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Your questions answered: the new Swiss 1,000-franc note

From colour choice to controversies, here is everything you need to know about the new version of Switzerland's very valuable 1,000-franc bill.

Your questions answered: the new Swiss 1,000-franc note
The Swiss continue to have a love affair with cash. Photo: SNB

Is the new Swiss 1,000-franc bill the world's most valuable bank note?

No, but there aren't many contenders left. Only Brunei’s B$10,000 note is worth more than the new Swiss 1,000-franc note. It is worth around 7,440 Swiss francs (€6,550).

By contrast, the highest denomination note in the US is just $100 while the UK has a £100 note.

How many of the old 1,000-franc notes are there floating around?

More than you would think. According to Swiss National Bank (SNB) figures, there is around 48.6 billion francs in circulation in the form of 1,000-franc notes. That is some 59 percent of all Swiss notes in circulation.

Why is the 1,000-franc note controversial?

Critics claim the high-denomination Swiss note is the perfect vehicle for money laundering, tax evasion and other criminal activities.

Indeed, by unveiling a new version of the note, Switzerland is bucking the international trend. In 2016, the European Central Bank announced it would stop producing and issuing its 500-euro note over concerns it “could facilitate illicit activities”.

Transparency International has repeatedly called for Switzerland to scrap its 1,000-franc note for the same reason.

But the Swiss government has defended the high-denomination note, saying there is no evidence to suggest the 1,000-franc bill has any particular link to criminal activities and noting that Switzerland’s culture of cash usage and high prices and salaries justify the note’s existence.

But a study carried out by Swiss economist Yvan Lengwiler and quoted by Swiss daily NZZ could tell a different, darker story.

According to that research, there is a rush on 1,000-franc notes in December every year as people move their assets to cash. The money is then deposited in bank accounts again in the new year. In other words, the notes could be being used in the process of avoiding wealth tax.

How is the new 1,000-franc note different from its predecessor?

Both are a regal-looking violet in colour but the new note is far shorter: just 158mm long against 181mm for the old version.

What does the artwork on the new 1,000-franc note represent?

According to the SNB, the design “focuses on Switzerland’s communicative flair – expressed by language”. The other core design elements are the hand and the globe, which appear on every denomination in the new series.

What security features does the new note contain?

The news note has 16 different security features. If you want to find out if your note is the genuine article or a fake, check here.

How long will the old 1,000-franc notes remain legal tender?

The Swiss National Bank says the old notes will remain legal tender until further notice.

When can I get my hands on one of the new notes?

The notes will go into circulation on March 13th at Swiss National Bank offices in Bern and Zurich and at the headquarters of 14 cantonal banks. It will then start to appear in ATMs in the following days.

Is Switzerland going to release any more new bank notes?

Yes. The final note in the new 'ninth series' is the 100-franc note, which will be unveiled on September 3rd and go into circulation on September 12th. The new 200-franc, 10-franc, 20-franc and 50-franc notes are already in circulation.

The updated 10-franc note, released in October 2017, was rated the world's best for last year by the International Bank Note Society. That award came after the new Swiss 50-franc note claimed the same prize in 2016.

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EXPLAINED: Why not paying off your mortgage in Switzerland can save you money

The idea is strange to most of us, but the majority of people in Switzerland choose not to pay off their mortgage - and save money in the process.

EXPLAINED: Why not paying off your mortgage in Switzerland can save you money

Many of us who have been raised with the goal of one day owning property will have one thing on our mind as soon as that deal is done: pay it back. 

From avoiding credit rating issues to not seeing the erosion of our hard-earned money due to interest, there are a number of reasons we want to get out of mortgage debt as fast as possible. 

But in Switzerland, due to a variety of factors, it sometimes makes more financial sense not to pay off your mortgage – or at least to pay off less than you can afford to. 

Estimates vary, but statistics show that a majority of Swiss do not pay their mortgage off before retirement. 

Not only that, but Switzerland has the highest mortgage debt per capita of any country anywhere in the world, according to OECD figures. 

READ MORE: Buying property versus renting in Switzerland: What is actually cheaper?

Here’s what you need to know. 

Why would you not want to pay your mortgage off in Switzerland? 

There are a number of factors which contribute to Switzerland’s unique framework when it comes to mortgages. 

These include the country’s wealth tax, the dual system of mortgages and traditionally low interest rates. 

At this stage, it is important to mention that while a majority of people don’t pay off their mortgage during their working life, this does not mean they skip out and run for the Caymans upon retirement (although presumably some do). 

