Comparison of pillars 3a and 3b – what are the differences?

The chess game of choosing between 3a/3b

Comparison of pillars 3a and 3b – what are the differences?

The 3rd pillar relates to private and voluntary retirement provision. The assets in the 3rd pillar serve to close any pension gaps left over from the 1st and 2nd pillars. These assets can also be used to fulfill larger wishes. The 3rd pillar is divided into pillar 3a and pillar 3b. Find out here what the differences are and what you should bear in mind.

Pillar 3a

Pillar 3a refers to restricted, private retirement provision. The state supports private retirement provision through tax relief. This means you can deduct paid-in contributions from your taxable income. There is a maximum amount, however, which may vary slightly from year to year. In 2023, persons in employment with a pension fund can pay in a maximum of CHF 7,056. Employed persons without a pension fund account may pay in up to 20% of their net earned income, capped at CHF 35,280.

The balance from this pillar is not freely available at all times. You will normally only receive the funds you contributed once you retire. It therefore serves primarily to provide for retirement – hence the term "restricted pension provision." 

There are three exceptional cases in which early payout is possible:

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

Our Premium Life savings insurance offers you security and flexibility in pillar 3a. You can find more information on the overview page.

Pillar 3b

Pillar 3b is a private retirement provision that is not supported by the state. The assets saved are not restricted to retirement, however. Therefore you are free to choose when you wish to draw money from the account. For this reason, it is referred to as a free or unrestricted pension plan. Pillar 3b generally includes everything you save over and above the 2nd pillar and pillar 3a. This can also include assets such as equities, real estate and art. 

However, pillar 3b often also refers to an insurance solution. Most people should only consider pillar 3b once they have exhausted the maximum amount payable into pillar 3a. A unit-linked life insurance policy offers you many advantages for saving in pillar 3b. 

FAQ on pillars 3a and 3b

When does pillar 3a make sense?
Paying into pillar 3a makes sense if you would like to maintain your accustomed standard of living after retirement. With the 1st and 2nd pillars, you will receive approximately 60% of your last salary in the best case. You can also use the assets saved for self-employment, home ownership or emigration. 

What are the advantages of paying into pillar 3a?
You can deduct payments into pillar 3a from your taxable income. In addition, you pay no income or wealth tax on the amount saved during the term.

How do you decide between pillars 3a and 3b? 
If you want to save beyond pillar 3a in the medium and long term, pillar 3b may be the right solution for you. 

When does pillar 3b make sense? 
If you want to save beyond pillar 3a for the medium and long term, pillar 3b may be the right solution for you. 

What are the biggest differences between pillars 3a and 3b? 
You can deduct payments into pillar 3a from your taxable income. However, there is a maximum annual amount. In 2023, these are: CHF 7,056 per year for employed persons with a pension fund and CHF 35,280 Swiss francs per year for employed persons without a pension fund. The balance is restricted to your retirement and can be paid out at the earliest five years before retirement. You can withdraw it earlier in the following three exceptional cases: If you want to buy residential property, if you become self-employed or if you leave Switzerland for good. Pillar 3a is more regulated, and there is less personal room for maneuver with regard to aspects such as the type of assets or the beneficiary in the event of death. 

Unlike pillar 3a, pillar 3b does not have an maximum annual amount that you are allowed to pay in. You cannot deduct payments into pillar 3b from your taxes. However, the state does not restrict availability to certain conditions – such as retirement. This means you can decide more freely when and why you want to withdraw the assets. Decisions about which form of investment makes sense for you depend highly on your personal life situation, your savings goal, your place of residence and many other factors. In the case of pillar 3b assets, you can choose more freely who you want to bequeath the money to after your death.

Are you uncertain which solution is right for you? Our experts will be happy to help you.

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