3rd pillar: Best individual pension plans in 2024

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.

What is the 3rd pillar?

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

1. 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.
2. 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.
3. 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).

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.

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.

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

*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

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.

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.

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.

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.

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

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

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

All our articles on the 3rd pillar

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