Living a self-determined life when you’re older, securing your financial future, making your greatest wishes come true – who doesn’t dream of living life to the fullest even in retirement, while benefiting from tax advantages now? Saving with pillar 3a can make this dream come true. Swiss Life answers the most important questions related to this topic.

What is pillar 3a?

Pillar 3a is part of the private pension system in Switzerland. The Swiss pension system has three pillars:

  • 1st pillar: state benefits (AHV)
  • 2nd pillar: occupational provisions (pension fund or BVG)
  • 3rd pillar: private provisions, made up of pillar 3a and pillar 3b

To ensure that you can maintain your accustomed standard of living after you retire it is recommended that you save using the 3rd pillar. The 3rd pillar is divided into pillar 3a (tax-qualified provisions) and pillar 3b (non-tax-qualified provisions).

If you rely solely on pension benefits from AHV and your pension fund, you will only be able to count on around 60 percent of your last income.

What are the advantages of pillar 3a?

With pillar 3a, you’ll be able to save for a self-determined life when you’re older: you’ll improve your retirement and close any income gaps.

Additional advantages of pillar 3a:

  • Taxes: you’ll save on taxes, as you can deduct your deposits from your taxable income. 
  • Savings amount: you determine how much you want to contribute up to a defined maximum. Even small amounts are worth it.
  • Early withdrawal: in special cases – for example, to finance a home – you can withdraw money from pillar 3a. 
  • Retirement: you can access the money in pillar 3a as early as five years before you reach AHV retirement age.

What is the maximum pillar 3a amount?

For insured persons with a pension fund, the maximum amount in 2019 is CHF 6826. Self-employed persons without a pension fund can contribute up to CHF 34 128 or a maximum of 20 percent of their net income to pillar 3a. The maximum amount is reset each year. 

 

How can I save on taxes with pillar 3a?

If you contribute to pillar 3a, you’ll benefit from tax advantages. You can fully deduct your deposits from your income tax. Each year, you’ll receive a receipt showing the amount you have deposited, which you can submit with your tax return.

To ensure that you can benefit from the advantages for the current tax period, be sure to make the deposits to pillar 3 by mid-December.

Steuern sparen mit der 3. Säule

When can I start contributing to pillar 3a?

As a general rule, the earlier you start contributing to pillar 3a the better. The condition is that you must be employed in Switzerland and have income subject to AHV.

When can I start withdrawing money from pillar 3a?

In general, you can withdraw money from pillar 3a as early as five years before you reach AHV retirement age.

However, there are special cases in which it is possible to withdraw money from pillar 3a early:

  • If you become self-employed
  • To finance a home you live in
  • To repay a mortgage
  • If you move abroad
  • If you become disabled or die

What happens to my pillar 3a assets if I die?

In the event of death, your savings generally go to your spouse or registered partner. If you do not have a spouse or registered partner, the following are the beneficiaries:

  1. direct descendants or persons who were largely dependent on the deceased for their support
  2. a person who had cohabited with the deceased in a continuous marriage-like relationship in the five years prior to the latter’s death
  3. a person who must support the children from the relationship

Subsequent beneficiaries include parents, siblings and other heirs of the deceased.

How many 3a accounts can I have?

The number of 3a accounts depends on your place of residence. Some cantonal tax authorities limit the number of 3a accounts.

In general, however, you are allowed – and it even makes sense – to have several accounts. If you divide your assets and have them paid out in different tax years, you’ll avoid progressive taxation: the more capital you draw in a single year, the higher the tax rate.

Which 3a product is right for me?

Both banks and insurance companies offer pillar 3a pension provision options.

  • Interest-bearing 3a account

With an interest-bearing 3a account, the interest on your account balance is slightly higher than on a savings account.

  • Unit-linked 3a account

While a pillar 3a unit-linked savings account offers better returns, it also poses an investment risk. Depending on the equity component and stock market developments, losses cannot be ruled out.

  • Fixed-interest 3a savings policy

While part of the premium is used for risk protection,
the remainder earns a fixed rate of interest and is used for retirement savings. There are also insurers that offer savings policies under which only the premium exemption is insured.

  • Unit-linked 3a policy

The savings portion of the premium is invested in funds – the amount paid out at the end of the term depends mainly on the performance of the funds. There are also policies that guarantee a minimum payout when they mature.

  • 3a risk insurance

This policy covers the risk of disability and death. It is not a savings policy, so the premiums are comparatively low.

The choice of the right 3a product depends on your objectives and your family situation.

If you are only seeking tax-exempt saving and do not wish to benefit from insurance cover, a bank solution is sufficient. You can adapt your deposits to your financial situation, but you are solely responsible for maintaining your discipline when it comes to saving.

The advantage of an insurance solution is that you also secure your family against the effects of disability and death. With a 3a policy you incur a long-term obligation, but because you are forced to save and are exempted from premiums you will definitely reach your saving target – even if you are unable to work.

Images: Adobe Stock

 

Providing for the future with three pillars

The three pillars of the Swiss pension system allow you to build your retirement savings up over years and decades. We can help you look forward to a self-determined future.

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