If you want to maintain your living standards in old age, you generally have to take matters into your own hands and invest in your own retirement provision. Because the funds provided by the first pillar (state pension) and the second pillar (employee benefits) are not normally sufficient for you to continue to meet your wishes and desires after retirement. That makes it all the more important to start to build up the third pillar early. The third pillar exists to cover individual gaps in coverage. A differentiation is made between fixed pension plans (pillar 3a) and the flexible savings offered by flexible pension plans (pillar 3b).
Does investment come to mind when it comes to planning your retirement? Or the other way round.
People know you need to use the third pillar to make your own provisions for retirement. The only question is how. It’s important to know what your needs are. In addition to retirement provision, do you also need insurance cover in the event of death or incapacity to work? And how do you want to invest your retirement money? Only if you know the answers to these questions can you find the right solution for your retirement provision.
Invest or leave the money in your account?
Instead of just saving the lump sums in a retirement savings account or savings account, you have the option of investing the money in funds or retirement funds. Savers have to accept certain risks in this case, but also have the opportunity to obtain a higher return in the long term. Because in the current sustained low-interest environment, funds in accounts hardly generate any interest. It’s important to take time to plan your investments. Because the longer your investment horizon is, generally the greater the risk you can assume. The reason is that short-term changes in the value of assets can be offset better over a long period of time.
Your own needs are what matters.
The third pillar offers a wide range of financial services, ranging from account solutions and investment products to retirement funds and life insurance. To choose the solution which works for you (and this could also be a combination of different products), it’s important to know your own personal investment situation and your needs: what are your personal objectives for investment and retirement provision? And for example, on top of retirement provision do you also want risk cover in case of death or inability to work due to illness or an accident? Or does saving on tax matter to you?
What’s important is that savers are always happy with the solution chosen. For example, with the life insurance savings programme SmartFlex pension plan, the individual insured does not just choose whether to include provision in case of death and inability to work in the solution. The individual insured also decides which proportion of their premium they want to invest at a fixed interest rate (secure credit subject to regulated return) or in a yield-orientated equity fund (equity credit). This decision is always taken based on your personal investor profile.
Good to know: the tax savings you can make with pillar 3a
When you provide for retirement by means of pillar 3a – be it with a retirement savings account 3a or SmartFlex pension plan – you can also save on tax. The legally defined annual maximum for the deductible amounts (as of August 2020) for people affiliated with an occupational employee benefits institution of the second pillar is CHF 6,826 − and for those with no such affiliation, it is 20% of their net earned income (max. CHF 34,128).
Our tax calculator shows you how much tax you can save with pillar 3a.
Are you unsure about your personal situation regarding retirement provision or want to find out more about our investment and retirement provision products?