Pillar 3a and 3b explained simply – Advantages and functionality for expats in Switzerland

AHV and the occupational pension fund alone are usually not enough to secure your customary standard of living in retirement. See our article “How to prepare your retirement in Switzerland as an expat” for more basic information about the three pillar principle. In this article, we would like to talk about the two types of 3rd pillar, its advantages and how we can help you with finding your personal pension strategy.

Pillar 3a – Restricted pension plan

The pillar 3a plan is a long-term pension provision, usually offered by banks or insurance companies. You decide how much you want to pay into the pillar each month, and your contributions are invested for you into attractive stock portfolios. As its name suggests, the capital remains “tied”. Advanced withdrawals are only possible subject to certain conditions, as for instance buying a house or starting a business. Generally, the capital paid into the pillar 3a can be paid out at the earliest five years before you reach the regular AHV retirement age (65). If necessary, you may keep paying into your pillar 3a plan for a few years over the retirement age. 

The pillar 3a in Switzerland offers many advantages, which are crucial for your financial strategy in Switzerland:

• Keeps your standard of living in retirement, as your pension from pillars 1 & 2 will only cover the bare minimum required to live. 
• All pillar 3a contributions are tax-free. The maximum amount you can pay into your pillar 3a plan for 2024 is CHF 7’056 per year, allowing you to save up to CHF 3'000 per year in taxes.
• Disability and life insurance as well as premium waivers can be included, which secures your family in the event of an emergency. 

If you're new in Switzerland, a pillar 3a plan must be a key part of your financial future. Since everyone has their specific individual needs, we would be happy to assist you in building your personal pension strategy. Get in touch with us via e-mail [email protected] or give us a call +41 44 552 72 32.

Pillar 3b – Unrestricted pension plan

The pillar 3b flexible pension plan is a private pension solution, ideally utilized when your pillar 3a is already maxed out. As the name suggests, pillar 3b offers greater flexibility and less restrictions. It is not subject to government requirements or restrictions regarding maximum contributions or contract duration. Therefore, you can freely decide for what purpose you save, and when & how much of it you want to use. Unlike with the pillar 3a, your contributions are subject to wealth tax. In exchange, the payout is tax-free under certain conditions.

Because your pillar 3b doesn't have to be tied to your pension, it's great for medium to long-term saving goals. Insurance solutions for life insurance can also be connected to this pillar.

The third pillar is crucial for expats in Switzerland, but there are many more things to take care of for a resilient future - find out what you can do in our guide "8 steps to secure your future in Switzerland as a foreigner".