Pillar 3a at your bank or at your insurance company?

The key que­sti­on is whe­ther you need insuran­ce at all (see sec­tion 2). Once you have ans­we­red this que­sti­on, the deci­si­on as to whe­ther you need a bank or insuran­ce is much easier. If you do not need insuran­ce, the­re is no rea­son to sub­scri­be to Pil­lar 3 insuran­ce (see major dis­ad­van­ta­ges in sec­tion 1).

And even if the second chap­ter should lead you to the con­clu­si­on that you need insuran­ce cover, we do not recom­mend insuran­ce that com­bi­nes 3a savings with risk coverage (mixed insuran­ce). You can also choo­se to obtain insuran­ce cover out­side the 3rd pil­lar, with the advan­ta­ge that you can then com­pa­re the offers more easi­ly. This redu­ces the risk of pay­ing exces­si­ve pre­mi­ums.

For the savings por­ti­on, we recom­mend an account or a secu­ri­ties solu­ti­on. This allo­ws you to remain much more fle­xi­ble than with a 3a insuran­ce poli­cy. You can deci­de each year whe­ther and how much you want to pay in. Fur­ther­mo­re, you can easi­ly open addi­tio­nal accounts/custody accounts (or trans­fer them to ano­t­her pro­vi­der) and thus crea­te the con­di­ti­ons for stag­ge­red with­dra­wals.

Section 1: Major disadvantages of 3a insurances

Insuran­ce poli­ci­es have decisi­ve dis­ad­van­ta­ges com­pa­red to an account or secu­ri­ties solu­ti­on with bank foun­da­ti­ons:

  • No fle­xi­bi­li­ty in terms of depo­sits: With many 3a insuran­ces, you have to make a depo­sit every year, whe­ther you like it or not. Even if you don’t work or only work part-time in a year, for examp­le, becau­se you are atten­ding a fur­ther edu­ca­ti­on pro­gram­me, you still have to pay the pre­mi­um bill. This means you are pena­li­sed twice. Becau­se if you earn litt­le, you may not pay taxes at all. So you can­not save taxes eit­her. And even though you do not save any tax on your depo­sit, you still have to pay tax on the amount paid when you recei­ve it.
  • No stag­ge­red pay­out pos­si­ble: You will also noti­ce the lack of fle­xi­bi­li­ty of insuran­ce poli­ci­es when you make your with­dra­wal. The refe­rence date is alrea­dy defi­ned when the insuran­ce is taken out. It usual­ly coin­ci­des with the year of regu­lar reti­re­ment and thus with a pos­si­ble pen­si­on fund with­dra­wal. Sin­ce the lump-sum with­dra­wal tax is pro­gres­si­ve and all lump-sum bene­fits are added tog­e­ther in one year, you pay more in taxes than if you would have the money paid out in ano­t­her year (stag­ge­red pay­out).
  • Lack of trans­pa­ren­cy in fees: For bank pro­ducts such as accounts or secu­ri­ties accounts, you can read about the fees. Howe­ver, insuran­ce com­pa­nies do not show any costs, but this does not mean that you are not char­ged any fees. They are sim­ply not shown sepa­r­ate­ly, but are inclu­ded in the pre­mi­ums. This lack of trans­pa­ren­cy makes insuran­ce appe­ar attrac­ti­ve. Howe­ver, it is well known that insuran­ce agents some­ti­mes recei­ve generous sales com­mis­si­ons, which you must first cover with your pre­mi­ums.
  • Com­plex and dif­fi­cult to com­pa­re: Insuran­ce poli­ci­es that com­bi­ne saving and risk pro­tec­tion are com­plex, espe­cial­ly if the savings por­ti­on is inve­sted in funds. How much does risk pro­tec­tion cost? How high are the pro­duct costs of the funds? Is the­re an issuing com­mis­si­on when sub­scrib­ing to the funds (some­ti­mes up to 5%)? How much does it cost me to with­draw from the insuran­ce con­tract? Who can keep track of this?
  • Ter­mi­na­ti­on only pos­si­ble with cer­tain restric­tions: Once life insuran­ce poli­ci­es have been purcha­sed, they can­not be with­drawn without fur­ther noti­ce. As a rule, you will suf­fer a con­si­derable loss if you ter­mi­na­te the poli­cy pre­ma­tu­re­ly. This cir­cum­stance can also nega­te the bene­fits of ear­ly with­dra­wals, for examp­le for the purcha­se of resi­den­ti­al pro­per­ty. It is also vir­tual­ly impos­si­ble to switch to ano­t­her pro­vi­der.

Section 2: Do you need insurance for the risks of loss of income, death or disability?

