3rd pillar: Best individual pension plans in 2024

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To prepare for your retirement, you can supplement the income already provided by the 1^er pillar and the 2^e pillar with additional insurance: private pension provision or 3^e pillar. The third pillar helps you save for a comfortable retirement, but it doesn't stop there: private pension provision offers you a range of options for achieving your savings goals.

But how does the 3rd pillar work in Switzerland? What are the differences between Pillar 3a and Pillar 3b? How do you choose the best 3rd pillar pension plan?

Read our guide to everything you need to know about the 3rd pillar and compare the best 3rd pillar pension plans in Switzerland.

3rd pillar: Key takeaways

Pillar 3a: many constraints but interesting tax treatment.
Pillar 3b: freedom but few tax breaks.
Maximum amount pillar 3a: employees = 7 056 CHF, self-employed = 35 280 CHF
Pillar 3a contributions can be deducted from taxable income.
Early withdrawal from 3a is possible under certain conditions.

What is the 3rd pillar?

In Switzerland, the "three pillars" refer to a social security system based on three main components. These pillars are:

First pillar: Old-age, survivors' and disability insurance (OASI): this pillar is compulsory and aims to cover vital needs. It is financed by contributions from employees and employers, as well as the self-employed. It includes AVS, which provides a pension for the elderly, and AI, which is an insurance scheme for those unable to work due to disability.
Second pillar: Occupational pension fund (OP): this pillar is also compulsory for employees and complements the first pillar. It is financed by employer and employee contributions. It aims to maintain the previous standard of living after retirement, in the event of disability or death.
Third pillar: Private pension provision: this pillar is optional and enables individuals to supplement their retirement beyond what the first two pillars offer.

The third pillar, also known as private pension provision, is often used to save more for retirement, for the purchase of residential property, or for additional protection in the event of death or disability. Private pension provision is itself made up of two sub-pillars: tied pension provision (pillar 3a) and flexible pension provision (pillar 3b).

What about 3rd pillar life insurance?

The 3rd pillar savings account does not necessarily include life insurance (this is particularly the case if you take out a policy with a bank). On the other hand, if you take out a policy with an insurance company, you will probably obtain life insurance as part of a 3rd pillar contract. The savings accumulated can then be passed on to your heirs in the event of your death.

Pillar 3a: Tied personal pension provision

The pillar 3a is known as tied pension provision, as it is mainly used for retirement provision and therefore benefits from tax relief at the federal level. Pillar 3a is normally paid in at retirement age and can only be paid in early under certain conditions.

You can only contribute up to a specified maximum amount to Pillar 3a, and contributions can be deducted from your taxable income each year.

Good to know

Salaried employees can pay a maximum of 7056 francs a year into their 3rd pillar; the self-employed, a maximum of 35,280 francs. (status as at 01.01.2023)

For Pillar 3a retirement provision, you can take out regulated life insurance with a Swiss insurance company, or open a regulated savings or investment account with a Swiss bank.

In both cases, savings accumulate to finance retirement, the only difference being that the insurance solution also offers death and disability cover.

Pillar 3b: unrestricted individual pension plans

The pillar 3b, on the other hand, is called a flexible pension plan because it allows greater freedom and can cover other needs in addition to those covered by pillar 3a.

Good to know

There is no maximum annual contribution in Pillar 3b. However, contributions are not tax-deductible.

The savings balance must be declared for tax purposes. Withdrawals, on the other hand, are tax-free and can be made at any time. In contrast to the requirements of Pillar 3a, Pillar 3b offers more flexibility but without the tax advantages. In other words, you can decide to save at your own pace, in the way you choose. It's often compared to life insurance, taken out to realize any of your projects.

Differences between pillar 3a and pillar 3b:

Features	Pillar 3a	Pillar 3b
Insured person, premium payer, policyholder	Always the same person	Can be different
Advantages and disadvantages	A lot of constraints, but an interesting tax system	Freedom but few tax deductions
Who benefits?	All working people with income subject to OASI and domiciled in Switzerland.	All persons, regardless of occupation or place of residence
Tax benefits on payments	The amount can be deducted from taxable income each year.	Deduction as part of lump-sum deductions for insurance premiums
Taxation during the term of the contract	Tax-exempt. Capital not included in taxable assets	Surrender value subject to wealth tax
Beneficiary Clauses *	Surviving spouse or surviving registered partner Direct descendant (parents, siblings) Other heirs (free choice)	Free choice
Duration	Until retirement age (65)	No limits
Pledging	Only for financing owner-occupied housing.	Possible at any time if accepted as liquid cover
Maximum annual payments	Employees: 7,056 CHF Self-employed: 35,280 CHF	No limits
Tax deduction	Employees: up to 7,056 CHF Self-employed: up to 35,280 CHF	Possible in some cantons
Tax on withdrawal of capital	Between 5% and 10% depending on the amount of capital	No tax
Withdrawal conditions	Become a homeowner Become self-employed Leave Switzerland permanently Up to 5 years before retirement age Be 100% disabled	No conditions required

Combined pension provision: what to choose between pillar 3a or 3b?

