For around 50 years, Switzerland has built up a 3-pillar system for personal retirement provision and the well-being of the family. The first, mandatory pillar consists of the old-age insurance, also known as AHV. Its purpose is to ensure a minimum income to cover basic costs at retirement age. It is based on the principle of solidarity and is financed by the working population, which pays wage contributions. The second pillar, also known as the pension fund or BVG, is also mandatory for most working people and is intended to contribute to a higher income in retirement.
However, the first and second pillars together cover only about 60-70% of the last income before retirement. If you want to maintain your standard of living after retirement, you should consider the third pillar at an early stage. In this article you will find all the important information about the two types of third pillar.
What is the third pillar?
The third pillar is an individual, private and voluntary insurance. You can take it out as long as you are gainfully employed. There are two types of third pillar: the tied pension plan, also known as pillar 3a, and the untied pension plan, which is also known as pillar 3b.
Who can pay into the third pillar?
All persons who are resident and working in Switzerland can open a pillar 3a. Also sole proprietors or under certain circumstances ANobAG, who cannot join a pension plan, can save for their pension with the third pillar. Pillar 3b can also be opened by non-employed persons.
What is the difference between pillar 3a and 3b?
Both pillars are part of the private pension plan. However, there are some differences:
Tied personal pension plan (3a)
Unrestricted personal pension plan (3b)
What is the maximum amount that can be paid into Pillar 3a?
Individuals who already pay into Pillar 2a and are therefore affiliated with an occupational pension plan can pay in a maximum of CHF 6,883 in 2022. For employed persons who do not have an occupational pension plan, the maximum amount is 20% of the earned income, with the maximum amount in 2022 being CHF 34,416 per year.
How long can I pay into pillar 3a?
If you can prove that you are still gainfully employed after retirement age, you may continue to pay into pillar 3a for up to five years. However, as soon as you stop working or no later than five years after reaching regular retirement age, the capital must be withdrawn.
How can I save taxes with pillar 3a?
If you pay into the third pillar, you may deduct it from your taxes. The contributions made, up to a maximum of CHF 6,883 for employed persons with a 2nd pillar or CHF 34,416 for employed persons without a 2nd pillar, can be deducted in the tax return. The taxable income decreases, and due to the tax progression, so does the tax rate. Thus, as a gainfully employed person with a 2nd pillar, you can save up to CHF 3,000 in taxes per year. For employed persons without a 2nd pillar, the tax savings can be even significantly higher.
At what point can I withdraw my Pillar 3a capital?
The capital from pillar 3a can be withdrawn as early as five years before reaching the AHV retirement age (2022: women 64, men 65), but must be withdrawn no later than five years thereafter. In the context of retirement, this is also referred to as ordinary withdrawal.
Under certain conditions, however, early payment of benefits from pillar 3a is also possible. Possible reasons for this are:
What are the advantages of a pillar 3a with an insurance company?
Would you also like to make provisions for your future and save retirement capital in an attractive and secure way with a third pillar? We would be happy to support you. Contact us now and receive competent and personal advice from long-standing insurance experts.