Bank instead of insurance
Do not purchase 3a insurance. Any insurance needs you may have can also be insured outside the 3rd pillar without any problems. With a bank or fund solution you remain much more flexible, can easily open additional accounts, transfer them to another provider if necessary and finally make staggered withdrawals. All this and more is either not possible with an insurance policy or only possible to a very limited extent.
Do not deposit if you earn little
A deposit into the 3rd pillar is most worthwhile when you are earning 100%. Then you save the most taxes. If you earn little or nothing in a year, you should not pay into pillar 3a. You will probably pay little tax anyway because you have worked relatively little. So you benefit very little from the tax deduction.
This point is important because you will always have to pay a reduced tax when withdrawing the deposited amounts, regardless of how much you have saved on your deposit. If you only make a deposit if you can actually save tax with a deposit, you will get more out of your 3rd pillar.
Set up several 3a accounts or custody accounts
When you draw retirement assets, you pay a reduced tax, which is progressive, similar to the income tax. This implies that the tax is not only higher in Swiss francs and centimes for higher amounts, but also in percentage terms. Since all lump-sum benefits from the 2nd and 3rd pillar are added together in the same year, it is advisable to withdraw retirement assets in stages over several years. However, in order to be able to withdraw retirement assets in stages, you must start building up several 3a accounts or custody accounts now. 3a accounts cannot be split up retroactively. They can only be withdrawn “en bloc”.
Start early with the 3rd pillar
The earlier you start with the 3rd pillar, the more you benefit. Once you have missed a payment, you cannot make up for it. This is relevant because with Pillar 3 you can save tax not only when you make your deposits, but also during the entire period until you withdraw. This is because you do not have to pay wealth tax on your retirement assets. Since you do not have to declare the retirement assets in your tax return, the income is also tax-free. This allows the compound interest effect to take full effect.
Invest in securities
In contrast to free assets, the 3rd pillar remains tied up in the long term. Only in a few exceptional cases can the money be withdrawn before retirement. The investment horizon is therefore extremely long for many 3a savers. Because this is the case, 3a money can be invested in securities. Even severe financial crises can be overcome unscathed. In the long term, securities offer a significantly higher return than 3a accounts, which hardly yield any interest.
If you want to invest your 3rd pillar in securities, you should definitely compare the fees of pension funds. After all, it is of absolutely no use to you if you take on more risks but the targeted additional return is wiped out by excessive fees.
Better to withdraw pension fund instead of 3rd pillar
If you do not have enough free funds to buy a house or apartment, you can draw money from the pension fund. This raises the question of what makes more sense to draw from the pension fund or the 3rd pillar?
Pledging instead of withdrawing
Advance withdrawal when buying your own home: If you have invested your 3rd pillar in funds, it is interesting to pledge the 3rd pillar instead of withdrawing it. In the long term you will pay less mortgage interest than you can earn returns.
Paying in beyond the ordinary retirement age
If you are employed beyond the ordinary retirement age, it may be interesting to continue paying into pillar 3a. The 3rd pillar can be continued for up to five years beyond the regular retirement age. If you have invested your 3a money in funds, you can extend your investment horizon by up to five years.
Pillar 3 withdrawal before the pension fund
Make sure that you do not draw Pillar 3 in the same year as the pension fund. We have developed a model for staggered payment that shows an optimal payment schedule.
written on 11.05.2020