Bank or insurance: The differences in pillar 3a

Bank or insurance

Bank or insurance: The differences in pillar 3a

Are you uncertain whether you should open your pillar 3a with a bank or an insurance company? The biggest differences are in the areas of risk protection, flexibility and contract period. Find out which solution best suits your requirements.

Bank vs. insurance: What they have in common

Before you weigh up the differences between banks and insurance in pillar 3a, you should know what the two solutions have in common:

  • You can use both solutions to save for your old age.
  • With both solutions, you can deduct a certain amount from taxes.
  • Your money is restricted in the case of both solutions. You can only have your pillar 3a credit paid out prematurely if you are acquiring residential property, taking up self-employment or leaving Switzerland for good.
  • In both solutions, you can invest your retirement assets in funds and benefit from higher returns.

Bank vs. insurance: The differences

The biggest differences between a bank and an insurance solution in pillar 3a relate to the following points:

  Bank Insurance
Risk protection No protection  Protection in the event of disability and death 
Maximum flexibility with respect to deposit amount (up to the maximum contribution) Limited flexibility
Contract period No defined term  Contractual term, generally until retirement 
Retirement assets Everything that is paid in, minus payment commission (depending on investment), fund costs or custody fees Premiums for the insurance coverage are deducted from the retirement assets. Acquisition costs and management costs also apply
Achievement of saving goal Depends on personal discipline and whether you are in employment 100%, even in the event of disability

We take a closer look at the differences below.

Risk protection Insurance – security thanks to a contract

If you take out your pillar 3a solution with an insurance company, you conclude an insurance contract at the same time. In this contract, you define your saving goal and thus the volume of contributions that you have to pay into pillar 3a each year. In return, the insurance contract includes insurance coverage in the event of disability and/or death. This means that if you are unable to work any longer, your insurance will pay the amount due annually into pillar 3a for you. Depending on the retirement provision solution you choose, you will also receive a disability pension until retirement, ensuring that you reach the saving goal that you defined at the start in full. In the event of death, your surviving dependents will receive a lump-sum death benefit depending on the contract, so 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 annual premium. 

Bank – flexibility in terms of deposits

If you open your pillar 3a with a bank, you are not obliged to pay a certain amount into your pillar 3a. Taking into account the maximum amount, you decide independently how much money you pay in each year, and anything that you pay in will be available to you after retirement. You can open several bank accounts or custody accounts and split up the amounts. With our pension funds 3a for example, you can combine bank and securities saving and take advantage of higher return opportunities. In addition, you can optimize taxes in this way if you close your pension accounts gradually from the age of 60. Further information on this can be found in the article "Pillar 3a: Save taxes on withdrawals". 

While you are more flexible with a bank solution, you also have to be more disciplined to achieve your saving goals. In addition, you and/or your family will not be protected against the financial consequences of disability or death. If you are no longer able to work, you are no longer allowed to pay into pillar 3a. 

Contract period Insurance – fixed term

Insurance contracts have a fixed period of insurance, which usually lasts until regular retirement. You undertake to pay a certain amount into the pillar 3a policy annually. 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, meaning that you will be fully insured even if, for example, you go on parental leave or spend time abroad. The only consequence is that your final amount will be reduced. The final amount is the amount that is paid out to you upon the expiry of the policy. 

Bank – no fixed term

As you are not obliged to pay in money with a bank solution, there is also no fixed term. You can redeem your pillar 3a assets a maximum of five years before your retirement. 

Conclusion: Insurance vs. bank solution

What better suits your requirements? If you consider security to be crucial, you should choose an insurance solution. If you wish to save flexibly, you should choose a bank solution. 

Our tip: Do the one but don't reject the other! Insurance and bank solutions can be combined with each other. We offer a wide range of retirement provision solutions. You can also take out a disability pension and/or term life insurance separately. In this way, you can deduct these risk premiums from your taxes. 

We would be glad to advise you

A personal consultation is often worthwhile, because our solutions are as individual as your personal circumstances. At Zurich, it's up to you: your customer advisor will advise you at your home, at the agency or via video conference - whatever suits you best.

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