My new employer's pension scheme lets me choose my contribution to the pension scheme: 5%, 6%, or 7%. Employer's contribution is fixed to 7%.
I don't have much intuition for these numbers. Is it worth having a higher contribution assuming I can afford it? Do the returns from higher investment scale proportionally or are diminished? What else should I think about when making up my mind about this?
I'd be grateful for any input on this matter!
Thanks a lot!
My new employer's pension scheme lets me choose my contribution to the pension scheme: 5%, 6%, or 7%. Employer's contribution is fixed to 7%.
I don't have much intuition for these numbers. Is it worth having a higher contribution assuming I can afford it? Do the returns from higher investment scale proportionally or are diminished? What else should I think about when making up my mind about this?
I'd be grateful for any input on this matter!
Thanks a lot!
Hi Stanislav,
The contributions are credited to your individual pension account. The more you contribute the more you save for your retirement. The returns will depend on the investment strategy of your pension fund.
Best regards,
André Graf
Hi Stanislav,
The contributions are credited to your individual pension account. The more you contribute the more you save for your retirement. The returns will depend on the investment strategy of your pension fund.
Best regards,
André Graf
Hi Stanislav,
Contribute the highest percentage you can afford. The money is tax-deferred and definitely worth it if you plan to stay here longer-term.
Best,
Steven
Hi Stanislav,
Contribute the highest percentage you can afford. The money is tax-deferred and definitely worth it if you plan to stay here longer-term.
Best,
Steven
Hi Stanislav,
It depends if you need more money now or more in your old age. However, if you want to save for your old age anyway, then a higher contribution is more tax efficient than most other types of saving, as the entire amount gets deducted from your tax base. The benefit is at the marginal tax rate which is typically much higher than your average tax rate. You can try with your online tax declaration. Just put an extra 1000 francs of deduction and let it recalculate to see how it reduces your tax burden (only for simulation, of course).
The money is blocked until you are 65, though, and that may not be everyone's cup of tea. Saving taxes is not a purpose in itself and 5% may be enough.
By the way, if you want to buy your own house or flat to live there yourself, you can also take out the pillier 2 for that.
Hi Stanislav,
It depends if you need more money now or more in your old age. However, if you want to save for your old age anyway, then a higher contribution is more tax efficient than most other types of saving, as the entire amount gets deducted from your tax base. The benefit is at the marginal tax rate which is typically much higher than your average tax rate. You can try with your online tax declaration. Just put an extra 1000 francs of deduction and let it recalculate to see how it reduces your tax burden (only for simulation, of course).
The money is blocked until you are 65, though, and that may not be everyone's cup of tea. Saving taxes is not a purpose in itself and 5% may be enough.
By the way, if you want to buy your own house or flat to live there yourself, you can also take out the pillier 2 for that.
In addition, I should mention that you save taxes now, but there is a tax to be paid later when you get the benefit. It can be a lot less, but it should not be neglected completely.
On the other hand, you have an advantage as you do not pay wealth tax on your pillier 2 or tax on the revenue (interest, dividends) it generates. For conventional investments you would have to pay both.
In addition, I should mention that you save taxes now, but there is a tax to be paid later when you get the benefit. It can be a lot less, but it should not be neglected completely.
On the other hand, you have an advantage as you do not pay wealth tax on your pillier 2 or tax on the revenue (interest, dividends) it generates. For conventional investments you would have to pay both.
