A Swiss annuity is similar to an American annuity, in which insured parties pay a premium which will be returned to them in time. However, unlike American and European annuities Swiss annuities can be used in offshore tax planning and are not subject to the usual tax and bankruptcy reporting requirements.
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Like its banking counterparts, the Swiss insurance industry is robust and vibrant, due to the Swiss being one of the most heavily insured populations on the planet. The country is home to over 100 insurance companies, 10 of them reinsurers.[1] In the 150 year history of the Swiss insurance industry, its companies have never failed to meet their obligations or closed.[2]
Switzerland consistently runs a budget surplus and is unaffected by the current European Union financial crisis. It has also voted to halt the further integration with the EU and its tax code.
Unlike other American and European annuities, Swiss annuities offer asset protection for life insurance products that are guaranteed by law. If properly administered, Swiss annuities are not subject to US Internal Revenue Service tax reporting requirements or Swiss income taxes. They are also protected from collections in bankruptcy proceedings.[3]
Beneficiary options for Swiss annuities include "revocable," which means the beneficiary can be changed at any time, or "irrevocable," meaning the beneficiary has to agree to be removed from the policy.
Swiss annuities cannot be subject to collection remedies and cannot be part of policy owner's bankruptcy estate. If a court decides to levy or attach the policy, Swiss courts will not authorize creditors or bankruptcy trustees control of the annuity and do not acknowledge the jurisdiction of foreign courts of law. In the event the policy holder is judged to be bankrupt, ownership transfers to the beneficiaries of the policy.[3] The transfer is automatic and cannot be challenged.
Irrevocable beneficiaries, with no restriction on their identities, and revokable beneficiaries, listing the spouse or the descendants of the policy owner, are eligible for this protection.[3]
Income from Swiss annuities are not subject to American income taxes. Americans can also swap their existing American life insurance annuity plans for Swiss annuity plans with no tax penalty under IRS section 1035.[4]
Swiss annuities are not subject to the one percent excise tax commonly imposed on purchases of foreign life insurance or annuity policies due to the double tax treaty signed by the U.S. and Switzerland in 1998.The annuities are also not taxed by the Swiss government.[3]
Strategic annuities take advantages of Swiss privacy laws to protect assets and to protect the policy holder during bankruptcy. Insurers do not provide investment advice or management.
Classic Swiss annuities are the basic kinds of annuities found in most other countries. Premiums paid into the annuity are managed by the insurance company and is an asset of the company.[8]
The classic annuities are also split into two different types: classic intermediate annuities and classic deferred annuities. Classic intermediate annuities pay a life income in Swiss francs within one year of the policy's inception for as long as the annuitant lives. It can be paid on one of two lives. Deferred annuities are formed with a single premium deposit, although some companies allow for multiple annual deposits to be made. The annuity account value can be partially or fully withdrawn at any time or be converted to an intermediate account.[8]
The Swiss Federal Office of Private Insurance oversees the Swiss insurance industry through the enforcement of strict rules and regulations. Swiss life insurance companies are required to cover their financial obligations and maintain an extra margin of security that is kept separate from the other assets of the company.[5]