Pillars 3a and 3b – an overview

2 boys playing Jenga

Pillars 3a and 3b – an overview

Why is it worth paying into pillar 3a? When should you start saving? And what is the difference between a saving and an insurance solution? The third pillar is an important element in retirement provision, so you should grapple with this topic as early as possible. We have compiled the most important information.
The third pillar relates to private and hence voluntary retirement provision. The longer the time period, the more assets from the third pillar serve to enable the maintenance of a person's customary standard of living after retirement. After all, the first and second pillar aim to cover around 60% of your final salary. The third pillar is divided into pillar 3a and pillar 3b.

Pillar 3a restricted pension plans – restricted, private retirement provision

Pillar 3a refers to restricted, private retirement provision. Pillar 3a restricted pension plans serve to ensure long-term asset accumulation and retirement provision. The state supports private retirement provision. Contributions that are paid in can therefore be deducted from taxes. In 2023, persons in employment with a pension fund can pay in a maximum of CHF 7,056. Persons in employment without a pension fund can pay in up to 20% of their net income from employment, but at most CHF 35,280.

The balance from this pillar cannot be disposed of freely at all times. Withdrawal is possible five years before regular retirement at the earliest. Its primary purpose is retirement provision – hence the expression "restricted pension plan." Early withdrawal is possible in the following three exceptional cases: 

  • If you want to buy residential property
  • If you become self-employed
  • If you leave Switzerland for good

A pillar 3a plan can be opened with various providers. You can choose between an insurance solution and a retirement savings account. Zurich offers both solutions. Further information on our savings insurance products can be found on our Premium Life Savings Insurance overview page. Further information on our retirement savings account can be found on the Retirement Savings Account 3a overview page. Further information on CapitalFund Life Insurance can be found on our overview page.

Retirement savings account vs. savings insurance

With a retirement savings account, you can decide between an account or a custody account solution. With a standard account solution, your assets remain in a savings account. You merely receive interest on them. With a custody account solution, your assets are invested in investment funds. This means that your chance of profit is higher – but so too are the risks. With a retirement savings account, you decide how much you want to pay in at all times. There are no stipulations with respect to amounts. 

 In the case of savings insurance, you conclude an insurance contract. The contract generally lasts from the time it is concluded until your retirement. You commit to paying the contractually agreed amount throughout the entire term. In return, the insurance offers you some benefits and security. With our Premium Life Savings Insurance, for instance, these are as follows: 

  • Security and returns: 95% of your savings premiums are guaranteed. At the same time, you get attractive potential for returns.
  • Security for your family: You and your loved ones are protected from the financial consequences of a disability or in the event of death. This is because, with savings insurance, we continue to pay into your pillar 3a even if you are unable to work due to disability. You will therefore continue to save for retirement, even if you can no longer work. 
  • You remain flexible:  You decide how much you want to save regularly. And should something happen at some point in your life, you can pause your premium payments for one to three years.

You pay no income tax on earnings in pillar 3a (interest and surpluses) during the term. 

Final taxation from pillar 3a

Upon your retirement, the capital payment is taxed separately from other income at a reduced rate. You can invest several pillar 3a solutions and have the balance paid out at different times. This may make sense for high amounts of over CHF 100,000, as it enables the progressiveness of tax to be counteracted.

For whom is pillar 3a suitable?

Paying into pillar 3a is worthwhile for anyone who has earnings from gainful employment that are subject to OASI and who wants to save on taxes and maintain their standard of living even in old age. After all, pillar 3a is becoming an increasingly important part of retirement provision. We recommend paying into pillar 3a as soon as you start working.

Pillar 3b unrestricted pension plans – unrestricted, private retirement provision

Pillar 3b unrestricted pension plans are private retirement provision that is not supported by the state. This means that amounts paid in cannot be deducted from taxes. Anyone can pay into this pillar. There is no maximum amount. You can pay in as much as you want for as long as you want. The assets saved are not limited to retirement. In other words, you can choose when you want to withdraw them and what you wish to withdraw them for. For this reason, it is referred to as a free or unrestricted pension plan.

Unlike with pillar 3a, all assets saved voluntarily, such as shares, savings accounts, real estate and life insurance, count toward pillar 3b. There are likewise various solutions for pillar 3b. In this context, the decision about what makes sense for you is very individual. Among other things, it depends on what assets you have. 

Bank or insurance?

An insurance solution offers you security against certain risks. However, you are restricted to a term defined in advance. You should therefore consider in advance what you will need capital for and when. Are you saving for your pension in pillar 3b and do you want to be covered? If so, you are well advised to choose life insurance. Do you wish to be able to make a dream come true with pillar 3b and to be able to access the assets more flexibly? In this case, a bank solution may be the better choice. 

Our unit-linked life insurance Zurich CapitalFund can be adapted to meet your requirements:

  • Premium or one-time payment: You decide whether you wish to pay in regularly or to make a one-time payment (single premium).
  • Security: In the case of partial or full disability, Zurich will continue to save for you, and you can also secure your income and, in the event of death, your family.
  • Returns: You can choose from ten investment plans with an equity portion of 0 to 100%.
Further information on Zurich CapitalFund Life Insurance can be found on our overview page.

For whom is pillar 3b suitable?

Pillar 3b is suitable for all individuals who want to save for their old age or a greater dream above and beyond the annual maximum amount from pillar 3a. However, we recommend that you only consider this option once you have exhausted the maximum amount from pillar 3a. 

Are you unsure which option is right for you? Our experts will be happy to help you.

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