Despite lovers hardly giving a thought to their pensions when the moment comes for "Will you marry me?", marriage has a massive impact on pensions, tax and inheritance.
It's just a ring on your finger - a brief "Yes I do." But these three words change a few things. Marriage is the foundation of marriage law, but cohabitation is barely regulated by law at all. This means that in many respects, cohabiting couples cannot be compared to married couples. Registered partnerships of same-sex couples are treated the same as married couples when it comes to pensions which is why they're not mentioned separately below. Whether marriage or cohabitation is better suited to a particular couple depends on their personal situation. Both types of living together have advantages and disadvantages. "While cohabitation often has financial advantages in tax terms, obstacles soon build up as soon as children arrive, someone works part-time or one of the partners dies," says Jacqueline Weyermann, lawyer at AXA-ARAG.
However, many of these obstacles can be largely overcome with individual contractual solutions, but this requires extra effort, trust and an ability to deal with conflict. In any event, it makes sense to seek legal advice.
The greatest difference in marital status only becomes apparent after retirement, particularly in terms of OASI. The latter regards cohabiting couples strictly as individuals, meaning that on retirement, they each have a claim to the maximum OASI pension of up to CHF 28,680 per person. Unmarried couples therefore receive up to CHF 57,360 p.a. For married couples however, the total of both individual pensions cannot exceed 150 percent of the maximum pension for single people. By getting married, the annual OASI pension is therefore reduced by up to CHF 14,340 to CHF 43,020 for both spouses together. According to Jacqueline Weyermann, "Couples getting married gain security, but OASI penalizes them by up to CHF 14,340 every year."
"Couples getting married gain security, but OASI penalizes them by up to CHF 14,340 every year."
However, married couples fare better under OASI if one of them dies, in that the surviving spouse receives survivors' benefits from Pillar 1. Cohabiting couples are left empty-handed here and cannot benefit each other in Pillar 1 through a will either. So in terms of inheritance law too, marriage brings more financial security in the event of death. The surviving spouse receives a survivors' pension from Pillar 2 or at least a settlement. However, cohabiting couples can make their partner a beneficiary in their will, but whether benefits can be taken from the pension fund depends on the pension fund in question, so the relevant pension fund regulations must be consulted. The regulations may provide entitlement to a claim from the surviving partner, including in respect of joint children, if the deceased partner was largely responsible for living costs or the two had already lived together in a partnership for more than five years. "For cohabiting couples, it is particularly critical upon separation if one person worked part-time during the relationship and only paid very little into their own pension fund. Without additional protection, this results in correspondingly large pension gaps," says Jacqueline Weyermann.
"For cohabiting couples, it is particularly critical upon separation if one person worked part-time during the relationship and only paid very little into their own pension fund. Without additional protection, this results in correspondingly large pension gaps."
In addition to OASI and pension funds, the claims in tied pension plans, Pillar 3a, also differ. While surviving spouses are always the first-named beneficiary, tied pension plans in cohabitation are normally divided between the surviving partner and descendants, unless the deceased partner has specified that the partner should receive all the benefit. Here too, however, certain conditions must be met for the surviving person to enjoy a benefit, such as length of the relationship, that the survivor was largely supported or is responsible for maintaining joint children. Only if there are no descendants can the partner benefit without these conditions being met, provided this is specified in the will. Nevertheless, it must always be borne in mind that there is no legal inheritance claim in a cohabitation partnership. The partner must benefit through a will. Although the legal heirs are stated in the compulsory portion, the free inheritance section can be used and allocated to the life partner.
Married couples fare much better when it comes to inheritance tax, as cohabiting couples are subject to inheritance tax in most cantons, while married couples are essentially exempt from tax. The situation is different for other taxes: married couples are taxed jointly by law, which has a negative impact for higher-income couples due to progressive tax rates. Cohabiting couples, on the other hand, are taxed individually, so they usually pay less tax than if they had been married. Since 2008, there has been a higher two-earner allowance and a marriage allowance for direct federal tax which slightly reduces the differences compared to cohabitation taxation.
Regardless of the life form you ultimately opt for, it's important for you to know what your personal pension situation is and to protect each other in the cohabitation. Advantages and disadvantages - often love is also about gut instinct.
• Tax tends to be lower
• Larger OASI pension
• Always out of court, uncomplicated, can be dissolved at little cost
• Inheritance governed by law
• Upon death, entitlement to benefits from OASI, pension fund and Pillar 3a
• Essentially no inheritance tax
• Limitations when it comes to inheritance
• No OASI benefits in the event of the partner's death
• Benefits from the pension fund and Pillar 3a only under specific conditions in the event of the partner's death
• Inheritance tax depending on canton
• Smaller OASI pension
• More expensive upon divorce
• Usually higher tax