The Most Important Points at a Glance
The decision between pension and capital is made once and lasts a lifetime. It does not hinge on a single number, but on the interaction of AHV, pension fund, freely available assets, home ownership and taxes. At Baeriswyl Consultations, both options plus a mixed form are calculated using the original documents before you decide.
In my experience, the biggest risk is not choosing wrongly but starting too late. Many pension funds require the application for a capital transfer months, some years, in advance. Starting to consider the topic at age 60 keeps all options open.
What is the difference between pension and capital?
The pension is a lifelong, fixed income from the pension fund. It does not end, even if you become very old, and it continues in a reduced form to the surviving spouse. However, it is fully taxable as income and cannot be bequeathed.
Capital is the saved retirement credit in one lump sum. It is taxed once at a lower rate, remains at your disposal, and can be bequeathed. You bear the risk of it running out too early and the responsibility for its investment.
The mixed form combines both: part as a pension for the fixed base, part as capital for flexibility. This combination is often interesting when security, inheritability and tax impact matter at the same time.
«The right answer is not on the pension statement. It is in the calculation that merges AHV, pension fund, wealth and taxes over thirty years.»
What questions decide about capital or pension?
| Question | Better for Pension | Better for Capital |
|---|---|---|
| How secure should the income be? | Fixed amount for life | You can tolerate fluctuations |
| What about health and life expectancy in the family? | Long life expectancy | Rather short or uncertain |
| Is there wealth outside the pension fund? | Little free wealth | Sufficient reserve for bad years |
| Should something go to the children? | Less important | Important, capital is inheritable |
| How is the mortgage carried? | Pension counts as income by the bank | Capital requires an affordability discussion |
| How much tax is due? | Income tax every year | One-time capital tax, depending on amount and year |
What does a practical example show?
At Baeriswyl Consultations we calculate such cases year after year before anyone takes the definitive step. A Freiburg-based couple, aged 58 and 56, both employed, with a home and a mortgage, plan retirement at 65. The retirement savings balance for person 1 is about CHF 640,000 at retirement. The example is a calculation example and not client data.
| Variant | Income per month from 2035 | Withdrawal from wealth per year |
|---|---|---|
| 100% Pension | about CHF 7,700 | about CHF 3,900 |
| 50% Pension, 50% Capital | about CHF 6,300 | about CHF 19,900 |
| 100% Capital | about CHF 5,000 | about CHF 35,900 |
With a need of CHF 8,000 per month, all three variants are sustainable until the planning horizon. The difference is not in what, but in how: security and simplicity with pension, flexibility and inheritability with capital, a middle solution with the mixed form.
Why the order of withdrawals saves taxes
Capital from the pension fund and pillar 3a is taxed separately from the other income, at its own rate, which increases with the amount. Several withdrawals in the same year are added together. Therefore, the order can make a noticeable difference, especially when multiple retirement accounts exist.
| Withdrawal | Tiered over four years | All in the retirement year |
|---|---|---|
| Two 3a accounts of CHF 55,000 each, PK-capital CHF 320,000, partner's 3a CHF 45,000 | about CHF 26,800 taxes | about CHF 37,800 taxes |
About CHF 11,000 difference just due to the order. The prerequisite is that the 3a accounts were separated in time and the pension fund allows the withdrawal in the desired form.
How does the decision process work at Baeriswyl Consultations?
| Phase | Duration |
|---|---|
| First consultation | about 30 minutes, free of charge |
| Documents: pension statement, AHV account statement, 3a statements, tax return, mortgage contract | 1 to 2 weeks |
| Planning with three variants, year by year until planning end | 1 to 2 weeks |
| Discussion | about 90 minutes |
| Implementation: register with the pension fund, separate accounts, bank discussion | depending on deadlines 3 to 36 months |
We do not tell you what to choose. We show what each variant carries, costs and what remains in the end. You decide yourself, but based on a calculation anchored in your numbers.
What should you consider before deciding?
- Check the pension fund's deadline for capital withdrawal; it is in the regulations.
- For married couples, the capital withdrawal requires the spouse's signature.
- Those taking capital should have the affordability discussion with the bank before deciding, not after.
- A voluntary contribution to the pension fund blocks capital withdrawal for three years.
- Income tax on the pension and the one-time capital tax should be included in the same calculation.
Frequently asked questions
Can I change my decision later?
What share is typical for a mixed form?
What happens to the pension if I die?
Is financial planning worthwhile only for this decision?
Pension or capital is not a matter of gut feeling or a rule of thumb, but of your numbers. Those who calculate withdrawal variants early decide more calmly, make use of deadlines and pay no more taxes than necessary.
At Baeriswyl Consultations in Freiburg we combine independent retirement advice with digital financial planning so the decision for your retirement, your wealth and your life situation fits. Thus the question of capital or pension becomes a well-founded decision with a clear basis.
In Short
Pension or capital from the pension fund should not be decided by feeling, but with a complete calculation of income, taxes, wealth and family. Those who start early can better manage deadlines, mixed forms and tax consequences.
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Baeriswyl Beratungen GmbH, Freiburg