CHRISTIAN SCIENCE MONITOR Article

CHRISTIAN SCIENCE MONITOR Article:

Swiss annuities: A long way to go for tax advantages

Work Money: Financial Q A Column

from the December 19, 2005 edition

Q: Where can I find information about "Swiss annuities"?

G.C., via e-maIl

A: A Swiss annuity is basically a Swiss bank account wrapped in an annuity contract, says John Dietz, a senior adviser at Trustmakers.com. Such annuities allow owners to invest in foreign stocks, bonds, and mutual funds in a tax-favored environment.

Owners typically invest a lump sum, which then is placed in various subaccounts. Each one can have a different investment strategy (aggressive, moderate, or conservative).

Swiss variable annuities have no guarantee on returns, but they are sheltered from income and capital-gains taxes during their accumulation phase and partially sheltered from income taxes during the payout phase.

While a Swiss annuity sounds a lot like its US cousin, Mr. Dietz notes some differences:

Fees. Many investors are put off by annuity fees, which can easily chew up 2 percent annually. Some Swiss variable annuities come with maximum annual charges of only 0.6 percent. Liquidity. With some Swiss annuities, the surrender charge only lasts one year. American annuities can ding you for seven to 10 years.

Asset protection. If properly structured, assets in a Swiss annuity can be completely protected from creditors. Privacy. A Swiss annuity is not reportable as a foreign financial account, and no US excise taxes are incurred. Information won't be released unless you have committed a crime under Swiss law or in the event of tax evasion. Most financial experts agree that people should invest in foreign markets to counter any downturn in the US markets. A Swiss annuity offers this, but bear in mind that your money is a long way from home, and perhaps with a company that doesn't provide a toll-free number or other forms of instant access. Lastly, Dietz notes that finding someone you can trust with information on Swiss annuities can be difficult. A number of companies market them on the Internet, but you'll need to dig further to determine if they are on the up and up.

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