Pillar 3 savings

The 3rd Pillar – Ensuring a comfortable standard of living at retirement!

There are many statistics on what passive income at retirement will account for when one reaches retirement age. A common number speaks of a percentage of about 60% of the last gained income before retirement and is made up of the AHV (State Pension) and the pension from your employer. However, for many of those new or relatively new to Switzerland, this number will be a lot lower, as missing contributions will have a significant effect. So, for this reason it its almost inevitable, and sound advice, to build up a personal restricted pension provision in form of pillar 3.

Pillar 3a (Restricted pension provision). The type of investment or saving can be chosen individually and the investment savings is tax deductible from your taxable income.

The maximum savings for pillar 3a is CHF 6’768 per calendar year for an employee (2016) or 20% of the income of those self-employed, to a maximum amount of CHF 33’840 per calendar year.

Saving via 3a using below example:

  • Single person, no children
  • Taxable income 100’000
  • Taxed in Canton Zürich
Without Pillar 3a
CHF 100’000
Taxes due:
• Local city taxes
• Cantonal taxes
• Federal taxes
CHF 17’316
With Pillar 3a
CHF 93’232
Taxes due:
• Local city taxes
• Cantonal taxes
• Federal taxes
CHF 15’465 (A saving of CHF 1’851 per year!)

Pillar 3b

Pillar 3b is the unrestricted pension provision. Here you can individually add further retirement provisions. Unlike pillar 3a, pillar 3b savings amounts paid into 3b products cannot be deducted from income tax. However, the unrestricted pension provision is not subject to the strict legal regulations of the pillar 3a. A major advantage over the pillar 3a is that beneficiaries can be freely selected and, within the framework of an insurance product, further attractive tax benefits are possible. For this, it is best to speak to your expert adviser at Swiss Prime International!

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