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Differences between pillars 3a and 3b

Differences between pillars 3a and 3b
Differences between pillars 3a and 3b
Would you like to put away some money for your retirement or to save for a long-held dream? With a private pension plan there are various options for achieving your savings objectives. Helvetia explains the differences between tied and flexible pension plans.

Pillar 3a – tied pension provision

Pillar 3a is called tied pension provision because it is primarily for the purpose of retirement provision and for that reason it enjoys federal tax relief. In pillar 3a, the annual amount paid can be deducted from taxable income. In 2020, employees with a pension fund can deduct a maximum of CHF 6,826 and employees without a pension fund can deduct 20% of net income, or a maximum of CHF 34,128.

Pillar 3b – flexible pension provision

Pillar 3b is called flexible pension provision because it permits greater freedom and can cover other needs in addition to pillar 3a. There are no maximum annual contributions in pillar 3b. You can pay in as much as you want. However, the contributions are not normally tax-deductible. The balance must be taxed as an asset. On the other hand, the payout is usually tax-free. The date can also be freely selected.

A comparison of pillars 3a and 3b
  Pillar 3a 
Pillar 3b
Who benefits?
All employed persons with OASI-liable incomes who live in Switzerland All persons, irrespective of occupation and place of residence
Tax advantages on making payments
The amount can be deducted from taxable income each year
Deduction in the context of flat-rate deductions for insurance premiums
Taxation during the contract term
The surrender value is subject to wealth tax
Tax advantages on payout
Reduced tax rate, separate from other income
Tax-free under certain conditions
You can have your savings from pillar 3a paid out between five years before and a maximum of five years after the ordinary retirement age. An earlier payout is only possible if you are buying your own home, paying off a mortgage, becoming self employed, emigrating or, under certain circumstances, in the case of disability or when buying into the pension fund.
Freely selectable
Hereditary beneficiaries
When the insured party dies, the law prescribes who will inherit the capital from pillar 3a. The prime beneficiary is the spouse or registered partner, followed by the children.
Freely selectable, taking into account statutory shares
Only for the financing of owner-occupied residential property
Possible at any time if accepted as liquid cover

So you invest your money in the tied or flexible pension plan, as required. If you primarily want to put the money away for your retirement, pillar 3a is the right choice for you because of the tax advantages. But if you are saving for a trip around the world, you can invest your money solely in pillar 3b.