It is difficult to choose between 3rd pillar A and B because there is no “best choice”. In fact, the choice depends above all on your situation and your desires.
We have created a comparison table and we give you advice to help you make the choice in this article.
Comparison table between 3rd pillar A and B
| Characteristic | Pillar 3a | Pillar 3b |
|---|---|---|
| Target audience | Gainful activity in Switzerland, subject to AVS | Open to all, regardless of activity and residence |
| Objective | Old age provision | Savings for various projects |
| Maximum amount of contribution (2023) | CHF 7,056 (with pension fund), CHF 35,280 (without pension fund, max. 20% income) | No restrictions |
| Tax advantages when making payments | Deductible from taxable income | Generally not deductible |
| Taxation during the duration of the contract | None | Current cash value |
| Possibility of pledging | Only for owned accommodation for own use | Possible |
| Possibility of early payment | Possible 5 years before AVS age, in specific cases | Possible at any time |
| Beneficiaries in the event of death | Specific inheritance order | Free choice of heirs |
| Savings goal | Tax-privileged retirement provision, indirect depreciation option for owned accommodation | Flexible individual organization |
True or false: can you withdraw the 3rd pillar before retirement?
Tips for choosing between pillar 3a and 3b
To choose whether you should take pillar 3a or pillar 3b, consider the following points:
- Pillar 3a : Ideal for retirement savings with tax advantages. Choose it if you want to reduce your income tax and are okay with limited accessibility of funds until retirement.
- Pillar 3b : Suitable if you are looking for flexibility. It is the best choice for varied savings goals and if you have already maximized your pillar 3a or if you want freer access to your funds.
The importance of the third pillar in Swiss pension provision
The third pillar plays a crucial role in Swiss pension provision, providing an additional layer of financial security compared to the benefits provided by the first and second pillars. Here are the key points highlighting its importance:
- Complementarity with the other pillars : In Switzerland, pension provision is structured into three pillars, where the third pillar serves as a complement to the first two (AVS/AI and pension fund). While AVS/AI and pension funds aim to guarantee a basic income in retirement, the third pillar allows for more personalized and in-depth preparation.
- Targeting pension gaps : The third pillar is essential to fill any pension gaps left by the first and second pillars. For example, many can only expect around 60% of their final retirement income with the first two pillars, making the third pillar essential to maintain the desired standard of living.
- Flexibility and customization : Pillar 3a offers significant tax advantages and is generally intended for old age provision. On the other hand, pillar 3b, more flexible, allows you to meet various needs and save for various personal projects, without capping contributions and with freer availability of funds.
- Tax benefits : Pillar 3a allows contributions to be deducted from taxable income, thus offering significant tax advantages. These incentives encourage long-term savings and support old age provision.
- Accessibility and Withdrawal options : Although access to Pillar 3a funds is generally limited until retirement, exceptions allow early withdrawal for specific needs such as purchasing a home. Pillar 3b, for its part, offers greater freedom of removal, thus increasing its flexibility.
- Protection in the event of disability and death : The third pillar also provides financial security in the event of disability or death, thus protecting the beneficiaries and the subscriber's family.
- Availability for all : Unlike pillar 3a, targeting people with gainful activity subject to AVS, pillar 3b is accessible to everyone, thus offering a pension solution to a wider range of people, including those living or working outside Switzerland.
FAQ: 3rd pillar A and B
What is the fundamental difference between pillar 3a and pillar 3b?
Pillar 3a is a linked pension offering tax advantages and is mainly intended for retirement provision. Pillar 3b, on the other hand, is a free, more flexible pension plan, with no cap on contributions and not tax deductible.
Who can contribute to pillar 3a and pillar 3b?
Pillar 3a is accessible to people carrying out gainful activity in Switzerland subject to AVS. Pillar 3b is open to everyone, regardless of professional activity and place of residence.
What are the contribution ceilings for pillar 3a in 2023?
For 2023, people affiliated to a pension fund can contribute up to CHF 7,056, while those without a pension fund can contribute up to CHF 35,280, up to 20% of their net income from activity.
Can you benefit from tax advantages with pillar 3b?
Contributions to pillar 3b are generally not tax deductible, unlike pillar 3a. However, pillar 3b capital payments may be tax-free under certain conditions.
When can you withdraw money from pillar 3a?
Pillar 3a assets can generally be withdrawn at the earliest five years before reaching AVS age, with exceptions for the purchase of owned accommodation, permanent departure from Switzerland or the start of an independent activity.
In which cases is pillar 3b more appropriate?
Pillar 3b is recommended for those who want greater flexibility in their savings goals, particularly if the maximum Pillar 3a contribution amount has already been reached.
How to choose to enter a pillar 3a or a pillar 3b?
The decision depends on your personal goals, your tax situation and your savings flexibility needs. Pillar 3a is ideal for structured retirement provision, while pillar 3b is better suited for more diversified and flexible savings goals.
What is the main purpose of the third pillar?
The third pillar aims to supplement the benefits of the first and second pillars, thus offering better financial security during retirement, covering pension gaps, and making it possible to carry out important personal projects.