In the third pillar, the withdrawal of pension assets is taxed. Since taxation is progressive, the percentage tax rate rises with increasing retirement capital. For this reason, it is worthwhile distributing your retirement assets among up to five accounts to enable a staggered withdrawal.
The earliest possible withdrawal of pillar 3a assets is five years before reaching the normal retirement age. This means that if you have several 3a relationships, you can terminate a single relationship separately each year until you retire. Instead of withdrawing a large balance once, you can, for example, withdraw a quarter four times and thus benefit from lower tax rates. The following example illustrates this effect:
In the example, the accountholder pays the maximum amount of CHF 6’826 to account A for 10 years and then repeats the whole process for accounts B, C and D. After 40 years, he has four accounts with CHF 68’260 each or a total of CHF 273’040 (without interest). If the entire assets are withdrawn in one year, the tax rate in the example is CHF 21’103. If, on the other hand, the assets are withdrawn in stages over four years, the total tax rate is only CHF 13’280 (assumption: unmarried, childless and reformed man residing in the Canton of Zurich). The simple division into four accounts therefore results in a tax advantage of around CHF 7’823.
The larger the accumulated pension capital, the greater the difference. If we assume an average return of 5% per year in the same example, the following comparison results:
Deposits are made to the four accounts one after the other. Due to the return and compound interest effect, however, the accumulated assets now grow to a total of CHF 865’808, with the first account growing strongest due to the longer investment horizon and the correspondingly higher return and the stronger compound interest effect! The tax advantage due to the staggered withdrawal over four years now even amounts to CHF 68’433!
If you want to optimize even further, you can distribute the deposits evenly across the four accounts right from the start. This has the advantage that the individual accounts have the same investment horizon and thus the same performance. All accounts are then of the same (or similar) size when withdrawn and taxed, which means that progressive taxation can be countered in the best possible way.
If distributed evenly, the tax advantage increases to a total of CHF 82’019!
The above example shows two things. First, it makes sense to divide the deposits between different portfolios in order to enable staggered withdrawals before or at retirement. Second, especially with equity-based strategies, one should consider whether payments should be distributed evenly across different portfolios right from the start in order to effectively withdraw the same size. The greatest potential for optimization therefore lies in dividing your payments evenly between five different portfolios right from the start.
With VIAC, this is possible without any problems. You can open up to five portfolios directly in the app and within a very short time. These are regarded as independent 3a relationships and can be withdrawn in different years.