Four times more taxes Now the Federal Council wants to hit the middle classes in the wallet

The Federal Council wants to drastically reduce the tax benefits on third pillar payments and pension fund capital. This would hit the middle classes and high earners particularly hard.

The Federal Council is planning to reduce the tax benefits for the second and third pillars of old-age provision, which will mean significantly higher taxes for many people.

A new calculation method envisages that the tax burden will depend on income, which will primarily affect the middle class and high earners. For example, the tax for high earners could quadruple, as reported by theSonntagszeitungnewspaper. The newspaper cites the following example: Anyone who earns CHF 140,000 and has CHF 350,000 paid out will pay CHF 17,800 instead of CHF 6,580 in future.

While low earners could benefit, the planned change outrages many who relied on the previous tax privileges. Critics such as Erich Ettlin, a member of the Center Council of States, see this as "a breach of good faith."

Problems for pension funds?

Supporters of the reform, such as the SP, argue that the current regulation mainly benefits the rich, who achieve considerable tax advantages through their pension provision. The planned change is expected to generate additional revenue of around CHF 250 million per year for the federal government.

However, experts warn that the loss of incentives could greatly reduce the attractiveness of the second and third pillars, which could lead to fewer people paying in.

Another problem could arise for pension funds. As many funds rely on new pensioners having their capital paid out, the reform could increase the financial burden on the funds. According to the Sonntagszeitung newspaper, experts expect more people to opt for an annuity instead of a lump-sum payment in future, which means higher costs for pension funds.

Financial institutions that profit from payments into the third pillar are also concerned. Banks and insurance companies see the planned reform as a threat to the three-pillar system and warn of the possible long-term consequences, including an increase in dependency on social benefits in old age.