Why is a pillar 3a so important for my future and how can I benefit from tax advantages now? We answer the most important questions about pillar 3a and provide helpful tips that you can put into practice. For a future with financial self-determination.
What is pillar 3a?
- 1st pillar: state benefits (AHV/AVS, IV and supplementary benefits)
- 2nd pillar: occupational provisions (BVG/LLP, pension fund, UVG)
- 3rd pillar: private provisions, made up of pillar 3a and pillar 3b
Pillar 3a is voluntary and forms part of your private provisions. It helps you maintain your accustomed standard of living after retirement, as employee benefits from the AHV/AVS and your pension fund (1st pillar and 2nd pillar) only cover around 60% of your last income.
Pillar 3a is tax-qualified, which means that you can only access your accumulated savings under certain conditions.
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 save on taxes as you can deduct your deposits from your taxable income on your tax return.
- Savings amount: you determine how much you want to contribute up to a defined maximum amount. It is worth contributing even small amounts.
Early withdrawal: under certain conditions – for example, to finance a home – you can withdraw money from your pillar 3a.
- Retirement: you can access the money in your pillar 3a as early as five years before you reach AHV/AVS retirement age.
What is the maximum pillar 3a amount?
The maximum amount in 2023 for people with a pension fund is CHF 7056. People without a pension fund can pay in a maximum of 20% of their net earned income, up to a maximum of CHF 35 280. As a rule, the maximum amount is redefined every year or every two years.
How can I save on taxes with pillar 3a?
If you contribute to a pillar 3a, you benefit from tax advantages. You can deduct your contributions from your taxable income up to the maximum permitted amount. Each year, you receive a statement 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 any contributions to your pillar 3 by mid-December.
Use our tax savings calculator to find out how much tax you can save with a pillar 3a.
When can I start contributing to a pillar 3a account?
To contribute to a pillar 3a, you must be employed in Switzerland and your income must be subject to AHV/AVS.
As a general rule, the sooner you start paying into a pillar 3a, the better, because in addition to the amount you pay in, the profit you earn over the years also makes a significant difference.
Find out more here.
Which pillar 3a is the right one for me?
Both banks and insurance companies offer pension provision options:
Interest-bearing 3a account
With an interest-bearing 3a account, the balance in a pension savings account earns interest at a certain rate, which is slightly higher than that of a savings account. There is no risk of loss with this solution, but it does not offer a return that exceeds the fixed interest rate.
Unit-linked 3a account
A unit-linked pillar 3a account usually generates a higher return over the long term as the savings are invested in equities, funds, real estate or bonds. At the same time, you must be aware that there is an investment risk and that, depending on the performance of the investment and stock market, losses cannot be ruled out. However, these are usually offset over the longer term. Experts recommend a term of at least 15 years.
Fixed-interest 3a savings policy
A fixed-interest 3a savings policy combines a guaranteed lump sum in retirement with risk protection in the event of disability and/or death. Part of the premium is used for risk protection and the other part earns a fixed rate of interest that is used for retirement provision.
Unit-linked 3a policy
With a unit-linked 3a policy, you also benefit from the combination of capital and risk protection in the event of disability and/or death. The savings component of the premium is put into investment funds, with significantly higher returns expected over the long term. Here too, however, there is a risk that the capital markets are subject to fluctuations and there is an investment risk. There are also policies that guarantee a minimum payout when they mature.
Choosing the right 3a product depends on your objectives and your family situation.
If you only require a tax-exempt savings solution and do not wish to benefit from insurance cover, a bank solution is enough. You can adjust your deposits at the bank in line with your financial situation at any time, but with this solution you are yourself responsible for maintaining your discipline when it comes to saving.
The advantage of an insurance solution is that you can cover any income gaps in the event of disability and, if necessary, protect your family in the event of death. With a 3a policy you take on a long-term obligation, but because you are forced to save and benefit from a waiver of premium, you will definitely reach your savings target – even if you are unable to work.
When can I start withdrawing money from my pillar 3a?
In general, you can withdraw money from your pillar 3a no earlier than five years before you reach AHV/AVS retirement age. However, there are special cases in which it is possible to withdraw money from your pillar 3a early:
What happens to my pillar 3a assets if I die?
In the event of death, the savings amount or the insured death benefit goes to your spouse or registered partner. If you do not have a spouse or registered partner, the statutory intestacy rules apply.
How many 3a accounts can I have?
The number of 3a accounts you can have depends on your place of residence. Some cantonal tax authorities limit the number of accounts.
In general, however, you are allowed – and it even makes sense – to have multiple 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.
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