Want to have peace of mind in retirement, maintain your previous standard of living and enjoy life to the full when you give up work? Private retirement planning plays a vital part in making these dreams come true. Benefits from the first and second pillars – in other words, state and occupational pensions – usually make up only around 60–70% of your final salary. You need to use the third pillar to top up your pension individually to avoid facing any financial concerns in old age.

Find out more about the Swiss pension system and how you can make up pension gaps via the third pillar in the article “Everything you need to know about retirement planning.”

The key difference: flexible vs fixed retirement planning

Under the third pillar, you save for retirement privately and individually – in other words, not through old-age and surviving dependants insurance or a pension fund. The third pillar is divided into two types: pillar 3a and pillar 3b. While retirement planning is fixed under pillar 3a, it’s flexible in pillar 3b. What does that mean? If you make regular payments – ideally the maximum annual amount – into pillar 3a, you enjoy tax benefits, but can only access the capital paid in under certain circumstances. These are: 

• Five years before reaching statutory pension age 
• If you become self-employed 
• If you emigrate permanently 
• If you buy a house to live in yourself 
• To repay an existing mortgage 
• To pay into a pension fund 

By contrast, you can access your pillar 3b money at any time. This means that pillar 3b is ideal for medium- to long-term savings goals. You can decide for yourself how much you pay in and when and how much money you wish to take out. 

Various investment types for pillars 3a and 3b

The investment types are also limited under pillar 3a: you can pay your contributions into a retirement savings account 3a and also have the yield-oriented option of investing them fully or partially in retirement funds. Alternatively, you can take out 3a life insurance. The article “How to get more from your retirement planning” explains why you shouldn’t simply leave your retirement assets in the retirement savings account 3a.

As pillar 3b – unlike pillar 3a – is not subject to state regulations, a wide range of investment instruments can be used for this flexible retirement planning, such as:  

• A savings account 
• 3b life insurance
• Equities, bonds, funds and funds saving plans 
• Real estate 

You can use the various options available for fixed and flexible retirement planning to cleverly put together your own solution that meets your personal needs.

Enjoy maximum tax benefits through the third pillar

Pillar 3a offers tax benefits: the contributions you make can be deducted from your taxable income within the legal limits. The capital in your pillar 3a and earnings from it are also exempt from wealth, withholding and income taxes. You can read more about tax and pillar 3a and why it may be worth using several pillar 3a retirement planning solutions in our article “Retirement savings 3a: save on taxes with these tips”. 

You can deduct your payments into pillar 3b in your tax return. However, different rules and conditions apply depending on the investment type you choose for your pillar 3b. Find out about these conditions when you decide on an investment type.

Who are pillars 3a and 3b suitable for?

Generally, everyone benefits from organizing private retirement provision early and paying into both pillars 3a and 3b.

However, only people who earn income subject to old-age and surviving dependants insurance in Switzerland as an employee or through self-employment can pay into the pillar 3a. People who receive daily benefits from the Swiss unemployment insurance fund can also make contributions. 

Pillar 3b supplements the fixed pension plan and gives you the option of flexible retirement planning for the future in line with your preferences – anyone can pay into this.

The differences at a glance

The key points on the differences between pillars 3a and 3b are outlined here:

You can read more about Switzerland’s three-pillar system and individual retirement planning with fixed or flexible options in our guide “Everything you need to know about retirement planning”.

More than just the retirement savings account

Smart retirement planning for your future means being aware of your personal situation and closing any pension gaps with pillar 3a and 3b solutions, enabling you to prepare for a retirement without any financial worries.