Divorce and pensions– what do I need to know?

According to the Swiss Federal Statistical Office, if divorce patterns remain the same, two out of every five marriages can be expected to at some point end in divorce. In addition to strong emotions, divorces usually give rise to considerable existential fears. And not without reason as the financial consequences of a divorce can be considerable. Your home may have to be sold, for example. Contributions paid into retirement provisions must also be split. Here is an overview of the key points:

How long does a divorce take?

The length of the divorce process depends on how those involved behave.

Divorce at joint request

If it is a mutually agreed separation, the process normally lasts between three and four months. In this “best-case” scenario, the spouses agree on all the aspects of the divorce. These include the custody of children, maintenance payments, assets and pension funds. Even if there is disagreement on some points, a joint application for divorce can be submitted with a request for judicial clarification of the outstanding points.

Unilateral divorce

If one of the parties does not agree to the divorce, the person wishing to divorce may unilaterally apply for a divorce. This is possible if there has been evidence of the spouses living apart for at least two years. The divorce process then begins, which can take several years, depending on the decision reached and the potential for litigation.
 

How much does a divorce cost in Switzerland?

The costs of divorce in Switzerland are largely made up of legal and court costs. These differ from case to case, with court costs varying from canton to canton.

Costs of a mutually agreed divorce

• Both spouses are responsible for the costs.

• Court costs are broken down and regulated at cantonal level (between CHF 1000 and CHF 4000).

• Lawyer’s fees are covered by each party individually (between CHF 250–450 per hour)

Costs of a unilateral divorce

• In the event of litigation, the losing party must pay the divorce costs in full

What if I can’t afford the divorce costs?

If you are financially unable to pay the costs of a divorce, you can submit a request for free administration of justice.

Is a divorce possible without a lawyer?

Yes. The law does not require a lawyer for a marriage to end in divorce. Nevertheless, it is advisable to consult a lawyer in order to discuss assets and disputes together with an expert.
 

What happens to the AHV/AVS (1st pillar) in the event of divorce?

As soon as the divorce is finalised, you can apply to the relevant AHV/AVS administration offices for the income earned during the marriage to be split. Splitting means that the total income earned by both spouses during the marriage is divided equally between them. It is advisable to carry out the AHV/AVS splitting promptly in order to avoid any delays in the payment of retirement or disability pensions.

Income is only split for entire calendar years and only for those years in which both spouses were insured under the Swiss AHV/AVS system. The application form for splitting can be downloaded from the website of the AHV/AVS social security administration office.
 

We are getting divorced – what will happen to our occupational provisions (2nd pillar)?

All occupational provisions accumulated during the marriage (retirement savings in the pension fund or in vested benefits accounts/policies) are divided equally between the spouses. The calculation is based on the length of the marriage – i.e. the period from the marriage date to the date of initiation of divorce proceedings. The calculation also includes the interest accumulated during the marriage.

This splitting of occupational provisions is also known as the division of pension benefits and is independent of the marital property regime selected. It is therefore also carried out in the case of a separation of property. Only in exceptional cases – as a rule if the retirement and disability benefits of one of the spouses are covered in another way – may this be waived in whole or in part. A waiver prior to divorce – for example using a matrimonial agreement – is not possible.

If pension benefits are divided, the money is not paid out directly to the spouse benefiting, but is instead transferred to their pension fund. If the person is not affiliated to a pension fund, the assets are transferred to a vested benefits account or vested benefits policy. You can set one up with a bank, post office or insurance company (such as Swiss Life). If the beneficiary is over 60 years of age, the benefits may also be paid out directly.
 

What happens to the 3rd pillar in the event of divorce?

If you have a matrimonial agreement, 3rd pillar assets are divided based on this. If you have agreed to a separation of property, the assets will not be divided. There are various options in a matrimonial agreement as to how the assets are divided, or this process may be waived altogether.

If there is no matrimonial agreement, the ordinary property regime for the community of acquisitions applies and the 3rd pillar assets accumulated during the years of marriage are divided 50:50. These include the assets from all insurance in pillar 3a and pillar 3b (if financed from the acquired property) – as well as all other assets belonging to the spouses. The increase in the spouses’ assets during the marriage is also taken into account. Funds from pillar 3a tax-qualified provisions, which include accounts and insurance policies, must remain tax-qualified. These funds are transferred to a pillar 3a tax-qualified provision of the benefiting spouse. If no tax-qualified provisions are available, the transfer is made to an employee benefits institution for occupational provisions, if available, or a pillar 3a must be set up.

 

We are getting divorced – what happens to our property and the mortgage?

A divorce often raises the question of what to do with the couple’s jointly owned real estate. Will the home be sold or will one of the spouses take it over?

If the home was bought together, the person who moves out or “exits” the property must be compensated. The amount of this payment depends on the current value of the property, the matrimonial property law in place and the spouses’ respective financial participation and is determined as part of the divorce proceedings.

In most cases, the property will not yet have been paid off, and will be financed with a mortgage. It gets complicated here, as in the case of a joint mortgage, both of the separate partners are liable. They must help the other person out if they are no longer able to pay the interest on the loan and make repayments. This also applies to a partner who has already moved out. The debt obligations continue until the normal end of the mortgage regardless of the divorce and any new ownership arrangements between the ex-spouses. It is possible to exit the mortgage early. However, this often entails financial penalties.

The mortgage provider is not obliged to continue the mortgage contract with only one of the ex-spouses. The situation regarding the affordability of the mortgage will change and it may be the case that the criteria are no longer met. If the property has to be sold, it is possible to exit a current fixed-rate mortgage, although this usually involves high early repayment penalties.
If the home was financed by an early withdrawal from a pension fund, the exiting partner must pay the withdrawal back into the pension fund.