Contingency funding or capital, which advantages and disadvantages ?

The legislation concerning the 2nd category doesn’t force pension funds to leave the choice to the policy-holder to give up their regular retirement income in order to receive a capital instead. Therefore, it is important to get information about this option before choosing.

By pension funds which offer this possibility, the policy-holder must usually inform the company three years before reaching retirement age. Here is some information which will help you to choose.

The income

Usually paid at the same intervals as wages, it helps the pensioner managing his budget. Moreover, it has the social side required by the law and it is paid till death. It has to be known that some contingency funding institutions prepare an indexation of retirement incomes.

The capital

The payment of the retirement fund all at once, in the shape of a capital of several tens or hundreds of thousands of Francs requires a planning which may appear to be difficult: Indeed, the pensioner must calculate himself the parameter of life expectancy.

The capital provides outputs depending directly on the fluctuations of the market. Information about it and a minimal knowledge must be ensured by the pensioner. This may become more difficult as he gets older.

And on the level of taxes ?

What about taxes?

The income is taxed as a salary, whereas the payment of a capital is subject to a single and taxation.

The level of this tax significantly varies according to cantons and towns. For a capital of 200'000 CHF
paid to a married couple, the tax (cantonal and municipal altogether):

14' 961 CHF in Geneva.
29' 986 CHF in Lausanne.
9' 731 CHF in Liestal (small countryside town near Basle).