3rd Pillar Account
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The three-pillar system in Switzerland
In Switzerland, the calculation of the retirement pension is based on the contributions made to the three pillars during the working life.
The 1st pillar
The 1st pillar is a compulsory redistributive pension scheme which aims to provide a minimum subsistence income to every retired person.
It includes Old Age and Survivors’ Insurance (AVS), Disability Insurance (AI), additional social security benefits, unemployment insurance and the Allowance for Loss of Earnings (APG).
The 2nd pillar
The 2nd pillar is a compulsory individual pension scheme designed to improve the pension of retired employees.
More precisely, it is an occupational pension fund which is paid by the employee and his/her employer. In principle, the accumulated pensions from the 1st and 2nd pillar should represent approximately 60% of the last salary.
The 3rd pillar
The purpose of the 3rd pillar is to maintain the standard of living of former professionals who are now retired. It consists of two forms of savings.
The 3A pillar
The 3A pillar allows you to save a tax-deductible amount every month. This can be withdrawn when you retire or in the case of particular events, such as the purchase of a principal residence.
The 3B pillar
Also known as free pension provision, the 3B pillar allows you to save an unlimited amount every month. Unlike the 3A pillar, the saved amount is not tax-deductible, but it can be withdrawn at any time and without restriction.
What are the advantages of the 3rd pillar?
Reduced taxable income
By opting for a 3A pillar, you benefit from tax advantages. You can deduct up to CHF 6,883 per year from your taxes. This amount can even be up to CHF 34,416 if you are self-employed and not affiliated to a 2nd pillar pension fund.
No decline in living standards when you retire
It is important to be aware that approximately 40% of your current salary will not be covered by your 1st and 2nd pillars. Therefore, opting for a 3rd pillar allows you to maintain your standard of living when you retire.
Contributing to the purchase of a home
In Switzerland, it is necessary to have a capital equivalent to 25% of the price of a real estate property in order to buy it and obtain a loan from the bank.
By using the money you have saved in your 3A and/or 3B pillar, you can facilitate the payment of this minimum deposit and become the owner of your main residence.
How do I choose the best 3rd pillar account for my situation?
In Switzerland, there are several pension funds, banks and insurance companies that offer 3A and 3B savings plans. The rates of return can vary from one option to another. It is difficult to find your way around if you are not familiar with the Swiss pension market.
By relying on an independent fiduciary firm such as Dylitics, you will enjoy the following benefits:
Finding the best savings plan for your situation;
Comparing all options in Switzerland;
Getting personalised tax advice;
Gaining access to tax simulations to better assess your future decisions.
Interested in improving your retirement? Are you looking to reduce your tax bill with a 3rd pillar? Do not hesitate to contact our team of experts.