Publications
Withdrawals from the 2nd/3rd Pillars: Will Taxation Change the Game?
The Federal Council proposes higher taxes on lump-sum withdrawals from the 2nd and 3rd pillars to align them with pension taxation and support social insurance amid demographic and budgetary pressures.
Where does the process stand?
The consultation phase ended on 5 May 2025. The Federal Council will now analyse the feedback received, adjust its proposal if necessary, and then submit it to Parliament. If the text is adopted, the most likely effective date would be 1 January 2027.
The reform proposes to introduce a progressive scale, replacing the current reduced rate, with a particularly marked impact on large lump-sum withdrawals.
Illustrative figures: before/after
Source: Federal Council, 2025 draft. The rates and amounts are indicative and may vary depending on the canton.
A Societal Debate: Between Fiscal Fairness, Trust, and the Future of the System
The issue of taxation on lump-sum withdrawals touches on fairness, trust in the pension system, and Switzerland’s ability to ensure the sustainability of its social insurance. The strong reactions to the proposal reflect the wide range of views on pension and tax policy. Below is a detailed analysis of the arguments raised by different stakeholders.
The Federal Council and Supporters of the Reform
The Federal Council justifies its proposal with several key arguments:
- Strengthening social insurance funding: Faced with an ageing population and pressure on the AHV (OASI), the reform aims to generate additional tax revenues – estimated in the hundreds of millions of francs per year – to support the system’s stability.
- Fiscal fairness: Currently, lump-sum withdrawals are taxed at a significantly lower rate than annuities, creating unequal treatment. The government believes it is fairer to align the tax treatment of both options, so the choice between annuity and capital is based on real needs rather than tax incentives.
- Combating tax optimisation: The reform seeks to limit strategies that involve accumulating large pension assets and withdrawing them as capital to benefit from lower taxation, sometimes by leaving Switzerland.
- Harmonisation and transparency: The reform also aims to simplify the system by removing different scales for married and single individuals, making taxation more understandable for everyone.
Right-wing Parties (FDP, SVP) and the Economic Sector
Right-wing parties and many business representatives strongly oppose the reform, citing specific arguments:
- Threat to individual pension planning: The reform penalises voluntary savings and personal responsibility – two pillars of the Swiss model. Heavier taxation on those who made the effort to save is perceived as unfair.
- Risk of breaking trust: Changing the rules when many people have planned their retirement based on the current tax system is seen as a breach of trust. It could discourage long-term saving and weaken support for the system.
- Negative economic impact: Heavier taxation on lump-sum withdrawals could reduce household investment capacity, hinder consumption, and ultimately harm the Swiss economy.
- Administrative complexity: Introducing new scales and more complex calculations risks increasing the administrative burden for both taxpayers and tax authorities.
The Pension Sector (Pension Funds, Insurers, Professional Associations)
Stakeholders in the pension sector raise specific concerns, often technical but essential for the system’s stability:
- Uncertainty for insured persons: Pension funds and insurers highlight that the reform creates uncertainty for those nearing retirement, who need to plan their financial future with confidence.
- Loss of the Swiss system’s appeal: Switzerland could lose one of its key advantages – flexibility in choosing between annuity and capital, and the ability to optimise one’s retirement strategy.
- Windfall effect and early withdrawals: Some experts fear a surge in early withdrawals before the reform takes effect, paradoxically reducing short-term tax revenues.
- Alternative proposals: The sector suggests other ways to strengthen the pension system, such as gradually raising the retirement age, improving coordination between the pillars, or offering incentives for annuity options over lump-sum payments.
What Next?
The debate is underway and the consultation phase has ended. The next crucial step will take place in Parliament, where discussions and decisions will shape the future of pension taxation in Switzerland.
Now is the time to stay informed, anticipate changes, and diversify your pension strategies.
Feel free to share your opinion or contact us to discuss the concrete impacts of this significant change!
Michel Mazenauer
Executive Director
June 03, 2025
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