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Viac Academy

Why is pillar 3a so important?

After your retirement, experience shows that you can count on around 60% of your last salary for the annual old-age pension from the 1st (AHV) and 2nd pillar (pension fund). In order to finance your accustomed standard of living after retirement, a lot of money is missing!

Depending on the study, this figure will fall from around 60% today to 45% in the next 10+ years. In order to maintain your standard of living after retirement, you have to live on your savings. In technical jargon, this loss of wealth is called a pension gap. Also, the tax burden in old age is often massively underestimated, since certain tax deductions as a pensioner can no longer be made.

Example: If you had an income of CHF 100’000 before retirement, you can currently expect a pension of around CHF 60’000. However, this figure will soon have to move in the direction of CHF 45’000 due to demographic developments (life expectancy, more old people, fewer offspring) and low interest rates (pension funds are often very heavily invested in bonds).

So what needs to be done?

The pension gap must be closed. This can be achieved either by private, free savings – in connection with pension savings, this is referred to as pillar 3b. This includes normal efforts to save money, such as saving with a savings account, a stock deposit or investing in real estate. These funds or investments can also be used for other private projects (e.g. holidays, a new car etc.) at any time.

In contrast, tied* Pillar 3a is a tax-supported pension vehicle from the very beginning. Pillar 3a deposits can be deducted directly from income. Savings are also not subject to wealth tax and current income such as interest or dividends are exempt from taxes. In this way, the Swiss government creates an incentive for Swiss citizens to secure their retirement income with the third pillar. Retirement planning with Pillar 3a is therefore the ideal instrument to save efficiently for old age.

*”Tied Pillar 3a” means that pension assets may only be withdrawn in special cases before the ordinary AHV age:

  • Reaching the AHV age (5 years before possible)
  • Financing of owner-occupied residential property
  • Purchase into the pension fund
  • Start of self-employment
  • Definitive departure from Switzerland
  • Disability and death