Pillar 3a payout: how to cancel the 3a pension account
When can you access your pillar 3a savings? What do you need to do when withdrawing your private pension savings? Comparis explains the ins and outs and shares tips on how to save money when withdrawing pillar 3a assets.
13.12.2022
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1. When can I have my pillar 3a savings paid out?
Pillar 3a is known as the restricted private pension plan. It is described as ‘restricted’ because your options for withdrawing the savings are limited. Payouts are only possible in the following circumstances:
Five years before reaching statutory retirement age at the earliest
If drawing a disability pension
To finance a home purchase
To start a business
To pay extra into the second pillar
When leaving Switzerland for good
In the event of the pension recipient’s death
2. What are standard pillar 3a withdrawals and how do they work?
A standard pillar 3a withdrawal is when you receive your pension benefits when you retire. In addition, you may withdraw pillar 3a savings five years before you reach the statutory retirement age defined by AHV/AVS at the earliest. This is 65 for men and women (transitional provisions apply to women until 2028).
Pillar 3a can also be paid out after retirement. Are you planning to work beyond the normal retirement age?As long as you can prove that you are doing a job, you may postpone the payout. However, you must withdraw the capital no later than five years after the normal retirement age, i.e. at the age of 69 or 70, respectively.
Closing a pillar 3a account: what do I need to do?
Regardless of when you withdraw your pension savings from the 3rd pillar, you must actively close your pillar 3a account. The payout is not automatic. Contact your bank or insurance company in good time. They will send you the application form. If you do not get in touch, the provider will contact you. Important: you must state your pillar 3a payout on your tax return. The amount is taxed at a reduced rate, separately from income tax.
3. When can I make an early withdrawal from pillar 3a?
Early withdrawal is when you take out your pension savings before you actually retire. You can withdraw your pillar 3a assets ahead of time in the following cases:
You can use money from pillar 3a to finance a home that you will live in. You have the following options:
Finance a home you will live in through advance withdrawal or pledging
Withdraw pillar 3a savings to repay an existing mortgage
Withdraw pillar 3a savings for renovations and conversions
Read more about advance withdrawal of retirement savings to buy a home.
Beneficiaries of a full disability pension (IV/AI) may have their pension savings paid out if the disability risk is not covered by supplementary insurance . You cannot draw a pension, however. You are eligible for a full disability pension if your degree of disability is 70% or more. The disability insurance process must be completed before any money can be paid out.
You can use third pillar pension savings to pay extra into an occupational pension (second pillar) with no tax implications. To do this, the following conditions must be met:
You have gaps in your contributions.
If you withdrew money to buy a home to live in, you must have repaid it.
You can ask for your pension savings to be paid out under the following conditions:
Your business constitutes your primary occupation so you are no longer obliged to pay into an occupational pension.
The amount is withdrawn within one year of you starting your business. You may make another withdrawal at a later time for the purpose of investing in your business. The investment must be used for stock and equipment and not to cover ongoing operating costs.
You are registered with the AHV/AVS compensation fund as self-employed.
Your business is a sole proprietorship (partner in a limited or general partnership is also possible). You cannot withdraw your pension savings if the business is a public limited company (AG/SA) or a limited liability company (GmbH/SARL).
You can also withdraw from pillar 3a if you switch from one type of self-employed activity to another (change of industry). Once again, you must withdraw the amount within one year of taking up the new activity.
In the event of the pension recipient's death, the bank or insurance company will pay out the capital to the beneficiaries. Article 2 of the the ordinance on tax relief on contributions to recognized pension schemes (BVV/OPP 3) (in German, French and Italian only) stipulates who can be designated as a beneficiary.
If you leave Switzerland permanently, you may withdraw your 3a pension savings. To do this, you must prove that you already have a permanent address abroad. Withdrawing funds for a round-the-world trip, for instance, is not permitted. Upon withdrawal, withholding tax is deducted directly from the amount paid out.
Note: you can usually make early withdrawals from 3a bank accounts without incurring any extra costs. However, if you end a pension policy or life insurance policy from an insurance company ahead of time, this can often be very costly.
4. Tax tips on withdrawing pillar 3a assets
Save on tax when withdrawing pillar 3a savings
You must close your pillar 3a account and withdraw all the savings in one go. You cannot just withdraw some of the money – unless you have opened multiple 3a accounts.
Splitting your 3a savings in this way can pay off from a tax perspective. Because of progressive taxation, you will pay less tax everywhere in Switzerland if you withdraw 30,000 francs five times instead of 150,000 francs all at once. It’s therefore a good idea to open several 3a accounts and stagger your withdrawals over several years. Please note that the maximum annual amount of payments remains the same even for several 3a accounts.
Coordinate 3a withdrawals with second pillar withdrawals
Stagger your 3a withdrawals in coordination with any withdrawals from your occupational pension. If you withdraw pension capital from the second and third pillars in the same year, it will be added together before the lump sum tax is calculated. If you stagger the withdrawals, you will pay less tax.
Open a new 3a account for your last year of employment
Are you not working beyond statutory retirement age and intend to withdraw all or part of your occupational pension assets as a lump sum? Then you should have already closed your existing 3a accounts 1 year before. Otherwise, the assets from the occupational pension and your 3a payout will be added together to calculate your tax liability. This means that your capital withdrawals will be taxed at a higher rate. You can always open a new 3a account for your final year.
This article was first published on 24.07.2019
