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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 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.
| 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 |
Tax-free |
The surrender value is subject to wealth tax |
| Tax advantages on payout |
Reduced tax rate, separate from other income |
Tax-free under certain conditions |
| Term |
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 |
| Pledging |
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.
