Why should I take out a 3rd pillar pension?
For a few reasons :
· So that you can treat yourself to a restaurant when you retire and not panic when your date chooses the Gourmet menu, which includes Wagyu beef and Matsutake mushroom dish.
· You can reduce taxes... who would argue with that?
· So that you don't blush when you ask your banker to screen your application to buy your new home.
For a few reasons :
· So that you can treat yourself to a restaurant when you retire and not panic when your date chooses the Gourmet menu, which includes Wagyu beef and Matsutake mushroom dish.
· You can reduce taxes... who would argue with that?
· So that you don't blush when you ask your banker to screen your application to buy your new home.
The 3rd pillar and retirement planning
The Swiss pension system is made up of 3 pillars.
· The 1st pillar : is the OASI (“Old Age and Survivors’ Insurance”, AVS in French and AHV in German): the share of your pension paid by the State.
· Le The 2nd pillar : is the OPA (“Occupational Pensions Act”, LPP in French and BVG in German): the share of your pension saved by your employer and yourself during your professional career.
If everything goes well, by joining the two pillars, you will get between 50 and 70% of your final salary each month during your retirement. 70% is the best-case scenario: for that, your employer must have been more generous than average, and you must have worked continuously throughout your adult life – until the age of 65 for men, and 64 for women.
Then, 50-70% may seem like a good deal if you haven't worked.
Well, that may be true... but only if you have plans to live on a boat in the middle of the ocean or in a country with a lower cost of living than in Switzerland. In which case, you might be fine with that amount of money.
But if you intend to remain in Switzerland and your standard of living gets cut in half, you’re in for a rough ride.
Here’s where your personal savings come in
While the first two pillars are mandatory, the 3rd pillar is optional. This is what you bring to the table yourself.
And since it’s up to you to decide if you want to start saving or not, proceeding proactively is of the utmost importance: get informed, ponder, think ahead and, if necessary, take out a 3rd pillar pension plan.
Moreover, the 3rd pillar comes with significant advantages, as the Swiss Confederation promotes private pension provision. Let's review them together.
The 3rd pillar pension: a great way to lower your taxes!
The amount of money deposited into your 3rd pillar is deducted from your income. Now, I have both good and bad news.
Which one should I start with? Alright, the bad news first...
The amount is capped, and that seems normal – otherwise all your savings would be used up, and the State would be left with nothing but the crumbs.
The good news is that this cap tends to increase over the years.
This rate used to hold at CHF 6’768 in 2017 for an employee and CHF 33’840 for a self-employed person.
In 2022, this limit is going to be set at CHF 6’883 for an employee and CHF 34’416 for a self-employed person.
Sure, knowing the amounts that can be deducted is a good thing, but knowing what makes you reduce your taxes is much better.
However, you can’t figure out how much you save just like that. The exact amount is dependent on your personal situation.
The impact of a 3rd pillar can be quite different, depending on your income, your tax deductions, your marital status, and the canton and municipality you live in.
Have some coffee ready, and maybe a Tylenol too.
Otherwise, simply get in touch with us and have one of our tax experts do it for you – doesn’t that sound much convenient?
Save up to purchase properties or start a new business with your 3rd pillar savings account!
Whether you are planning to buy a real estate property or start a new job, what usually comes to mind is the 2nd pillar pension, and less often the 3rd pillar pension – but the latter can turn out to be much wiser.
This is for two reasons:
· Withdrawing your 3rd pillar account allows you to keep your 2nd pillar intact, or at least to dip into it as little as possible – leaving you with more savings for retirement.
· It can act as a guarantee, known as pledge, for your bank, which might be more inclined to lend you money.
The bottom line is that:
· If you dream of becoming for example a freelance photographer and wish to complete the construction of a property by a beautiful Swiss lake, the opening of a 3rd pillar account turns out to be a must.
· If you want to do either one or the other but not both simultaneously, opening a 3rd pillar account might be a brilliant idea.
And even if you’re not willing to do either, opening a 3rd pillar account will definitely lead you to tax savings, something everyone warmly welcomes.
When is the best time to open a 3rd pillar account?
Ideally: ASAP.
Just as with any savings plan.
This being said, it’s best when your financial situation allows you to put a certain amount aside without depriving yourself of anything.
You won't be able to access the savings from your 3rd pillar account until later.
Ideally: ASAP.
Just as with any savings plan.
This being said, it’s best when your financial situation allows you to put a certain amount aside without depriving yourself of anything.
