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Personal retirement provision enables you to reduce the difference between your current and future income and close retirement provision gaps. You can deduct your contributions to pillar 3a up to a particular amount from taxable income. A life insurance not only enables you to save for retirement, but also protects against life risks such as disability and death as well as closing retirement provision gaps. Normally, you only have access to the money saved upon retirement. There are a few exceptions, such as financing self-used residential property or self-employment. 

Normally, the first and second pillars only allow attaining something over half the previous earnings from gainful employment. Those who want more financial freedom in old age should certainly also turn to personal retirement provision – via pillar 3a or 3b. 

Those who rely exclusively on the first and second pillars are threatened by income gaps – not just in retirement, but also in the event of the life risks of disability and death. 

Disability: Those with long-term illnesses or even disabled must expect clear losses, depending on the situation. These losses can be covered by personal disability insurance. 

Protecting your partner or family in the event of death is also important, e.g. to enable them to continue to live in the customary location. Depending on the situation, benefits from the first and second pillar only flow to a limited extent. Life partner couples are worse off in our retirement provision system. The lump-sum death benefit from risk life insurance can then represent an important safety cushion for surviving dependants. 

Our tips: 

• Take a look at your wage certificate: Your current wage certificate or pension fund certificate provides you with a lot of important information about your current retirement provision status. Our customer advisors would be glad to explain the numbers to you. This will give you a solid basis for further planning.
• Draw up a budget: Note all income and expenses per month/per year. Also deliberately financially plan for vacations, hobbies or purchases, and create reserves for the unexpected. This will tell you how much money you have left for saving.
• Plan for the future: What wishes and dreams would you still like to fulfill – and what would it cost? Saving is much easier with a clear goal in front of you.
• Benefit from retirement provision planning: Our experts would be glad to advise you free of charge and without strings. 

The biggest differences between a pillar 3a solution from a bank or an insurance company relate to the risk protection for you and your family, your savings goal and the period of insurance.

Risk protection for families and savings goal
With an insurance company, you take out an insurance contract under pillar 3a. This includes insurance coverage in the event of disability and/or death. This means that if you become disabled, your insurance will pay the annual amount due into pillar 3a for you. You will therefore continue to save for retirement, even if you can no longer work. Depending on the retirement provision solution you choose, you will also be paid a disability pension until retirement. In any case, you will meet your defined savings target. In the event of death, a lump-sum death benefit will be paid to your surviving dependents. This means that your loved ones will at least be protected from the financial consequences of this misfortune. You pay for this insurance coverage with a portion of your premium.

When you open your pillar 3a with a bank, the main focus is on the savings process. You and/or your family will not be protected against the financial consequences of disability or death. If you can no longer pursue your work, you will no longer be permitted to pay into pillar 3a. In this case, you will not reach your defined savings goal. 

Period of insurance
Insurance contracts under pillar 3a always have a fixed period of insurance. This usually extends until the normal retirement age. You undertake to pay a certain amount into the pillar 3a policy on a regular basis. 

After the third insurance year, however, you have the option of pausing payments for up to three years. Insurance coverage does not expire in this case. This means that you will continue to be fully insured if, for example, you go on parental leave or spend time abroad. The only consequence is that your savings target will be reduced by the amount of the paused payments.

First, you should make maximum use of pillar 3a. This is because the deductible contributions do not add up, but expire at the end of the year. On the other hand, possible pension fund purchases do not expire. You can also close any existing gaps in the pension fund in the following year. 

Note that pension fund purchases three years before retirement have an impact on how you will be permitted to withdraw your pension fund assets. Specifically, in this case, you will be required to withdraw your balance as a pension. In the event of a lump-sum withdrawal, the tax saved on the purchase is reclaimed.

Together with the first pillar, occupational retirement provision is intended to protect your standard of living in old age, disability or death. Employees and employers contribute to the second pillar, usually in equal shares (so-called equal share financing). By contrast with the first pillar, each insured party saves and earns interest on their own retirement capital – however, 56 percent of the Swiss population is unaware of this. They do not include their pension fund savings in their own assets. Yet for many people, this is the greatest portion of their assets. 

All employees with an OASI annual salary of more than CHF 21,510 are subject to mandatory insurance for the risks of disability and death from January 1 after turning 17. Retirement benefits are also insured from January 1 after turning 24. The following can take out voluntary insurance: the self-employed, those with an annual salary under CHF 21,510 and those with several employers.  

More information

Occupational retirement provision is the most important retirement provision pillar. But it has for long been faced with major challenges. There are three reasons for this: In the first place, people are becoming much older than in the years when occupational retirement provision was created. Secondly, a low interest rate level has existed for more than ten years, leading to the investment of retirement assets generating much lower returns. Therefore, interest as «third contribution provider» along with employees and employers is no longer fit for purpose. Thirdly, the rigid statutory requirements result in excessive guarantees – in the form of conversion rates that are too high and unrealistic interest rate promises. The consequence: A financing gap for pensions has arisen that is not so easy to close. Retirement provision institutions have to finance these with a considerable portion of the investment returns of the employed and redistribute investment earnings in favor of the retired. Find out how much this redistribution affects you and what can be done to counter it. 

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Early withdrawal of second pillar retirement capital 

Your pension fund assets belong to you, but they can only be withdrawn early, i.e. before retirement, in three special cases: If you want to acquire residential property, become self-employed or leave Switzerland for good.  

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Purchase potential in the second pillar

Many people have contribution gaps in their retirement provision – because they studied a long time, lived abroad or took a maternity break. Many are not even aware of this. Even a salary increase also has the potential to adjust the insurance benefit to the new salary retrospectively. Those who pay in additional money can compensate for their contribution gaps, improve the retirement benefit and at the same time reduce their tax burden. This is because the purchase sum can be deducted directly from the taxable income in your tax declaration. The current purchasing potential is given in the pension certificate. Since almost all pension funds operate under the so-called defined contribution principle, purchases to increase the future retirement pension have become more important. 

• For many people, their pension fund holds the lion’s share of their assets – but 57% don’t know that.
• One in two employed people sees contributions to the 2nd pillar as a kind of tax or fee. Why? Because they are deducted directly from the salary.
• Only 22% of applicants realize: Occupational retirement provision plays a major role for income in old age.

More about the study

Together with the old age, surviving dependants' and disability insurance (OASI/IV), governmental retirement provision forms the first pillar in the Swiss retirement provision system. The goal of the first pillar is to protect the existence minimum for pensioners, the disabled and surviving dependants. If the benefits from OASI and IV are insufficient for existential protection, the person involved in addition receives supplementary benefits. The first pillar is financed on a pay-as-you-go basis. This means gainfully employed and employers pay monthly contributions with which current pensions are paid out. 

The following are insured: 

• everyone who lives and works in Switzerland 
• people who work in Switzerland but live abroad 
• people who live in Switzerland, but do not engage in any gainful employment (e.g. students, housewives/-men, the disabled and early pensioners) 

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