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Pillar 3a: insurance company or bank?

Feb 23, 2021.

You can take out your private pillar 3a pension with an insurance company or a bank. The best solution will depend on your personal situation. Here, we explain the advantages and disadvantages of both. That way, you can decide for yourself which option best suits your needs and circumstances.

 

Generally: Pillar 3a is always a sensible solution, whether taken out through an insurance company or a bank. Not only can you save for old age, but you can also save on tax. That is because the deposits can be deducted from your income. You only have to pay tax on the savings when you withdraw the money. The tax rate for this is lower than the normal rate.

 

 

Pillar 3a through a bank

Pillar 3a is part of the standard product range of practically all Swiss banks. The advantage: you have the flexibility to decide how much you want to pay in. You can also take a payment break if ever you find yourself short of money. If you are no longer satisfied with the bank or the conditions, simply move your assets to another provider.

 

Pillar 3a through a bank is available as a savings account or a fund account.

  • A savings account is a safe option, but little interest is paid. Under certain circumstances, this option may not be enough to fill the pension gap in the 1st and 2nd pillar.
  • With a fund account, the bank invests your money in securities. You normally benefit from higher returns than with a savings account.

 

Pillar 3a through a bank is suitable for anyone who wants a simple and flexible way to put money aside for old age purely by saving up. It can be a good solution for young adults in particular.

Pillar 3a through an insurance company

Insurance companies usually offer pillar 3a in combination with risk insurance. This means: you can save for old age while also protecting yourself against risks such as loss of earning capacity or death. The premiums for the insurance are treated as payments into pillar 3a. These premium payments are also tax-deductible, so you can save even more.

 

 

Pillar 3a through an insurance company is suitable for anyone who wants to achieve their savings objective by any means possible while also protecting themselves against financial risks such as loss of earning capacity or death. Risk cover is important if you are starting a family or becoming self-employed, for instance.

Risk cover in detail

In the article Important in your family budget: saving for emergencies and retirement, we explain the importance of first protecting against risks such as loss of earning capacity or death before saving for anything else. That way, you can protect your children if you or their other parent dies or is no longer able to work.

 

 

Practical example

 

How the Smith family can protect themselves and save at the same time

Petra and André Smith want to protect themselves against loss of earnings if they are no longer able to work owing to illness or an accident. André, as the main earner, would also like to have some protection in the event of death. The family would want to be able to maintain their current standard of living should any of these things happen.

 

The family’s current situation is such:

  • Petra is 34 years old and André is 35.
  • They have two children: Emilia (6) and Tobi (4).
  • The family lives in a rented property.

 

Monthly household income:

  • André earns CHF 4,715 a month (net) working at an FTE of 80%.
  • Petra earns CHF 1,768 a month (net) working at an FTE of 30%.
  • Their combined income is CHF 6,483 plus child allowance of CHF 400.

The couple have defined the following risk cover with the help of their advisor:​ 

 

RiskLoss of earning capacity

André Smith

Risk benefitsPension for loss of earning capacity

CHF 24,000 per year

Annual premiumCHF 840

RiskLoss of earning capacity

Petra Smith

Risk benefitsPension for loss of earning capacity

CHF 24,000 per year

Annual premiumCHF 860

RiskDeath benefits insurance

André Smith

Risk benefitsDeath benefits insurance

André Smith

Annual premiumCHF 470
Total   CHF 2,170

*The annual premiums are rounded off.

Savings:

 

CantonNeuenburg Total tax burden for approx. 30 years without risk cover in pillar 3aCHF 258,000 Total tax burden for approx. 30 years with risk cover in pillar 3aCHF 224,000 Savings for approx. 30 years after deducting capital gains taxCHF 34,000
CantonZug Total tax burden for approx. 30 years without risk cover in pillar 3aCHF 38,000 Total tax burden for approx. 30 years with risk cover in pillar 3aCHF 32,000 Savings for approx. 30 years after deducting capital gains taxCHF 6,000

The calculations are based on the tax factors known for 2020. The figures are rounded off.

By combining their risk cover with their pillar 3a, the Smiths pay up to 15% less tax. This can add up to a considerable amount over the years. Depending on your income and where you live, it would be enough to pay for a family holiday or even a new car.

 

 

Generali tip: insurance company, bank or both?

It makes perfect sense to have more than one pillar 3a – through an insurance company and/or a bank. The advantage: you can have your money paid out in phases so you don’t have to pay tax on your savings all at once. We recommend a maximum of CHF 40,000 to CHF 60,000 per 3a account.

 

However, the total amount may not exceed your annual contributions. You can find the current statutory maximum amounts here.

Generali solution

 

Our flexible pillar 3a: the best of both worlds

With our pillar 3a solution, you enjoy the combined benefits of insurance company and bank, i.e.: flexibility and risk cover. Flexibly is important, especially if you are still young. You don’t know what the future holds. You might need to take a break from work because you are having a baby. Or you might want to work abroad for longer or go travelling. We give you the choice of how much you want to pay in and when.

 

You can take out this solution online in just a few minutes – and without having to complete any paperwork. In the customer portal, you can access your 3a account at any time, make payments and monitor its performance. You also get income protection insurance for just CHF 8 per month. If you are unable to work, we will continue to save for you.

MORE ARTICLES ON THE SUBJECT

Guide: pillar 3a and more

Find out all you need to know about private pensions and how you can close any gaps in your pension savings.

Protect your family

Further information about the main risks and the best way to protect your family can be found in our “Protecting your family” series.

How good is my retirement provision?

Will my pension be enough to live on later? Are there any gaps in my retirement provision?

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