Savings for your rent

To keep your Life standard Switzerland has the 3 Pillar System, that means there are 3 pillars to invest to have a nice retirement, now we will explain to you how this system work and all the three pillars. The first pillar is organized by the state, it is to safe your existence. The second pillar is organized by your job, but only if you earn more than CHF 21’150 per year. Your employer is obligated to insure you as of age 25 against the results of death & disability. An even greater risk is retirement. And the third pillar is privately organized. Pillar 1 is mandatory for everyone the first part of the second pillar as well, the second part of pillar 2 and pillar 3a and 3b are voluntary.

Every month a certain amount of your salary is taken aways and directly paid in to the first pillar. You the employee must pay 5.275 % of your salary into the first Pillar. Your employer pays the same amount but this time it will not affect your salary, that’s why there is a gross and net salary. There are some other points that affect your gross salary, but they don’t affect your pension. The AHV is for your Pension, the IV is for the case you get badly injured and can’t work anymore and the EO is if you can’t work for some other reasons like military service or pregnancy.

The second pillar is for the case you get injured or something like that. The IV from pillar one supplements pillar 2. This is the mandatory part. With the voluntary part of pillar 2 you can insure a lot more that isn’t covered by the mandatory part 1 of pillar 2.

After you get retired you will not have a salary. To keep on living you will get about 60% of your salary from the AHV (State Pension). But as an Expad it is more difficult, because if you worked in Switzerland your whole life your AHV will be higher. So to keep your life standard we highly recommend to invest in the Pillar 3a and Pillar 3b.

How to invest in to the Pillar3a is totally individualized. There are so man ways to invest, it can be Shares, Real estates, Fonds, precious Metals and many more. If you are an employee you can invest a maximum of CHF 6’883 per year (as per 2020). And if you are self employed you can invest 20% of your income up to a maximum of CHF 34’416 a year. Investing in Pillar 3a is tax deductible that means you can reduce this amount from your taxable income. But if you retake this money in your retirement you must declare for your taxes.

Example:

If you don’t have children and live in canton Zurich, and have a taxable income of CHF 100’000. With Investing CHF 6’883 into Pillar 3a you can save up to CHF 1’851 taxes per year. Isn’t that great?

Pillar 3b has two major differences to pillar 3a. First there are no restriction on how much you can or want to invest. The other your investment into pillar 3b are not tax deductibles. So we recommend to sit down with an expert and together you can create a plan how to invest for retirement.