The 3rd pillar B stands out for its versatility, offering tailor-made financing options such as periodic savings or one-off bonuses.
But above all, it is independent of retirement age, thus being able to be withdrawn at any time.
We have summarized everything you need to know about the 3rd pillar B.
In short, what is the 3rd pillar B?
- Choice of currency and financing method, including periodic savings or single premium.
- No link with retirement age, offering total freedom on the timing of capital withdrawal.
- Varied options for paying out savings, including life annuity or capital.
- Fixed interest options for security or variable interest for higher return potential.
- Capital interest tax-exempt during the savings phase; possibilities to benefit from additional tax advantages depending on the domicile.
Difference between pillar 3A and pillar 3B
The main difference between pillar 3A and pillar 3B lies in their flexibility and tax advantages.
Pillar 3A is a form of linked pension provision with capped and tax-deductible annual contributions, intended mainly for retirement.
On the other hand, pillar 3B is a free pension plan, offering more flexibility without contribution limits and with fewer tax advantages. Pillar 3B funds can be used for different purposes, not just retirement.
What is the 3rd pillar B?
The 3rd pillar B, also known as free pension provision, stands out for its great flexibility. It is not directly linked to retirement, thus allowing flexible withdrawals.
Contributions are not capped and can be varied, including options such as periodic savings or a one-off bonus.
Pillar 3B is open to everyone, regardless of professional activity or place of residence, and offers various investment options.
Unlike Pillar 3A, contributions to Pillar 3B are generally not tax deductible.
The 3rd pillar B can be combined with life insurance.
The strength of the 3rd pillar B: personalization and flexibility
The 3rd pillar B allows you to freely choose the time of capital payment, without being linked to retirement age.
This flexibility makes it possible to adapt to various life and pension objectives, beyond just preparing for retirement.
An example of useful personalization of the 3rd pillar B could be an individual choosing to contribute via a single premium to maximize the growth potential of their capital.
This person could also opt for a variable interest rate, thus aiming to benefit from potentially higher market performance. In addition, she could decide to receive her savings in the form of a life annuity to guarantee a regular income in retirement.
The different financing options
The 3rd pillar B includes the possibility of financing the capital by
- periodic savings,
- a single bonus
- or a combination of both.
Contributors can choose the currency (Swiss francs or euros) and the financing method adapted to their specific needs, thus offering maximum flexibility in setting up their pension.
The different ways of receiving savings (life annuity, capital payment, etc.)
Savers can choose between 3 savings collection options,
- life annuity,
- the capital payment,
- or a combination of both.
This variability offers individuals the possibility of structuring their pension according to their personal needs and objectives.
Fixed and variable interest rate options
The 3rd pillar B offers fixed and variable interest rate options.
Fixed rate products guarantee an interest rate determined upon signing the contract, regardless of economic and financial fluctuations.
On the other hand, variable rate products allow you to benefit from performances based on the organization's stock portfolio, thus offering potentially higher return prospects.
These options offer contributors the opportunity to choose between the security of a fixed rate and the higher return potential of a variable rate.
Pillar 3B taxation
Pillar 3B taxation in Switzerland offers several distinct aspects:
- Interest exemption while saving : The interest generated on the capital of pillar 3B is not taxed during the savings phase.
- Tax benefits depending on place of residence : In Geneva and Friborg you will benefit from additional tax advantages that the other cantons do not have.
- Taxation of annuities : Life annuities from pillar 3B are only taxed at 40% of their value, offering a tax advantage compared to annuities from the first and second pillars.
Tax specificity of the 3rd pillar B in Geneva
In the canton of Geneva, tax deductions for the 3rd pillar B vary depending on your professional and family status.
A single employee can deduct CHF 2,196, while a self-employed person can go up to CHF 4,434. For a married couple or registered partners, the deduction is CHF 3,294 if both are employees, and it increases if one or both are self-employed.
Additional deductions are available for children, with amounts varying depending on the parents' employment status.
Tax specificity of the 3rd pillar B in Friborg
In the canton of Fribourg, the annual tax deductions for the 3rd pillar B are CHF 750 for a single person and CHF 1,500 for a married couple.