Living abroad comes with its own set of unique challenges, including managing pensions, taxes, currency fluctuations, and inflation risks.
One key aspect to consider is your future financial management and investment strategy. It is advisable to plan ahead and take into account country-specific differences and your initial financial situation before moving abroad.
When it comes to retirement income, three main sources typically come into play:
State Pension (AVS / AHV)
Personal Pension fund
Income from assets
The Swiss Federal Council reviews AVS / AHV adjustments in line with changes in prices and salaries every two years. However, the impact of inflation on your AVS / AHV pension will depend on how prices and salaries change in your new country compared to Switzerland. Additionally, payments from Pillar 2 are generally not adjusted for inflation, which means that inflation can reduce the purchasing power of your pension.
Managing currency risk is another important consideration. Both Pillar 1 and Pillar 2 offer the option to receive monthly payments in either Swiss francs or the local currency of your country of residence.
If your income and expenses are in different currencies, you are therefore exposed to currency risk. It is generally advisable to convert only the amount needed for your living costs into the local currency if it loses value compared to CHF.
Double taxation can be a concern when it comes to pension payouts. If you are already a resident abroad at the time of payment, pension payouts from your personal pension fund or Pillar 3a are taxed at source in the Canton where the your Pension Foundation Provider is based. However, you may be eligible to reclaim this tax or have it credited towards taxes due abroad, provided there is a double taxation agreement (DTA) between Switzerland and your country of residence.
Please note that all content within this article has been prepared for information purposes only. This article does not constitute financial, legal or tax advice.