3rd Pillar Pension

Pension plan comparison - different options

The right preventive care needs to be well planned

The Swiss pension system is based on the 3-pillar principle: Pension provision is regulated at the state, professional and private levels. This includes a state pension (AHV) and the provision by the employer (pension fund) in the first two pillars as well as a purely private pension, which forms the 3rd pillar (Pillar 3A and Pillar 3B). Adequate private provision is essential in order to provide complete and ideal provision. Depending on the standard of living, salary and expectations of your own retirement, savings plans and strategies can be developed at an early stage in order to maintain the usual standard in old age and to really enjoy retirement.

Pillar 1 and 2 - the mandatory elements of retirement provision

Pillar 1 and 2 include those contributions to old-age provision that in principle every employee in Switzerland receives. Every Swiss person automatically pays into the 1st pillar - old-age and survivors' insurance (AHV), disability insurance (IV), contributions to income compensation for military service (EO) and maternity as well as unemployment insurance (ALV). These payments are intended to secure the subsistence level in old age. The pension fund is financed through a pay-as-you-go system based on the principle of solidarity. Current pensions are paid from current income - young pays for old and high earners help finance low earners. This small state pension is supplemented by payments from Pillar 2 for employees. For this, both employees (from the 17th Age) as well as employers regularly in an accident insurance and a daily sickness allowance insurance. However, only if the employee's annual income is over CHF 21,330. Self-employed persons and employees with fixed-term employment contracts of a maximum of 3 months can voluntarily secure and pay in via the 2nd pillar. The pension agreements of pillar 2 are also referred to as extra-mandatory pension.

Get active yourself and take precautions in good time

However, employees build up the pension plus with the 3rd pillar. This is the purely voluntary part of retirement provision that everyone has to take care of themselves. However, it is advisable to create savings plans for the 3rd pillar so that you can start your retirement without worries and with the necessary financial cushion. In addition, you can make tax savings in Pillar 3a, which you can benefit from before you retire.

Pillar 3a: tied pension provision

Pillar 3a savings measures are also known as tied pension provision, as the relevant contracts with a bank and / or insurance company are binding. Money is regularly deposited into the relevant bank account or into the life insurance, which is then no longer freely available. Only in a few exceptional cases, such as amortizing a mortgage, can the saved capital be accessed before retirement age. Pillar 3a is particularly worthwhile because savings result in tax advantages and pension provision is subsidized with federal funds. All contributions to pillar 3a can be deducted from taxable income in the annual tax return. Even if taxes are incurred as soon as you receive capital benefits from your pension, you benefit from these tax advantages overall.

Pillar 3b: For the best possible pension

The provision in pillar 3b is the icing on the cake of old-age provision. If you pay into pillar 3a and have already exhausted the maximum amount that can be claimed for tax purposes, you can still put more money aside for old age. This is possible within the framework of pillar 3b, where saving is not tied to fixed contracts or forms of savings, but also does not bring any tax advantages. Many of the pension offers in this pillar are very flexible and can be changed or canceled on a regular basis. You have more control over your saved assets than in Pillar 3a, but you also don't benefit from government subsidies.

Personal advice

Finding the right pension is not always easy in Switzerland due to the variety of offers. We'll find the best options for you and help you make your retirement a pleasant one. Our advisors will work with you to create pension plans that are precisely tailored to your personal situation and needs. Make an appointment with a consultant today.

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