Pension savings in Switzerland

The retirees who only have the AHV (old age pension from Switzerland) and BVG (company pension from Switzerland), can hardly keep their standards of living in the future. Fortunately, people in Switzerland have an additional trump card: The Swiss pillar 3a. A 3a is described as the private Swiss capital pension, and the paid in capital is basically tied up until you retire. Pension savings does, however, provide three major tax benefits besides improving the economic standard of living.

Tax benefits in Switzerland

  1. Payments on a pillar 3a can be deducted from the taxable income and because of the high tax progression it gives large tax benefits, among other in the marginal tax.
  2. Savings and gains on pension savings are exempt from the taxation in the term.
  3. When paid out income tax is due: The tax calculation is made separately from the other income and at a very low rate.

The benefits with a pension scheme in Switzerland increases concurrently with the salary. If you have a certain level of salary, you are encouraged to start a pillar 3a to benefit from the tax benefits.

There are two providers of capital pension: The banks and insurance companies. What is best depends on individual circumstances such as willingness of risk, security and, indeed wishes for the future. The three most commonly used solutions are:

  1. A common 3a account that will accrue interest at a variable interest rate and is slightly above a normal savings account.
  2. A 3a policy with guaranteed interest rates and capital protection also available for premium exemption and coverages at incapability for work as well as death.
  3. A 3a policy with unit trusts/mutual funds (unit link). Savings are invested in unit trusts/mutual funds and it is possible to select both with or without capital guarantee.

If one wants to dissolve one’s pillar 3a before retirement, it will generally only happen if one of the following conditions are present:

  • Moving from Switzerland
  • Purchase of real estate in Switzerland
  • Start of self-employment in Switzerland
  • Enduring incapability for work

Contact us if you want an offer on a pension saving in Switzerland.