*Beneficiary clause: on the death of the insured, the law determines who inherits the Pillar 3a capital. The first beneficiary is the spouse or registered partner, followed by the children. * *Duration: you can have your Pillar 3a savings paid in between five years before and a maximum of five years after ordinary retirement age.

What to choose between Pillar 3a and 3b?

Here is a table to help you choose between pillar 3a and pillar 3b according to your investor profile.

Investor profile	Prudent	Balanced	Dynamics
Age	Over 60	From 40 to 60 years	Under 40
Personal situation	Family	Couple	Single
Professional situation	Employee Self-employed Retired	Employee Self-employed	Employee Self-employed
Goals	Optimizing the transfer of assets Protecting your family	Prepare for retirement Reduce your tax burden Capitalize and grow your assets Top up your retirement Save on taxes with deductible contributions Finance your children's education Save on taxes with deductible contributions Save on taxes thanks to deductible contributions Finance your children's education Finance a personal project	Build wealth Generate additional income Prepare for retirement Finance a personal project
Investment horizon	Short term	Medium-term	Long term
Type of investment	Pillar 3a	Pillar 3a	Pillar 3a or Pillar 3b

Summary of 3rd pillar savings by personal situation

Keep in mind

If you are primarily interested in saving for your retirement, Pillar 3a is the right choice for you because of its tax advantages.
If you're saving for a specific project, such as a round-the-world trip, you should put your money in Pillar 3b, which allows you to withdraw your money whenever you like.

What is the maximum amount of the 3rd pillar?

Pillar 3a: Payments into Pillar 3a are regulated by law:

If you are an employee or contribute to the 2nd pillar, you can contribute up to 7,056 CHF per year.
If you're self-employed, you'll pay up to 35 280 CHF per year.
There is no minimum contribution.

These amounts remain unchanged for 2024.

Pillar 3b: For Pillar 3b, there is no maximum limit.

When you retire, Pillar 1 and 2 benefits often represent only around 60% of your previous salary. That's why it's worthwhile for young adults to give serious thought to private pension provision.

It's fair to ask whether saving on the 3rd pillar is the same as having that amount in the bank or in cash at home? The answer is obviously no, and this is where all the subtlety of the 3rd^ème pillar comes in.

Why save with the 3rd pillar?

The third pillar has one advantage that a sum kept warm at home doesn't: its deductibility. Every franc invested in a 3a account (within the annual limits for a salaried employee) is no longer considered as income received and is therefore no longer taxed. When you retire, Pillar 1 and 2 benefits often represent only around 60% of your previous salary. That's why it's worthwhile for young adults to give serious thought to private pension provision.

It's fair to ask whether saving on the 3rd pillar is the same as having that amount in the bank or in cash at home? The answer is obviously no, and this is where all the subtlety of the 3rdème pillar comes in.

The third pillar has one advantage that a sum kept warm at home doesn't: its deductibility. Every franc invested in a 3a account (within the annual limits for a salaried employee) is no longer considered as income received and is therefore no longer taxed.

What is the tax deduction for the 3rd pillar in Switzerland?

With regard to Pillar 3a, contributions paid into Pillar 3a can be deducted from taxable income. This means that the amount you invest in your Pillar 3a reduces your taxable income, lowering the amount of tax you have to pay for the year in question.

What's more, the capital accumulated in Pillar 3a grows at a generally higher interest rate than traditional savings accounts, and capital gains and interest are not taxed as long as they remain in the 3a account.

This tax advantage makes Pillar 3a particularly attractive for people looking to save for retirement while reducing their current tax burden, within the limits of the maximum deductible amounts:

For employees, the maximum deductible amount is 7,056 CHF per year.
For self-employed people without a pension fund, the limit is set at 20% of net income, up to a maximum of 35 280 CHF per year.

Concerning the 3rd Pillar b, pillar 3b generally offers no annual tax benefits. On the other hand, you won't have to pay tax when you withdraw all the capital accumulated there, unlike Pillar 3a.

Let's summarize the tax differences between Pillar 3A and 3B :

	3rd Pillar a	3rd Pillar b
Tax deductions on taxable income	Payments made to a 3rd pillar 3A plan are tax-deductible up to a maximum of 7 056 CHF if you are employed, and up to a maximum of 35 280 CHF if you are self-employed (only if you are not already contributing to the OP).	Deductions are lower and apply only to residents of Geneva and Fribourg.
Wealth tax	3rd pillar capital and income (interest and surplus earnings) are not included in taxable assets.	3rd pillar capital and income (interest and surplus earnings) are included in taxable assets.
Tax on capital withdrawal	Capital withdrawals are taxed at rates ranging from 5% to 10%, depending on the amount of capital.	Withdrawal of capital is not taxed.

