The 3rd pillar forms the final pillar of the Swiss pension system and is known as the voluntary private provision This means that, as the name implies, it is not compulsory. Nevertheless, the 3rd pillar is extremely important when your are retired.
What is the objective?
The aim of the 3rd pillar is to create financial savings through investments before the retirement. This ensures that the accustomed standard of living can be maintained when your are retired or that a long-term dream, such as the purchase of a single-family home, can be fulfilled.
So it's about the financial security and freedom in old age.
Why is the 3rd pillar so important?
Switzerland's 3-pillar principle aims to ensure that everyone can maintain their standard of living in the retirement. The 1st & 2nd pillars cover 60-70% of the last income, the 3rd pillar shall cover the difference.
What is the difference between Pillar 3a and 3b?
Pillar 3a, the pension provision, is the state-supported part of self-provision and is subject to certain conditions. It is designed for the long term and can only be withdrawn under specific circumstances and for certain purposes before the retirement age. The annual deposit amount is limited; in return, Pillar 3a enjoys extensive tax advantages.
Pillar 3b, the unrestricted pension provision, is more flexible and subject to fewer regulations. The annual deposit amount is not restricted, and it can be withdrawn at any time. However, compared to 3a, Pillar 3b does not enjoy the same tax privileges.
What are the advantages of Pillar 3a?
Retirement provision
You can ensure your financial independence in old age, systematically cover pension gaps, and fully enjoy your well-deserved retirement. At the same time, Pillar 3a serves as a financial reserve in case of disability, providing a dual layer of security.
Tax savings
You can deduct the payments into Pillar 3a, up to the predefined limit, from your taxable income, thereby saving taxes. The maximum amount is usually reassessed by the Federal Council every two years and is CHF 7,056 with a pension fund connection and CHF 35,280 without a pension fund connection in 2023. The accumulated wealth within the 3rd pillar is not subject to wealth tax until retirement.
Flexibility
Up to the specified limit, you can decide how much you want to pay into your Pillar 3a. Additional flexibility is ensured through optional additional contributions, individual premium adjustments, and occasional premium breaks.
Achieving savings goals
Regular, fixed payments and premium exemptions in case of disability will help you securely achieve your savings goals.
Early withdrawal
You can, for instance, use your Pillar 3a funds for financing a home or for transitioning into self-employment by withdrawing them prematurely or using them as collateral.
Our recommendations before year-end
To benefit from the tax advantages of a payment into Pillar 3a this year, there is still plenty of time
Open a Pillar 3a
Payments into Pillar 3a are possible until December 29, 2023. If you don't have private provision yet, we can assist you in finding a tailored solution quickly and easily.
Your provision
There's no one-size-fits-all solution! Even if you already have a Pillar 3a provision, it's important to periodically review it in light of your current life situation. You might be able to afford a premium increase or open a second or even third Pillar 3a provision.
Our experts are here to help: We'll sit down together, analyze your current solution, and work out possible alternatives.
