Save with pillar 3a
Pillar 3a will allow you to save on retirement and tax at the same time. With these tips from Comparis, you can take full advantage of the benefits of tied pensions.
23.02.2024
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Maximum contributions – maximum tax benefits
Payments into pillar 3a can be deducted from your taxable income. However, the condition for this is income subject to OASI contributions. The more you pay in, the greater your tax savings. However, a maximum amount applies to pillar 3a contributions: it is 7056 francs for employees (as at 2024). Self-employed people with no occupational pension can pay a maximum of 34,128 francs or 20% of their net income into pillar 3a. Any payments over this amount will not be accepted by the tax office.
For this, you need to fill in the corresponding field in your tax return and include a confirmation of payment from your bank or insurance company.
The tax benefits of pillar 3a are as follows:
Contributions can be deducted from your taxable income.
The retirement savings are exempt from wealth tax.
You do not have to pay income or withholding tax on interest and capital gains.
Your withdrawn pension assets are taxed separately from your main income and at a lower rate than income tax.
Multiple accounts pay off even with small balances
However, you can only withdraw the full amount saved in a pillar 3a account. After all, when the saved retirement capital is The higher the paid-out capital in a year, the higher the taxation due to the so-called tax progression.
That's why it's worth spreading your 3a savings across multiple accounts and withdrawing them at a split rate. So you can reduce the lump sum tax with little effort.
Compare interest rates
The interest rates on 3a accounts are currently between 0 and 0.5 percent (as of November 2022). In the long term, even a fraction of a percent can have a considerable effect on the savings you accumulate.It's worth comparing different insurers.
Pillar 3a – Why it pays to pay in early
The earlier you pay into pillar 3a, the longer you will benefit from the preferential interest rate of pillar 3a.
Savings or investment account?
You can invest your pillar 3a assets in a savings or investment account. With the latter, your money is invested in securities (shares, bonds). Savings accounts are the more conservative option, carrying minimal risk. Interest is credited to the account annually, but the interest rate may fluctuate at any time.
A securities solution via an investment fund is suitable for people looking to invest over a long term (10 years or more). There is a risk that you may lose money, depending on the state of the economy and composition of the fund. In favourable circumstances, on the other hand, the yields can be greater. You can read more about this in our comparison of pension accounts and pension funds.
Compare fees and costs of investment accounts
In the long term, additional costs and fees can have a significant impact on the capital accrued. Over time, they are the biggest eroders of investment returns. The fees charged on the various pillar 3a investment funds can differ quite widely.
Savvy savers who do their research and check their account costs regularly will be at a distinct advantage. It's also a good idea to get some advice from an independent specialist when comparing the different investment options.
How well protected are pillar 3a products in the event of bankruptcy?
The safety of pension accounts if a bank collapses is a frequent source of misunderstanding. Although pillar 3a and vested benefits accounts are classed as preferential, they do not enjoy the protection of the depositor protection scheme afforded to traditional savings accounts, i.e. 100,000 francs per customer.
However, pension savings accounts will be given priority in the event of a bank failure. So they fall into the second and not the third class of creditors. Although this preferential treatment increases the chances of a payout, it does not guarantee it.
The only pension accounts that are fully protected are those provided by cantonal banks with a state guarantee. In this case, the canton guarantees full reimbursement if the bank files for bankruptcy.
Of the 24 cantonal banks, three have no state guarantee or only a limited one. Banque Cantonale Vaudoise (BCV) and Berner Kantonalbank (BEKB) have no state guarantee; Banque Cantonale Genève (BCGE) has a limited state guarantee.
Endowment-style policies are not always the best solution
Endowment-style policies combine insurance cover with a savings element. However, they may be obliged to make premium payments for decades. An early exit often entails a steep financial loss.
For more flexibility, you should separate risk cover from your savings plan: take out a term insurance policy with an insurance company and choose a savings or investment plan with a bank.
Supplement pillar 3a with pillar 3b
Pillar 3a savings options are also known as restricted pension plans. The reason: pillar 3a savings are tied up until five years before you reach statutory retirement age, and can only be withdrawn earlier under certain conditions (e.g. to buy a residential property).
But there is also an option to save without these restrictions: pillar 3b. This is an unrestricted pension plan, which means you can save without being tied to fixed contracts or particular savings products. It doesn't, however, offer any tax benefits.
This article was first published on 11.11.2019
