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When the Pillar 3b explained, it is often also referred to as "free provision" labelled. The Swiss pension system with its 3 pillars has already been addressed in this article.
The Pillar 3b is an important component of unrestricted pension provision in Switzerland. Unlike pillar 3a, you can make flexible provisions here without being bound by strict requirements.
But what exactly is covered by unrestricted pension provision, and it is worth investing in a Pillar 3b product? In this article you will find out everything you need to know about pillar 3b, including tax advantages and typical forms of investment.
The Free provision is part of all your voluntary activities saved Assets. You may not have bought a "3b product" from a provider, but have a small gold bar in your drawer? Then you have already created a free pension.
Real assets According to this logic, assets such as classic cars or property are just as much a part of unrestricted pension provision as shares, ETFs, savings or cryptos. There is also something else: Pillar 3b products from banks and insurance companies.
Banks and insurance companies specifically offer Pillar 3b products. In the case of insurance companies, these include asset-building endowment insurance policies, for example. In the case of banks, this could be a savings plan on an equity fund. Of course, you should pay attention to the Fees and the product itself and get a clear picture in advance. Hidden costs This is because the tax advantages of Pillar 3b, which apply under special conditions, can quickly evaporate.
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While payments into pillar 3a can be deducted from taxable income, this is not the case with pillar 3b. The credit balances in pillar 3b count towards assets. The definitive rule is therefore: Pillar 3b must be declared in the tax return.
But you don't have to give up hope for Pillar 3b tax benefits right away. As always, there are exceptions.
The payout from Pillar 3b is tax-free if the following four conditions are met:
Pension provision makes sense and is essential. But whether a bank or Insurance product is ideal for you should always be examined in detail. Fund savings plans or risk insurance are known for high, but well-hidden costs. You should therefore not let yourself be persuaded by the selling advisor to take out something that you do not understand in detail.
For yourself, you can also make free provision with your own investments and value investments without having to surrender to a convoluted product.
A solid investment portfolio with a broad investment horizon and low costs is usually ideal. We have shown you what this could look like in the Investment Area pointed out.
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In the long run, your finances will be determined by whether you've been smart with your assets. Tax advantages in the Pillar 3a are certainly helpful here.
You should carefully consider whether a classic Pillar 3b product from an insurance company or bank is advantageous for you. Investing assets that you can spare for the next few years is certainly advantageous in the long term. Here we show you how to proceed and thus build up your own free pension provision.
The Pillar 3a is the tied pension plan. It offers tax advantages, as the payments can be deducted from taxable income. However, the payments are limited (maximum annual amount) and the payout is linked to certain events such as retirement, house purchase or emigration.
The Pillar 3b is a free pension plan. It is not subject to any restrictions regarding deposits or withdrawals. However, payments into Pillar 3b do not offer any direct tax deductions. Depending on the product and conditions, however, payouts may be tax-free under certain conditions.
Pillar 3b includes all types of private savings and investments that are not tied to specific pension rules. These include
-Banking products such as savings accounts or investment portfolios,
-Insurancese.g. endowment policies,
-Real assets such as property, art, gold or classic cars,
-Securities such as shares, bonds and ETFs.
Some providers, in particular Insurances and Banksoffer specific Pillar 3b products, which are often insurance policies or combined savings plans. Particular attention should be paid to the cost structure.
Payments into pillar 3b offer No direct tax advantages as in pillar 3a. However, there are certain products for which Tax advantages on payment are possible. Payment can be made tax-free if the following conditions are met:
However, these rules generally only apply to endowment insurance policies and not to all forms of Pillar 3b.
It depends on your goals. Many banks and insurance companies offer Pillar 3b products such as endowment insurance or fund savings plans. These products offer structure and often tax optimisation, but can also have high fees. Alternatively, you can invest your Free provision yourself by working independently in ETFs, Shares, Real Estate or other assets. This option usually incurs lower fees, but requires more personal initiative and knowledge.
5 responses
Thank you for your informative piece on Pillar 3b. Your article sheds light on this lesser-known aspect of pension planning, offering valuable insights into the financial strategies and opportunities it presents. It's clear that Pillar 3b plays a pivotal role in Switzerland's retirement system, and your explanation makes it more accessible to readers. Your commitment to providing comprehensive financial information is commendable, and it empowers individuals to make informed decisions about their financial futures. Keep up the excellent work!
Note on the holiday savior blog post, you can not view this because it is password protected :O
thanks for pointing that out, shouldn't be visible. This will be published only next week on Wednesday 🙂
If the maximum amount has not yet been exhausted, you can also deduct premiums for a pillar 3b life insurance policy under insurance premiums in your tax return. Normally, the maximum amount is already exhausted by the health insurance. However, if you receive a premium reduction, for example, there may still be some room for manoeuvre.
very exciting, thanks for the hint Hugo!