be substantially lower than the taxes you would pay in the UK.

In any case, you will have to declare the withdrawal in the UK, if you are resident there. HM Revenue & Customs will let you know what happens from there, in keeping with the DTA. That makes things pretty simple.

The moneyland.ch financial guide for people leaving Switzerland answers questions about pillar 2 benefits and other aspects of personal finance:
Leaving Switzerland: Important Financial Questions Answered

Hi francescapanico21,

Did you end up moving the UK and cashing out the Pillar 2? Was it taxed by the UK government or did you only pay Swiss witholding tax?

If anyone else has experience with this situation, please do share. Thank you!

Best, Ethan

A friend of mine just withdrew her Swiss pension benefits last year after moving to the UK. She paid the Swiss withholding tax, but no UK tax.