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Accurity Blog

Love and bliss are two words traditionally associated with getting married. But is promising to “remain together in both good or bad times, no matter what”, becoming a mantra of a bygone era?

The reality is, the number of people getting married in Switzerland is falling. In 2018 for example- 39,800 weddings took place – representing a 2 percent drop compared to 2017. At the same time, the overall divorce rate continued to rise during the same period, and when 16’200 divorces recorded. This according to the national statistical office.

And the fall in the number of people willing to commit themselves to one partner for life, is not only related to heterosexual couples. According to official data, there was also a sharp decrease in the number of registered civil partnerships between same-sex couples in Switzerland, which in 2018 was down by 13.2 percent compared to 2017.

 

So what lies behind these negative trends? There are obviously several reasons why couples get divorced, or don’t want to get married in the first place.

Financial problems are listed high on the reasons for divorce.  But what many people getting married fail to fully comprehend at the outset of their partnership, are the long-term financial consequences for a married couple in Switzerland. 

  • In fact on today’s average wage in Switzerland, a married couple will suffer a marriage “penalty” of around a half a million Swiss francs over a 30-year working life, just for being married. This in an average Swiss canton.
  • In high tax cantons, it can be worse. Then the worse case scenario would be to get 25% less pension between both partners from the Swiss State. As a result, many married couples now have to move abroad to a cheaper country in retirement. (The Accurity Source Tax calculator can be referenced for those wishing to estimate the marriage “penalty”).

 

But change to this unequal system is around the corner. A group organising a vote against unequal tax laws for married couples announced this past week that it had collected the required 100,000 signatures to launch a referendum.

And according to the latest count, from the 128,000 signatures already collected over 104,500 had been certified by municipalities. This means there will now definitely be a national referendum in Switzerland on this – which will most probably take place in 2024.

But before the referendum vote is taken, here we look at some of the pros and cons from 4 key financial perspectives that currently affect married people in Switzerland.

 

  1. Social Security
  • Pro
    • Women are entitled to receive a lifelong widow’s pension based on their spouse’s social security contributions should they pass away.
    • Men may also receive a widower’s pension based on their spouse’s social security contributions. This applies for as long as they care for any children from the marriage aged 18 or younger.
    • When not employed, the employed partner does not have to pay the minimum annual social security contribution for the other person from their salary.
  • Con
    • Two individuals living together without getting married (or registering a partnership)  are entitled to receive two full Swiss social security pensions.
    • As long as both partners contribute to social security throughout their working lives, each receives at least the minimum state pension.
    • As a married couple, the combined pensions are limited to 150% of a single maximum pension. This means the married couple will receive just one-and-a-half maximum pensions instead of two full pensions.
  1. Taxes
    Switzerland’s progressive income tax system means for married couples, both incomes are combined to determine which tax bracket the married couple are placed in.
  • Pro
    • There is a small allowance for for married couples.
  • Con
    • If both partners earn – then both incomes are added to determine which tax bracket is applicable. Because the tax rate is highly progressive, this means married couples generally pay more income tax and this can  be very significant for average to high earners.

 

  1. Inheritance
    Switzerland has strict rules dictating who gets what when somebody passes away. The spouse is first, followed by any children.
  • Pro
    • The spouse receives a large part of any assets if one partner passes away.
    • Depending on the canton of residence, there is little or no inheritances taxes on gifts made to a spouse.
  • Con
    • There is less flexibility, because a compulsory share will go to the spouse or registered partner. Even if a will is in place,  people are still required to leave a large share of their estate to their legal heirs.
  1. Pension fund
    Although exact rules governing occupational pension funds (pillar 2) may vary between individual funds, there are certain general rules that apply to married persons.
  • Pro
    • The spouse or registered partner receives a survivor’s pension from the other partner’s occupational pension fund after they die.
    • The couple need to have been married for at least 5 years. Additionally, they must be at least 45 years old or have dependent children to care for.
    • The pension the spouse receives upon death is equal to 60 percent of the old-age pension which would have been received upon retirement (some pension funds may offer higher pensions).
  • Con
    • In the case of divorce, the pension fund is divided between both spouses pension savings.
    • Depending on how much one spouse has contributed to their pension fund, the effects of this splitting may range from minor to significant.
    • For unmarried couples without a registered partnership, pension fund savings normally remain in the possession of the person it is registered in.

 

In summary – the current tax and pension rules in Switzerland do not favour married couples or those registered in a legal partnership. In fact, there are serious discrepancies in the amount of benefits paid out to married couples, despite them often contributing more in taxes than single people living together. This could all be about to change and with a national referendum on the horizon, it may soon make more financial sense to get married or enter into a legal registered partnership in Switzerland.

Accurity GmbH is a professional employer organisation (PEO) based in Zurich. We are SECO licensed with a 20+ year enviable reputation as a trustworthy, reliable and transparent partner for companies of all sizes including SMEs, contractors and recruitment agents. Our core services include EOR and ANobAG for contractors and clients wishing to engage contractors. We are based in Switzerland and have excellent local knowledge and connections.  Contact our team for a non-binding consultation on sales@accurity.ch to see how we can help you.