You won't be able to access the savings from your 3rd pillar account until later.
No need to open a 3rd pillar account if you are still unable or unwilling to set aside a part of your income annually. It will be an additional source of stress rather than a support for your pension plan.
It should be noted that since there’s no minimum contribution fixed, you can add anything to your account, be it CHF 500 or 50 per month – it's up to you.
What type of 3rd pillar pension plan should I choose?
There are as many types of 3rd pillar pension plans as there are different types of cereal in your supermarket – it takes up a whole department!
The best option is the one that suits you best. The one that best meets your expectations, desires, and current needs.
That said, many people contact us after having opened a 3rd pillar account with other service providers but are not fully satisfied with it. Why?
There are as many types of 3rd pillar pension plans as there are different types of cereal in your supermarket – it takes up a whole department!
The best option is the one that suits you best. The one that best meets your expectations, desires, and current needs.
That said, many people contact us after having opened a 3rd pillar account with other service providers but are not fully satisfied with it. Why?
That's an excellent question; let’s just say that sometimes clients are not fully aware of certain drawbacks, or that the latter have been somewhat underestimated.
So, let’s look at a list of factors you should take into account when opening a 3rd pillar account, no matter what your advisor has decided for you.
· The size of the contribution: whether you can change it along the way (i.e., if you get a pay cut or a pay raise) and the payment frequency.
· The period over which your contributions will be made.
· The contract start date.
· The various insured sums (if you chose to insure them).
· The asset manager in charge of increasing your assets.
· The surrender values.
· The possibility of modifying your contract if you move to another country.
· The financial consequences in case of premature termination of your contract
All these points are important; the last one is crucial.
Opening your 3rd pillar account with FBKConseils: Here's how it works
1. The first date!
During this meeting, that’s non-binding, we will get to know each other and discuss your needs. We will also give you the keys to determine whether you can consider opening a 3rd pillar account. We’ll study which direction you should go in to work out optimal solutions adapted to your situation.
2. It’s time for the 2nd meeting, so let’s optimize your taxes!
According to your criteria, we’ll precisely calculate the fiscal impact a 3rd pillar will have on your taxes to submit you the most suitable offers. If none suits you, we’ll carry out further research until we find an offer that perfectly addresses your needs and desires. We believe it’s essential on the one hand that we can consider different scenarios and institutions, and on the other that we know the ins and outs regarding your contract and, above all, that we can run a simulation of the fiscal impact that this choice will have on your finances in the short, medium, and long terms, so you can make the right choice.
3. Finding the 3rd pillar pension plan that's right for you!
After having found the right 3rd pillar pension scheme for you, we’ll schedule a 3rd meeting so you can sign your new contract, only we have made sure that you grasp all the elements within the contract.
How long does this procedure take?
It depends on the time needed to find the right 3rd pillar pension plan. Therefore, it’s best to discuss how long this procedure may take starting when you know which 3rd pillar pension you intend to take out. Once you send your application to the relevant financial institution, it takes about one to two weeks for your 3rd pillar account to be opened – and for you to start contributing to your pension scheme.
The pillar 3A is the one we usually refer to when we are talking about the 3rd pillar. It has an annual contribution limit, it is tax-deductible, and its purpose is retirement planning. It can only be withdrawn under certain conditions and is taxed.
The pillar 3B is sort of a flexible savings plan – it has no limit but is not deductible (unless you live in the cantons of either Fribourg or Geneva). It is not limited to retirement provision and the contract can be renewed after the age of 65. Withdrawing it is free and untaxed.
There’s no specific amount – unless stated in your contract, that’s why it’s important to double-check it. You basically pay into your pension scheme what you want to save. On the other hand, you cannot contribute more than CHF 6’883 per year if you are employed or CHF 34’416 if you are self-employed.
It’s always possible to suspend your contributions, at any time.
Unfortunately, you won’t be able to do that – but it’s possible to keep it in Switzerland until you retire.
Yes, and we’d even recommend that as there’s a wide variety of 3rd pillar pension plans. You’re better off opening several such accounts to get various services and diversify risks.
Finally, opening several 3rd pillar accounts is a good idea if you want to withdraw part of your 3rd pillar pension to fund a personal or professional project but you don't actually need all the money.
One is allowed to withdraw a pension plan only in its entirety, so, if you hold several 3rd pillar accounts, you may withdraw the entirety of one account, except that you’re still going to have access to the remaining accounts.
