Want to have peace of mind, to maintain your previous standard of living and to enjoy life to the full during retirement – for most people, private retirement planning plays a vital role in making these dreams come true. Benefits from the first and second pillars – in other words, state and occupational pensions – usually only make up around 60 to 70 percent of previous income during employment. To ensure you enjoy retirement with financial peace of mind, individual supplementary benefits under the third pillar provide support.
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Created on 01.11.2021
| Updated on 26.05.2024
Pillars 3a and 3b explained: what’s the difference?
You’re bound to have heard of the third pillar – after all, it’s a key part of the Swiss retirement system. You may also know that making regular payments into the third pillar is well worthwhile. But are you also aware that the third pillar is divided into flexible (pillar 3b) and fixed (pillar 3a) pension plans? We explain what lies behind the third pillar and how pillars 3a and 3b differ.
The key difference: flexible vs fixed retirement planning
The third pillar allows you to save for retirement privately and individually – in other words, in addition to OASI or a pension fund. The third pillar is divided into two types: pillar 3a and pillar 3b. While retirement planning is fixed under pillar 3a, it’s flexible in pillar 3b. What does that mean? If you make regular contributions – ideally the maximum annual amount – into pillar 3a, you enjoy tax benefits, but can only access the capital paid in under certain circumstances. These are:
- Five years before reaching statutory pension age
- If you become self-employed
- If you emigrate permanently
- If you buy a house to live in yourself
- To repay an existing mortgage
- To pay into a pension fund
By contrast, you can access your pillar 3b assets at any time – but check the contractual provisions of the solution selected. This also makes the pillar 3b ideal for short, medium and long-term savings goals. You can generally decide for yourself how much you pay in and when you wish to withdraw your assets.
Various solutions for pillars 3a and 3b
In the pillar 3a, you can make contributions into a retirement savings account 3a, take advantage of the opportunity to generate higher returns by investing some or all of these contributions into a retirement fund or take out a 3a life insurance savings policy.
As pillar 3b is based on contractual provisions and is not generally governed by state regulations (unlike pillar 3a), a wide range of investment instruments can be used for this type of flexible retirement planning, such as:
- savings account
- 3b life insurance
- equities, bonds, funds and funds saving plans,
- real estate
You can use the various options available for fixed and flexible retirement planning to cleverly put together your own solution tailored to your personal needs.
Maximum tax benefits through pillar 3a
Pillar 3a offers tax benefits: the contributions you make can be deducted from your taxable income within the legal limits. The capital in your pillar 3a and earnings from it are also exempt from wealth, withholding and income taxes. Outpayments are taxed separately from other income at a reduced rate.
The payments into the pillar 3b cannot generally be deducted on your tax return. However, different conditions apply depending on the type of pillar 3b investment you opt for. Find out about these conditions when selecting a 3b solution.
Good to know: the maximum legal limits for pillar 3a
Want to know the maximum amount you can pay into the pillar 3a this year? The maximum legal limits can be found on our retirement savings account 3a website (under Preconditions and conditions).
Who are pillars 3a and 3b suitable for?
Generally, everyone benefits from organizing private retirement provision early and making regular payments into the third pillar.However, only people aged over 18 who earn income subject to old-age and surviving dependants insurance (OASI) in Switzerland as an employee or through self-employment can pay into
the pillar 3a. People who receive daily benefits from the Swiss unemployment insurance fund can also make contributions.
Pillar 3b supplements the fixed pension plan and gives you the option of flexible retirement planning for the future in line with your preferences. Anyone can pay into this option – subject to the provisions of the chosen solution.
The differences at a glance
The key points on the differences between pillars 3a and 3b are outlined here:
| Criteria | Pillar 3a | Pillar 3b |
|---|---|---|
| Criteria Who are they available to? |
Pillar 3a Persons in employment aged over 18 with income subject to mandatory OASI contributions |
Pillar 3b Generally anyone, regardless of their employment status and place of residence (subject to contractual agreement) |
| Criteria Saving goal |
Pillar 3a Retirement provision, making up pension shortfalls |
Pillar 3b Individual |
| Criteria Possible saving solutions |
Pillar 3a Retirement savings accounts, retirement savings custody accounts, life insurance policies |
Pillar 3b Investment funds, accounts, securities, home ownership, collections of valuables, life insurance policies, payout plans |
| Criteria Level of annual inpayments |
Pillar 3a Legal maximum amount |
Pillar 3b Generally unlimited (subject to contractual agreement) |
| Criteria Maximum inpayment term |
Pillar 3a Up to five years beyond statutory OASI reference age if still in employment |
Pillar 3b Generally unlimited (subject to contractual agreement) |
| Criteria Time of payout |
Pillar 3a Five years before the statutory OASI reference age at the earliest |
Pillar 3b At any time (subject to contractual agreements) |
| Criteria Early withdrawal |
Pillar 3a Not possible, except for in these cases:
|
Pillar 3b At any time (subject to contractual agreement, e. g. regarding minimum term) |
| Criteria Tax treatment of contributions |
Pillar 3a Contributions can be deducted from taxable income within the legal limits = income tax saving |
Pillar 3b Deduction of contributions not generally possible (check different cantonal regulations) |
| Criteria Tax treatment during the term |
Pillar 3a Assets and income are exempt from tax |
Pillar 3b Depends on the solution selected |
| Criteria Tax treatment of outpayments |
Pillar 3a Tax is paid on the capital withdrawn (capital payment tax – separate from other income at a reduced tax rate). |
Pillar 3b Depends on the solution selected |
| Criteria Pledging |
Pillar 3a Depends on the solution selected |
Pillar 3b Depends on the solution selected |
Questions and answers
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If your financial situation allows you to invest money long-term (until into retirement), it’s best to mainly save with the pillar 3a and to pay in the maximum annual amount, if possible. While the tax benefits of pillar 3a differ significantly depending on where you live and your level of income, you should not miss out on the retirement planning opportunity presented by the pillar 3a – based on your financial situation and life circumstances. Pillar 3b is a good option for supplementing pillar 3a, if the requirements for paying into pillar 3a are not met or if a pillar 3b solution better meets your financial requirements.
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If the pension solution holder dies, the following persons are the beneficiaries. The order stipulated by law applies.
- Surviving spouse or registered partner
- Direct descendants and natural persons supported to a significant extent by the deceased or persons in a life partnership with the deceased for an uninterrupted five-year period prior to their death or persons who must meet the maintenance costs of one or more joint children
- Parents
- Siblings
- Other heirs excluding the state
As the pension solution holder, you are entitled to specify one or more persons from the beneficiaries listed under section 2 by means of written declaration, to determine their entitlement in greater detail or to amend the order of beneficiaries in accordance with section 3 to 5.
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Under pillar 3b, you can freely select the beneficiaries in the event of death – taking into account the obligatory parts provided for by law.
