Until when can I pay into my pillar 3a account?
Payments must be on your pillar 3a account no later than December 31 of the relevant year to be tax-exempt in that year. We recommend making the payment early to ensure that the transaction is seamless and you can deduct the full amount from taxes.
Pillar 3a at a bank or insurance?
There are two chief options in case of pillar 3a: bank or insurance solutions, both of which have advantages and disadvantages depending on the circumstances of the person saving.
Commonalities of bank and insurance solutions:
Tax advantages: Payments can be deducted from taxable income. Capital withdrawals are taxed, though at a lower rate than income.
Legal requirements: Both options are subject to the same legal conditions, particularly with regard to contributions and capital withdrawal possibilities.
Maximum contributions: The maximum amount per year is the same whether you are saving at a bank or an insurance.
Main differences of bank and insurance solutions
Flexibility:
Bank solutions: High degree of flexibility in terms of payments. It is possible to not make any payments one year but contribute again the following year. Capital withdrawals are not subject to any additional fees.
Insurance solutions: Obligation to contribute regularly up to retirement. Diminished flexibility in case of early capital withdrawal, as losses may arise.
Insurance protection:
Bank solutions: Higher retirement capital, as no deductions are made for insurance.
Insurance solutions: Lower retirement capital, as a part of the contributions is used for insurance protection. However, the goal is reached even in case of lost income.
Inheritance and bankruptcy privileges:
- Bank solutions: Savings are part of the estate or the bankruptcy estate.
- Insurance solutions: Better protection thanks to privileged treatment in case of inheritance and protection in the event of bankruptcy.
Investment options of bank solutions:
- Retirement account: Save thanks to interest, low risks and low returns.
- Securities account: Investment in equities, funds, or bonds; potentially higher returns, but also higher risks.
Investment options for insurance solutions:
- Pension policy: Combination of guaranteed retirement capital and insurance protection, possibility of profit participation.
- Unit-linked pension policy: Investment in funds with risk protection, higher return potential but stronger fluctuations and risks.
Target groups
Pension policy: Suitable for young single persons who favor flexibility and easy availability of capital.
Insurance solutions: Suitable for families, patchwork families, and self-employed persons with a greater need for risk protection and insurance in the event of inheritance and bankruptcy.
