A self-determined life in old age requires private provisions arranged as early as possible. The third pillar represents a big step towards financial security. While the funds you invest in pillar 3a are tied up over the longer term, you are free to use the capital in your pillar 3b. Swiss Life answers the most important questions related to this topic.
What is pillar 3b?
- 1st pillar: state benefits (AHV/IV)
- 2nd pillar: occupational provisions (BVG/pension fund, UVG)
- 3rd pillar: private provisions, made up of pillar 3a and pillar 3b
As distinct from pillar 3a (tax-qualified provisions), pillar 3b is not tax qualified. This means that pillar 3b is not tied to retirement but can also be used for medium or long-term savings targets.
You can choose from a large pool of provisions solutions. All assets that are saved voluntarily count towards pillar 3b. This may include equities, securities, real estate or even vintage cars. Life insurance also frequently serves as additional security for the period following retirement.
What are the key types of investment?
Key types of investment are:
- a savings account
- investment funds
- structured products
- insurance policies
What are the advantages of pillar 3b?
If you rely solely on 1st and 2nd pillar post-employment benefits, you will only be able to count on around 60 percent of your last income in retirement. Pillars 3a and 3b help you maintain your accustomed standard of living even after retirement, and to close any gaps in coverage you may have.
Additional advantages of pillar 3b:
- Anyone residing in Switzerland can pay into a pillar 3b.
- You determine how to use your pillar 3b savings.
- You may freely designate a beneficiary.
- You may freely choose when it is paid out.
- There is no maximum annual deposit.
Do I enjoy tax advantages with pillar 3b?
Let me start by saying: you do not enjoy the same direct tax advantages as with pillar 3a. Nevertheless, there is some good news:
Depending on the type of investment you choose, there are a variety of rules and conditions. Capital-sum insurance with a surrender option, for instance, offers tax benefits. Although you may only have a limited tax deduction, up to the limit of the lump sum usually used to cover health insurance premiums, and the surrender value is taxed as an asset during the term, at payout the entire balance is tax-exempt, including all earnings. This is provided you comply with the legal requirements.
Who offers pillar 3b?
You can conclude private provisions in pillar 3b with banks as well as with insurance companies. If you opt for an insurance solution, you benefit from supplementary cover in the event of death or disability.
It isn’t easy to find the retirement provisions that are just right for you. The range of 3b solutions available is large and you should certainly make your selection based on your situation in life. How old are you? What shape are your finances in? Are you fit and healthy? Although these are small details, they can play a major role in your choice of product.
You have various options when it comes to selecting a deposit type: would you prefer to make periodic (e.g. monthly) fixed payments? Or have you received an inheritance and want to invest a larger lump sum? Your risk appetite also plays a role. Would you like a low-risk investment that may result in lower profits? Or would you rather take a higher risk and possibly achieve higher profits?
Image source: Unsplash, Yanapi Senaud
Arrange a consultation
We offer you a range of attractive solutions for your asset accumulation – with or without coverage. Our consultants will help you identify the solution that suits you. Why not sign up to a professional financial planning session?
Swiss Life FlexSave Uno
Swiss Life offers both insurance and bank solutions. Would you like for example to benefit from modern savings insurance with guaranteed benefits and potential returns? Not only does Swiss Life FlexSave Uno offer you a guaranteed minimum payout, it also presents attractive earnings opportunities. In years when the stock markets perform well, there may be additional gains due to participation in the index basket.