Tax differences between pillar 3a and 3b

How do I declare my 3rd pillar on my tax return?

You'll need to declare the amount of premiums you paid during the year to contribute to the 3rd pillar. To find out this amount, please contact the organization that holds your contract to obtain a summary of the premiums paid.

The amount to be deducted from income is then entered on the tax return:

Paper tax return, you will need to look for box 310 on the paper return;
If you use software such as GETax or VaudTax, go to " Deductions ", then to the submenu " Insurance contributions (provident fund)".

How do I make withdrawals from my 3rd pillar?

Pillar 3a: Withdrawal of the money saved in your pillar 3a is generally made when you reach retirement age, or at the earliest 5 years before this legal age (65 for men and women since the OASI 21 law came into force on 01/01/2024).

However, it is possible to make an early withdrawal of your capital in the following exceptional situations:

If you intend to buy or build a home for yourself.
If you are planning to leave Switzerland permanently.
If you're thinking of starting your own business.
If you are planning to change your self-employed occupation.
For the purchase of insurance periods in a second-pillar pension fund.
If you receive a full disability pension from the IV and the risk of disability is not covered by insurance.

What's more, if you choose to continue working after the age of 65, you can continue to make payments into your account and defer the withdrawal of your capital for up to 5 years.

Pillar 3b : For Pillar 3b, you can recover your saved capital whenever you like under no conditions.

Good to know

In general, it makes sense to have several 3rd pillars. If you spread your assets and have them paid out in different tax years, you'll avoid progressive taxation. In fact, the greater the capital withdrawn in a single year, the higher the tax rate. On the other hand, a partial withdrawal, i.e. not withdrawing everything at once, reduces the exit tax.

Can I buy back my 3rd pillar?

If you haven't contributed the maximum to your pillar 3a in certain years, you have the option of "buying back" these missed contributions. This means you can make additional payments to reach the annual contribution ceiling.

The additional payments made for the buy-back are tax-deductible, just like ordinary pillar 3a contributions. This allows you to reduce your taxable income for the year in which the purchase is made.

Buying back can be an effective strategy for increasing your retirement savings and benefiting from tax advantages, especially if you've had years with lower incomes or started saving late for retirement.

Before proceeding with a buy-back, it is advisable to consult a financial advisor or pension expert. Tax implications and retirement planning should be carefully examined to ensure that the buy-back corresponds to your financial situation and retirement objectives.

Watch out!

Pillar 3a contributions are limited each year (7 056 CHF for salaried employees). You cannot exceed this annual limit by making a purchase, but you can reach it if you have not already contributed the maximum in previous years.

Should I take out a 3rd pillar via an insurance company or a bank?

The decision to take out your 3rd pillar with a bank or an insurance company depends on your specific needs, your financial objectives and your risk profile:

The bank contract is undoubtedly the simplest to understand. In a nutshell, a third-pillar bank account can be compared to a blocked savings account into which you can organize your payments as you wish. The only limit is the maximum authorized amount, i.e. CHF 7,056 for salaried employees. All you have to worry about is how much you're investing.

If you decide to take out a pillar 3^ème with an insurance company, this is no longer a contract but an insurance policy. In concrete terms, the principle is the same as that of the bank, but in addition to the savings, you must insure certain risks, such as a guaranteed capital sum in the event of death, a life annuity in the event of disability, waiver of premium payments, etc. This is called the insured part, and it is compulsory. This is called the insured part, and it is compulsory.

Good to know

Insurance companies often offer life insurance as part of a 3rd pillar policy, so the savings you build up can be passed on to your heirs in the event of your death.

How can you protect your family with the 3rd pillar?

The 3rd pillar offers several ways to protect your family financially:

Saving for the future: Build long-term capital for your loved ones.
Life insurance: In the event of death, a sum of money is paid to the beneficiaries.
Disability coverage: Provide an annuity or lump sum in the event of earning incapacity due to disability.
Flexibility of beneficiaries: Possibility of freely naming beneficiaries outside the legal rules of succession.
Tax benefits: Payments are tax-deductible.

Good to know

The 3rd pillar "Child Savings" is a pension product in Switzerland designed specifically for children. It enables parents or relatives to build up savings for a child's financial future, often with a view to financing his or her education or providing start-up capital for adult life. This type of account can offer tax advantages and be a form of long-term provision for the child.

All our articles on the 3rd pillar

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Nishadh Mohammed

Nishadh Mohammed is a seasoned news editor and financial writer, working with HelloSafe since May 2023. Nishadh has developed expertise in financial markets, insurance, and investment products, with a deep understanding of the Canadian financial landscape. He has honed his SEO skills and content marketing strategies while writing for Canadian publishing houses. Armed with a master's in Business Analytics and extensive journalistic experience, Nishadh uniquely combines data proficiency and thorough research to deliver comprehensive and accessible information.

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