Pillar 3b
Pillar 3b: pros and cons of the unrestricted pension
Comparis shows the differences between the unrestricted pension in pillar 3b and the restricted pension in pillar 3a.
23.02.2024
iStock / RichVintage
1. Explanation: what is pillar 3b?
Pillar 3b is part of the private pension scheme. Together with pillar 3a, it forms the third pillar of the Swiss pension system:
Pillar 1: the state pension (OASI/DI)
Pillar 2: occupational pension (BVG/UVG)
Pillar 3: private pension (pillar 3a and pillar 3b)
Unlike pillar 3a (restricted pension plan), pillar 3b is not restricted by retirement age or investment rules. It is an unrestricted pension plan.
2. What are the main types of investment in pillar 3b?
In principle, all assets saved outside the first and second pillars and pillar 3a form part of an unrestricted pension plan. This means that a home, valuable jewellery or art objects are also part of your unrestricted pension plan. More common pillar 3b components are:
Savings and private accounts
Bonds
Shares
Investment funds
Structured products
Insurance policies
Two-in-one with life insurance
Life insurance allows you to save pension capital and at the same time protect you and your relatives from financial risks such as those caused by death or disability.
3. What are the advantages of pillar 3b?
Paying in: you can save as much as you like. There is no maximum amount.
Payout: the time of payout can be freely chosen. However, early termination may result in financial losses. This applies, for example, in connection with life insurance.
Investment decision: anyone living in Switzerland can decide whether and with what risk they want to invest.
Inheritance law: you can freely determine the beneficiary within the limits of inheritance law (statutory entitlements).
4. What are the disadvantages of pillar 3b?
Pillar 3b and taxes
Payments into pillar 3a can be deducted from your taxable income. Pillar 3b does not offer the same tax advantages when depositing. In many cases, however, payouts are tax-free.
Are you drawing the capital from pillar 3b as an old-age pension? If you draw capital from pillar 3b as a retirement pension, only 40% of the pension payments will be subject to tax. 100% of 3a pensions are taxed.
Pillar 3b and investment security
Pillar 3b offers much less investor protection than the other pension pillars. This makes it more flexible. At the same time, it is more susceptible to risky (or simply wrong) decisions. You should always seek good advice, preferably from an independent service provider.
5. What are the differences between pillar 3a and pillar 3b?
| Restricted pension plan (pillar 3a) | Unrestricted pension plan (pillar 3b) | |
|---|---|---|
| Target groups: | Employees and self-employed people subject to OASI | People living in Switzerland |
| Purpose | Saving for old age | Saving for old age or personal wishes |
| Payments per year | Employees: max. 7,056 francs; self-employed people: max. 35,280 francs (as of 2024) | no maximum amount |
| Products | Savings account 3a, securities account 3a, insurance policy 3a | Savings account, securities, investment funds, life insurance, residential property, tangible assets |
| Regular payment | at OASI retirement age | always |
| Early payout | Only for residential property, self-employment, disability and emigration | no restrictions, but may incur financial losses |
| Tax advantages | Premiums are deducted from your taxable income | limited tax deduction |
| Nomination of beneficiary of inheritance | Individual beneficiary is only possible to a limited extent | Free to choose beneficiary (taking into account the statutory entitlements) |
Have you safeguarded your financial future? The Comparis pension calculator will help you identify pension gaps in good time.
This article was first published on 17.01.2023