When asses­sing whe­ther you need insuran­ce, you must be awa­re that Switz­er­land alrea­dy has a very well-deve­lo­ped social secu­ri­ty system. We will dis­cuss this fur­ther as far as the scope of this arti­cle allo­ws.

Loss of earnings

If you lose your job, you will recei­ve an unem­ploy­ment bene­fit of 70 to 80 % of your pre­vious sala­ry (maxi­mum insu­red sala­ry is CHF 148’200 per year) after a wai­t­ing peri­od of 20 days at the latest. If you have been employ­ed for at least 12 mon­ths in the last two years befo­re regi­stering with the RAV, you are enti­t­led to 200 to 640 dai­ly allo­wan­ces (approx. 1 to 3 years, as only working days but no wee­kends and public holi­days are coun­ted). The num­ber depends on your age, the num­ber of con­tri­bu­ti­on years and whe­ther you have child­ren requi­ring finan­cial sup­port.

If you can live on 70 to 80% of your sala­ry for a cer­tain peri­od of time, you do not need addi­tio­nal insuran­ce cover in case of unem­ploy­ment.

Death

Do you have fami­ly mem­bers who depend on your inco­me? If not, you don’t need insuran­ce cover in the event of death. If so, the insuran­ce requi­re­ment must be cla­ri­fied on a case-by-case basis. It is best if you cla­ri­fy how high widows’ and orphans’ pen­si­ons under the 1st pil­lar (AHV) and 2nd pil­lar (PK) would be and com­pa­re the sum with your cur­rent inco­me. In the fol­lo­wing, we assu­me that you are mar­ried and have child­ren.

was main­ly respon­si­ble for child­ca­re should die:

  • The amount of insuran­ce cover depends to a lar­ge extent on the inco­me from employ­ment (pen­si­on fund insu­red or not? Amount of bene­fits?). If the part­ner who was main­ly respon­si­ble for child­ca­re dies, widows’ and orphans’ pen­si­ons are low.
  • The sur­vi­ving spou­se has to redu­ce his or her workload in order to take over child­ca­re them­sel­ves or to finan­ce exter­nal child­ca­re. If need be, even both.

All in all, this leads to addi­tio­nal expen­ses and pos­si­b­ly to a lower inco­me. Deci­de for yours­elf: Will the pen­si­ons you would recei­ve be enough to cover the short­fall?

If the part­ner who con­tri­buted the hig­her con­tri­bu­ti­on to the total inco­me dies, hig­her widows’ and orphans’ pen­si­ons are usual­ly gua­ran­te­ed. From a finan­cial point of view, the­re may be suf­fi­ci­ent finan­cial pro­tec­tion to match the pre­vious­ly ear­ned inco­me. Howe­ver, this rai­ses the que­sti­ons of whe­ther the sur­vi­ving part­ner can con­ti­nue to work part-time and whe­ther (expan­ded) exter­nal child­ca­re is necessa­ry to relie­ve the bur­den on the sin­gle parent who will be living alo­ne from now on? Deci­de for yours­elf: Could you cope with the finan­cial los­ses?

In the case of homeow­ners, it can make sen­se to have enough capi­tal avail­ab­le in the event of death so that the second mor­tga­ge can be paid off in a sin­gle pay­ment, ther­eby avoiding annu­al repay­ments. This can lead to a wel­co­med reli­ef of the house­hold bud­get. Howe­ver, befo­re you purcha­se a death bene­fit poli­cy, check with your pen­si­on fund to see whe­ther it offers resti­tu­ti­on on your reti­re­ment assets. If the pen­si­on fund pays out the reti­re­ment assets in addi­ti­on to widows’ and orphans’ pen­si­ons, you may not need any addi­tio­nal insuran­ce at all. If the pen­si­on fund does not have enough money or no resti­tu­ti­on is offe­red, a simp­le death bene­fit poli­cy can be purcha­sed with a decre­a­sing sum insu­red.

Why a decre­a­sing sum insu­red? The sum insu­red should decre­a­se annu­al­ly by the amount of amor­ti­sa­ti­on. If your pen­si­on fund offers resti­tu­ti­on, the future accu­mu­la­ti­on of reti­re­ment assets can also be deduc­ted. In this way, you avoid being over-insu­red over the years and pay­ing too many pre­mi­ums.

Disability

The finan­cial con­se­quen­ces of disa­bi­li­ty can be more exten­si­ve than in the event of death. The cost of living of the sick or inju­red per­son remains the same or may even incre­a­se due to the disa­bi­li­ty. Check your pen­si­on enti­t­le­ment in 1st and 2nd pil­lar and com­pa­re it with your cur­rent inco­me.

