The third pillar. What is the difference between pillar 3a and pillar 3b?
Why is the third pillar important?
Everyone living or working in Switzerland is covered by the old age, survivors’ and disability insurance schemes (OASI/DI). These pay benefits in the shape of retirement, disability or survivors’ pensions. If, on top of that, you are a member of a pension fund through your employer, you will enjoy additional retirement, disability and survivors’ benefits.
But even if you have always paid your OASI contributions in full and have always been insured in a pension fund through your employer, you can expect to receive only 60% of your final salary as pension income. That makes supplementary private provision via the third pillar so essential – especially for people who are not gainfully employed, only work part-time or have breaks in employment, but also for self-employed persons who do not belong to a pension fund.
What is the third pillar?
The third pillar – private provision for retirement – supplements the benefits paid by the state pension schemes (OASI/IV) and occupational pension schemes (pension funds).
The third pillar enables you to voluntarily build up additional savings for your retirement, systematically supplementing your OASI and occupational pensions and enhancing your financial freedom in retirement.
You can also use the third pillar to supplement first- and second-pillar disability pensions in accordance with your particular needs, making it at least financially possible for you to live an independent life despite a disability. If you have financial obligations, such as a mortgage, you can also secure it via the third pillar. Then, if you were to die, your family would be protected financially and could remain in their own four walls.
Pillar 3a: tied pension provision
Pillar 3a is referred to as tied pension provision because its primary aim is to secure your retirement. That is why the federal government provides tax incentives for it. Annual payments into pillar 3a are capped at a set maximum and are deductible from your taxable income. Further information on pillar 3a
Pillar 3b: flexible pension provision
Pillar 3b is called flexible pension provision because it offers greater freedom and flexibility and can cover other needs in addition to those covered by pillar 3a. While the annual contributions under pillar 3b are not capped, they are not tax-deductible. Payouts, on the other hand, are tax-free and the contract term is freely selectable. Further information on pillar 3b
What others wanted to know
Our customer advisors can provide answers to selected FAQs. Just tell us what you want to know. We will be happy to help you.
Diana G. (33), St. Gallen
When should I pay into the third pillar?
As a general rule, you can make payments at any time. In the case of pillar 3a, however, you cannot pay in more than the maximum annual amount set by the Federal Council. Your payment must reach the recipient by no later than 31 December of any year in order to qualify for deduction from your income tax the following year. If you pay in at the beginning of the year, you earn interest over the entire year on the amount paid.
And, if you can afford to invest the pillar-3a maximum amount, you can invest up to the same amount in pillar-3b, provided you have the necessary funds available.
Carlos N. (38), Oberwil
I work part-time. How much should I pay into the third pillar?
The third pillar is particularly important for part-time workers, as their pension fund benefits will be much lower due to their part-time status. But, unfortunately, part-time workers generally have very little money available to invest in the third pillar. Still, even small amounts are worthwhile – especially over a very long savings period. What is more, you can also lower your tax burden by making contributions to pillar 3a. Do the test with our tax calculator.
Diana G. (33), St. Gallen
When should I pay into the third pillar?
As a general rule, you can make payments at any time. In the case of pillar 3a, however, you cannot pay in more than the maximum annual amount set by the Federal Council. Your payment must reach the recipient by no later than 31 December of any year in order to qualify for deduction from your income tax the following year. If you pay in at the beginning of the year, you earn interest over the entire year on the amount paid.
And, if you can afford to invest the pillar-3a maximum amount, you can invest up to the same amount in pillar-3b, provided you have the necessary funds available.
Carlos N. (38), Oberwil
I work part-time. How much should I pay into the third pillar?
The third pillar is particularly important for part-time workers, as their pension fund benefits will be much lower due to their part-time status. But, unfortunately, part-time workers generally have very little money available to invest in the third pillar. Still, even small amounts are worthwhile – especially over a very long savings period. What is more, you can also lower your tax burden by making contributions to pillar 3a. Do the test with our tax calculator.
