Coordinating corporate and private assets for a better after-tax performance

The significant reduction in the corporate tax rate has been a boon for many SMEs, bolstering their profit margins. But now business owners face a conundrum. How can they balance the advantages of a healthy company income with the demands of taxation to build wealth in retirement?

A comprehensive rather than a silo approach

They have two options. Firstly, they can take a "silo" approach - manage their personal assets, their pension assets and their company separately, with potentially higher taxes and a greater degree of uncertainty in the long term about how they will finance their retirement. Alternatively, take a comprehensive approach - handle their assets in a coordinated, efficient manner, integrating their private portfolio with their pension assets and the surplus liquidity from their company to put in place effective solutions and potentially improve the after-tax returns on their wealth.

The significant reduction in the corporate tax rate has been a boon for many SMEs, bolstering their profit margins.

Repatriating surplus liquidity

This task, carried out with close cooperation with the business owner's tax advisor, results in the creation of a new pension plan (1E) for the company. The new plan allows executives and managers to build up individually managed pension capital. Insured individuals are then active players in their supplementary pension provision. To date, pension solutions have been under-utilised by business owners, despite offering opportunities for significant asset appreciation in terms of the after-tax performance generated over several years. Entrepreneurial risk is also reduced as the assets are diversified.

Business owners can provide for simultaneous buy-ins for shortfalls in contributions without tax implications. Unlike partial taxation of dividends, the payment of liquidity that is not required for company operations is not subject to tax. In the case of available vested benefits, planning options in connection with possible early retirement or leaving Switzerland should be taken into consideration.

Best after-tax return

Each business owner’s case is unique. So it is important to conduct a comprehensive analysis which includes evaluation of the company’s available liquidity and the business owner's personal situation, and then ensure tailored financial planning to identify different scenarios and set the right course for retirement. The investment strategy most closely aligned with the needs of the business owner and their family is then chosen on this basis. With their global overview of the personal and pension fund portfolios, the wealth manager will then make the necessary switches between them to achieve the best overall after-tax return.

Each business owner’s case is unique. So it is important to conduct a comprehensive analysis which includes evaluation of the company’s available liquidity and the business owner's personal situation.

By analysing moveable assets, real estate and pension assets, managers can optimise each investment 'silo' individually and harmonise the entire asset portfolio. Allocating the assets in this way makes it possible to enhance performance without changing the risk profile.

To do this, your banker must be able to rely on a proven technology platform to implement a convergent investment strategy between the different pockets.

Given the complexity of this topic, it is clear that only an experienced advisor dedicated to client as a whole, who knows the importance of coordinating the different investment instruments, is capable of devising tailored solutions for assets and pension capital.