Dis­c­lai­mer: No respon­si­bi­li­ty is taken for the cor­rect­ness and com­ple­teness of this sec­tion. We recom­mend that you inform yours­elf about your situa­ti­on with your pen­si­on fund (Pil­lar 2) and the AHV (Pil­lar 1) and, if necessa­ry, con­sult an inde­pen­dent expert.

Insurance, which is always worthwhile, has not yet been invented

It is remar­kab­le how popu­lar per­cep­ti­ons, such as the idea that cer­tain insuran­ce poli­ci­es are “always” worthwhile, per­sist in the gene­ral popu­la­ti­on. After all, from a pure­ly busi­ness point of view, it is not at all pos­si­ble for insuran­ce to be worthwhile per se. If this were the case, the­re would no lon­ger be any insuran­ce com­pa­nies, becau­se they would per­ma­nent­ly pay for more dama­ge than they earn pre­mi­ums. But of cour­se, they don’t do that. They pay wages, com­mis­si­ons on sales and even make pro­fits for share­hol­ders in addi­ti­on to the dama­ge pay­ments.

So befo­re you fall into the mista­ken belief that an insuran­ce poli­cy is “always” worthwhile, think care­ful­ly about whe­ther and why you need the insuran­ce. Becau­se as with all goods and ser­vices in life, insuran­ce also has its pri­ce. If you claim insuran­ce that you do not need, it is just as much money wasted as if you bought a cof­fee machi­ne but do not drink cof­fee. Well, at least you can ser­ve cof­fee to your guests. But then the insuran­ce is sim­ply not necessa­ry.

The difference between willing to take risk and being able to do so

When asses­sing whe­ther you need insuran­ce, a distinc­tion must be made as to whe­ther you are wil­ling to bear the risk or not.

Nowa­days many peop­le buy insuran­ce becau­se they do not want to bear the risks of dama­ge. They could easi­ly car­ry it becau­se they have enough money on the side, but they sim­ply don’t want to. Moreo­ver, they don’t want to have to pay anything if dama­ge occurs. They pre­fer to pay an insuran­ce pre­mi­um for it year after year (inclu­ding the mar­gin for wages, com­mis­si­ons and pro­fit). But they usual­ly igno­re the fact that insuran­ce has its pri­ce.

Whoever has an entre­pre­neu­ri­al mind­set thinks dif­fer­ent­ly. He only covers dama­ge that he can­not bear finan­cial­ly hims­elf. He con­si­ders that if he will never purcha­se ship­ping insuran­ce for online orders, he can easi­ly bear the one or other ship­ping dama­ge. Of cour­se, he has to build up some savings for this. But at the end of the day, the cal­cu­la­ti­on will pay off, becau­se he will not have to co-finan­ce the wages, com­mis­si­ons and pro­fits of the insuran­ce com­pa­nies.

But what even the entre­pre­neu­ri­al thin­ker would not do without is, for examp­le, lia­bi­li­ty insuran­ce. The poten­ti­al dama­ge is sim­ply too high to wai­ve it. In other words, a lia­bi­li­ty case could dri­ve him into bankrupt­cy. Simi­lar cases can ari­se in the finan­cial pro­vi­si­on of rela­ti­ves, espe­cial­ly if you have child­ren who are not yet finan­cial­ly inde­pen­dent (see sec­tion 2).

Pillar 3b is not the same as pillar 3a

Almost all 3rd pil­lar offers have in com­mon that pay­ments can be deduc­ted from tax­able inco­me in the tax return. Howe­ver, we deli­ber­ate­ly say “almost” becau­se cer­tain crea­ti­ve pro­vi­ders also offer a Pil­lar 3b in addi­ti­on to Pil­lar 3a. Of cour­se, this is very cle­ver, becau­se Pil­lar 3a has a very posi­ti­ve repu­ta­ti­on and you can sell ordi­na­ry insuran­ce poli­ci­es (yes, the­se are pri­ma­ri­ly insuran­ce poli­ci­es that use the term Pil­lar 3b) under the guise of pen­si­on pro­vi­si­on. Do not let this put you off. Pil­lar 3b is neit­her tax-pri­vi­le­ged nor does it have a sta­tu­to­ry pen­si­on cha­rac­ter.

writ­ten on 07.05.2020


Cur­r­ent­ly, fin­pen­si­on offers solu­ti­ons for vested bene­fit savings with secu­ri­ties and indi­vi­du­al manage­ment pen­si­on plans 1e. A 3a secu­ri­ties app is under deve­lo­p­ment.