In Switzerland, 40% of a life annuity (pillar 3b) is currently treated as taxable income, while 60% is considered tax-exempt repayment of capital. It follows that, in an environment of (very) low interest rates, part of the capital repaid is taxed as income.
As of 1 January 2025, the portion of taxable income of life annuities will, in principle, result from the underlying investment conditions.
In the case of Swiss life annuities ruled by the Insurance Contract Act, the maximum technical interest rate of the FINMA will be applied to calculate the portion of taxable income. The maximum technical interest rate applicable at the time of the conclusion of the insurance contract will be binding and applicable to the guaranteed portion of life annuities paid from 2025 onwards. E.g., for an insurance contract concluded in 2022, the relevant maximum technical interest rate is 0.05%, resulting in a taxable share of 1% (instead of currently 40%). Any additional (non-guaranteed) profit sharing will be taxable at 70%.
In the case of non-Swiss life annuities, the portion of taxable income will be determined on the basis of the average yield of the Swiss 10-Year Government Bonds in the year of the annuity payment and the preceding 9 years, increased by 0.5%.
From a fiscal perspective, life annuities finally become attractive. However, a life annuity insurance market revival will also depend on financial aspects (yield and insurance costs). Of course, for individuals who want to be protected against longevity risk and have the certainty of a guaranteed cash flow for the rest of their life, life annuities now become an option to be seriously considered.
(publication only in Italian)
Airoldi L., La nuova imposizione delle rendite vitalizie e delle forme di previdenza simili, in “Novità fiscali”, 2023 (5). pp. 309-318