Swiss pension plan: the third pillar, 3A and 3B
What is the third pillar in the Swiss pension plan?
The third pillar is a personal savings account designed for retirement purposes. It is meant to be a flexible and optional supplement to the mandatory first and second pillars.
Banks and insurance companies are the two organizations authorized to market the third pillar.
The third pillar: pillars 3a and 3b.
3A - Tied retirement plan
Pillar 3a, also known as the tied retirement plan, is open to all people who are employed within the Swiss borders.
This pillar is well defined in terms of maturation, the maximum premium amount and conditions for early withdrawal of funds.
- People may participate in pillar 3a until age 65 for men and 64 for women (the legal retirement age).
The maximum premium amount differs depending on the status of the worker:
- Employee status (or those with a pension fund) : 6,739 CHF maximum per year;
- Self-employed status (or those without a pension fund) : 20% of operating income or 33,696 CHF maximum per year.
- Early withdrawal of funds
It is possibly to withdraw funds early (subject to taxes) after a period of three years, but only under one of the following conditions: definitive departure from Switzerland, change of status to self-employed, purchase of a main residence or 5 years before the retirement age.
The funds in pillar 3a can be used in the purchase of the second pillar.
- The advantages of the third pillar
The law encourages the third pillar (and specifically 3a) by offering investors tax advantages.
Retirement contributions in pillar 3a can be deducted from the annual taxable income and are not subject to the wealth tax. However payment of capital is taxed a a reduce rate.
Pillar 3b - Flexible retirement fund
This pillar is a retirement fund in which the owner has total freedom regarding the retirement insurance contract (duration, premium amounts, beneficiary, etc.).