Pension equalization in Switzerland: supplementing the foreign divorce decree (Part 1/3)

• Litigation/Mediation
• Pension equalisation
• Private Clients

If the marriage was legally divorced abroad and at least one spouse was gainfully employed in Switzerland, an amendment to the foreign divorce decree is required for the equalisation of existing pension assets (in particular pension fund assets) in Switzerland. The Swiss courts have mandatory jurisdiction for this and the supplement is always subject to Swiss law. Depending on the agreement of the divorced spouses, the pension equalisation is carried out by means of an agreement to be approved by the court or by means of an action.

Entitlement to division of pension assets

The respective occupational pension entitlements in Switzerland (pension fund; 2nd pillar) are often unequal due to the division of responsibilities between the parties or existing salary differences. The occupational pension entitlements acquired by the divorced spouses during the marriage up to the time the divorce proceedings are initiated must therefore be equalised or divided. The assets from the mandatory (Pillar 2a) and from the more extensive occupational pension scheme (Pillar 2b), including claims against vested benefits institutions, must be taken into account. Although the claim for pension equalisation is directed against the obligated divorced spouse, the respective pension or vested benefits institutions are included in the court proceedings. Each spouse divorced abroad is generally entitled to half of the occupational pension entitlements acquired by the divorced spouse in Switzerland during the marriage without any preconditions. The termination benefit to be divided thus corresponds to the difference between the termination benefit (plus any vested benefits) at the time of the initiation of divorce proceedings and the termination benefit (plus any vested benefits) at the time of the marriage. If both parties have a corresponding termination benefit in Switzerland, the mutual claims will be offset.

Compensation for disability or retirement pensions

If a divorced spouse was receiving a disability pension before the regulatory retirement age at the time the divorce proceedings were initiated, the amount to which he or she would be entitled after the disability pension ceases to apply is deemed to be the so-called hypothetical termination benefit and is used for the calculation of the pension equalisation in Switzerland. However, if a divorced spouse was already receiving a disability pension after the regulatory retirement age or a retirement pension at the time the divorce proceedings were initiated, the court will decide on the division of the pensions at its own discretion. In this case, the portion of the pension awarded to the entitled divorced spouse is converted into a lifelong pension.

Deviation from the division rules

There are two exceptions to the aforementioned “usual” division rules – in addition to the provisions regarding the unreasonableness or impossibility of pension equalisation. Under certain circumstances, the divorced spouses can deviate from the principle of equalisation or even waive equalisation. The corresponding agreement requires court approval. Conversely, the court can award less than half of the pension assets to the entitled party or refuse to divide them or award more than half if there are important reasons or certain conditions. In order to discuss the possibilities of pension equalisation in detail before Swiss courts, we recommend that potential clients contact us before the start of divorce negotiations abroad. Together we can work out an optimal negotiating position with regard to pension equalisation in Switzerland.