“Opening several third pillars A? Really?”
Admit it, you are wondering how on earth this can be useful? Especially since we know that the maximal amount that can be saved to these pillars 3A altogether is 7,056 CHF for 2023 (it was 6,883 CHF for 2022), whether at insurances or banks.
For the simple reason that no one is stopping you from saving to several accounts! It is totally possible to open two accounts with insurances and three accounts with banks, as long as the total amounts paid to all your 3A put together does not exceed 7,056 CHF (for 2023).
Fraction your 3A accounts to save on taxes
If you’ve read our article “How much taxes will you have to pay if you withdraw your third pillar A?” , you know that withdrawing your third pillar A comes with an exit tax.
And this is what this article is all about! The bigger the amount withdrawn, the higher the taxes!
Do you see what I am getting at? Yes, separating your private providence will allow you to reduce the amount in each account and thereby, you will be able to take out money these different accounts, gradually, depending on your needs, rather than emptying the whole thing in one go.
Numbers! Numbers! Numbers!
Indeed, it is always easier with an example:
First case: I have only one non-invested third pillar A account on which I paid 4,000 CHF per year from my 30 to my 60 years old. I thus saved 120,000 CHF, that I will withdraw in full:
Second case: I have two non-invested third pillar A accounts on which I paid 2,000 CHF each per year from my 30 to my 60 years old. I thus saved 60,000 CHF per account, that I will make sure to withdraw separately:
Third case: I created not two but four non-invested third pillar A accounts on which I paid 1,000 CHF each per year from my 30 to my 60 years old. I thus saved 30,000 CHF per account, that I will make sure to withdraw in four times:
I know what you are thinking, this is good advice! By simply separating your savings, you go from taxes of close to 10,000 CHF to taxes of 5,500 CHF. I must however warn you about the fiscal authorities who do not like this method, which it considers to be tax evasion! So if I may give a piece of advice, do not push your luck too far with this.
Fraction your 3A accounts to make the most out of the third pillar
Few people know this but the third pillar A can be used for several things apart from saving on taxes:
- Products with interesting returns.
- Products capable of protecting your family.
- Mortgage amortisation products.
If you have the time and the patience to look into the complexity of the products that are on the market, you will find out that you can find solutions meeting almost perfectly your expectations.
Let’s imagine you want to buy a home in 10 years and you still need 60’000 CHF in personal funds. If you pick only one product, you will have to decide between:
- Placing your savings on a product invested on the market and take the risk of returns lowering at the end and thereby failing to meet the 60,000 CHF goal
- Placing your savings on a non-invested product in order to make sure to have the desired amount when needed, but by doing so, preventing you from making potential returns over the next 10 years.
Fractionning your pillars 3A will offer you more freedom and, most importantly, makes your private providence even more useful.