Future-proof your planning
When your career takes you to another country financial planning can be complicated. Sound international advice, independent choices and secure, confident decisions are required, says Majbritt Byskov-Bridges from Guardian Wealth Management.
Here she highlights the Top Ten pitfalls that could derail your finances:
- Long-term planning. It’s often difficult for Internationals to plan ahead. Where are you going next? When are you going to retire? While expats usually benefit financially from a career move abroad, relocation is expensive and it can be hard to budget in a new environment.
- Opening a bank account. Anyone employed in Switzerland is entitled to a basic salary account. Americans need to talk to a specialised US client adviser - investing through the main Swiss banks if the sum is more than $1m and 3rd pillars of pension must stay in cash. Under present regulations, Frontaliers should keep their investments in France, where there are tax-efficient options available for Internationals.
- Transferring your pension. Depending on the country, an accumulated pension may be blocked. Sometimes it makes sense to buy back years of Swiss pension; in other cases to unblock to invest elsewhere and avoid erosion by inflation.
- Entering the Swiss Pension. The Swiss State Pension AVS/AI or 1st Pillar is 10.3% of gross salary - paid 50/50 by individual and employer. The Professional Pension LPP or 2nd Pillar is your company pension, which is between 15-20% of salary. A Private Pension or 3rd Pillar is an optional tax deductible pension, limited to CHF6,768 (or 20% of salary for self-employed). Geneva Canton also allows a tax deductible 3B pension, but this should be discussed with a specialised adviser. If you have contributed for at least 40 years, the payout of your 1st, 2nd, 3rd pillars should be approx. 70% of final salary at retirement. Yes, 40 years!
- Leaving the Swiss Pension. Take out your pension or leave it here? How to transfer in the most tax efficient way? If you are employed by the UN, CERN or another international organisation you may also receive 70% of salary at retirement - if you have contributed a minimum of 35 years to the pension fund. But watch for shortfalls. Note: Women tend to have reduced pensions in CH, earning less than men, on average, and retiring a year earlier. They are also more likely to work part-time.
- Life Cover/Health Insurance. Check existing life cover is valid cross-borders - or purchase international life cover. Health Insurance premiums are obligatory and you must register within three months of arrival. If you are a Frontalier you have the choice of either the Swiss LAMal cover with a fixed premium (CHF300 p/month starting min.) or the French CMU (8% of salary at present). With the CMU you cannot use Swiss doctors or hospitals.
- To buy or not to buy.Rent is high in Switzerland but to buy a property you need a 20% deposit + 5% notary fees. You will also pay tax based on the rental value of your property. International mortgages are available to buy outside Switzerland but check property taxes as these are steeply rising in most countries.
- Children. Internationals often start their families late due to career development, and consequently university fees clash with retirement! Plan for education fees as early as possible...
- Partners.The partner of a major career mover may find it hard to work in Switzerland without speaking French/German or having the ‘right’ permit. Specialist training is not always recognised either.
- Low interest rates. The key is to diversify in different currencies through portfolio bonds. Again a financial expert will advise.
‘No one plans to fail – they simply fail to plan...’
WEALTH BY MAJBRITT BYSKOV-BRIDGES
Majbritt is a Senior Financial Consultant at GWM, helping clients find the best financial solutions and taking a specific interest in protecting the financial future of the international community. With a BA in Economics from the Copenhagen Business College and a trilingual Masters from the European School of Management based in Oxford, Madrid and Paris, Majbritt started her career on the trading floor at Morgan Stanley in London. She is Danish/British but grew up in Ecuador and Switzerland.