Instead, it means people are not actively paying off their principal, but investing the funds in an account with their bank. 

When they retire, they use the money in the account to pay off their mortgage debt – and keep the change. 

This sounds complicated because it is – and is explained at length below. 

For more information on buying property in Switzerland, check out this link. 

The Swiss mortgage system: Dual obligations

The reason you may not want to pay your mortgage off in full in Switzerland is partially because of the unusual structure of mortgage obligations. 

The Swiss mortgage system differs from that in most countries in that you effectively take out two mortgages when you buy a property, or more accurately, the mortgage is split into two mortgage obligations. 

The first obligation resembles a traditional mortgage seen abroad, in that it has an indefinite repayment period and covers the majority of the purchase price. 

This will usually be around 60 percent of the total purchase price, less the deposit and the amount included in the second mortgage obligation. 

The second will cover approximately 15 percent of the purchase price. 

Importantly, this will have a fixed repayment period, usually around 15 years (at around one percent per year) or by the time you retire (if shorter than 15 years). 

EXPLAINED: How to save on your mortgage in Switzerland

While you must pay off this amount, the ‘optional’ part relates to the other component of the mortgage. 

Mortgage rates in Switzerland are low by international standards. Photo by PhotoMIX Company from Pexels

Should you choose direct or indirect amortisation? 

Amortisation is an accounting term which refers to reducing the book value of a loan or debt, but basically means paying off your mortgage. 

In most countries, the only option is ‘direct amortisation’, which means paying money to the bank to cover your debt. 

Direct amortisation not only reduces the debt, but the interest (as the interest is based on the quantum of the debt). 

Indirect amortisation is something relatively peculiar to Switzerland and is where the idea of not paying off your mortgage comes in. 

Finding a flat in Switzerland: How to stand out from the crowd

Swiss financial advice site Beobachter points out that the system in Switzerland is effectively set up to allow long-term non-repayment of mortgages. 

“In hardly any other country are the amortisation standards as lax as in Switzerland… In no other national economy can debts remain “forever” in this way”, they explain.

Instead of paying off the mortgage directly, you make regular payments into a ‘third pillar’, which is basically an investment account or fund offered by the same bank. 

This money is then used as a security against the property. 

Keep in mind the amount you need to repay will be the value of the property when you bought it, not the value of the property when you retire. 

During this time you will continue to pay interest on the debt.

This interest will not decrease as you are not paying off the principal, although Switzerland’s low interest rates make this an attractive option. 

Eventually, the debt will be taken from the third pillar. Usually, this will happen when you retire, but you can also sell the property, organise some form of reverse mortgage or sell it to your kids and have them rent it to you, among other options. 

Why is this beneficial?

The main reason this is advantageous is for tax purposes.

In Switzerland, you can deduct mortgage payments from your tax. Also, the money you pay into a third pillar is not taxable. 

Another major reason is the country’s wealth tax, which is not as unique but still relatively uncommon. 

Property: Why you can be taxed four times over for owning a home in Switzerland

In most countries, you pay tax primarily on your income. In Switzerland, you are liable to be taxed on your total wealth as well (under one percent per year). 

The wealth tax is calculated by your total assets minus your total debts. If you have significant debts – including a mortgage – then this will reduce your wealth tax. 

Importantly, the money in your third pillar does not count towards your wealth tax. 

Look, I just clicked on this article to find out about my mortgage, can you speak English please? 

While this all sounds incredibly complicated and you are advised to seek the support of a licensed agent, the calculus is relatively simple. 

Calculate the amount you would pay if you invested the money in a third pillar – keeping in mind the tax savings – by the end of the mortgage, minus the interest payments and the mortgage principal upon retirement. 

Compare this to the amount it would cost you to pay off the mortgage completely, including interest payments, keeping in mind that your tax savings will decrease over time as your regular payments decrease as you pay more of the mortgage off. 

Generally speaking, your financial advisor will present this to you as comparable percentages over time, which means your income will be a major factor in your final decision, as will your retirement plans and the tax rate in the canton and municipality you live in. 

EXPLAINED: How where you live in Switzerland impacts how much income tax you pay

It is important to note that your bank is likely to offer a combined form of both direct and indirect amortisation, which will allow you to spread the risk/burden somewhat. 

Editor’s note: Please keep in mind this report is intended as a guide only and should not replace legal and financial advice from a qualified agent or advisor. 

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