Holders of a pillar 3a retirement account may have three reasons to terminate their account.
- Change of provider
- Reaching the age limit
- Advance withdrawal
Change of provider
It is possible to transfer the assets of a pillar 3a account to a different provider or to transform it into a different 3rd-pillar product. With most providers there is no period of notice. However, the money must remain in the 3a system and may not be transferred to a traditional bank account.
For that reason, the client is required to present his/her previous provider with a confirmation from the new provider to prove that the money will remain within the 3a system. In addition, all assets must be transferred completely. Changing one's 3a account like this is possible with banks but not with insurance companies.
Sample/Template of termination letter for pillar 3a account (in German only)
Reaching the age limit
Five years before the regular retirement age, holders of a pillar 3a account may ask for their savings to be paid out to a normal account, i.e. women at the age of 59 and men at the age of 60. From then on, they have the full amount at their disposal. Otherwise, the savings are withdrawn upon retirement or early retirement.
There are a number of exceptions that allow for pillar 3a savings to be fully or partially withdrawn before the age limit. However, these withdrawals are subject to taxes that are made up of special rates. These tax rates are lower than the ones for income tax.
The exceptions for advance withdrawal include:
- financing owner-occupied residential property or paying back mortgages,
- purchasing additional pension benefits (2nd pillar) to fill gaps in one's retirement provision from the past, which arose e.g. due to inactivity,
- starting an activity in a self-employed capacity or changing one's previous self-employed activity,
- emigrating from Switzerland,
- drawing an invalidity pension.
Holders of a 3a insurance (life insurance) are also able to make advance withdrawals. This kind of advance withdrawal is clearly regulated by law and very expensive.