The advantages of the 3A pillar
The advantages of the 3A pillar
"I currently live and work in Geneva and have been advised to set up a 3A pillar. I've been told that pillar 3A benefits from tax advantages over my savings account. Is this true?
Florence, Eaux-Vives
Switzerland's occupational pension system is traditionally based on three "pillars". The first pillar comprises old-age insurance (LAVS), invalidity insurance (LAI) and supplementary benefits (LPC). The second pillar consists of occupational pension provision (BVG), which is compulsory for employees over the age of 17 who receive an annual income of at least CHF 21,150 from the same employer, and optional for the self-employed. Lastly, the 3rd pillar is made up of personal pension provision, which complements or replaces the 2nd pillar. Unlike the 1st and 2nd pillars, which are compulsory for the individuals concerned, the 3rd pillar is optional. There are pillars 3A and 3B.
The pillar 3A you are planning to set up is a linked pension plan that is tax-privileged. By law, payments made into a Pillar 3A plan are tax-deductible, up to a ceiling set and regularly reviewed by the Ordinance on tax-deductible contributions to recognised forms of pension provision (BVV 3). Currently, employees can deduct a maximum of CHF 6,768 a year from their taxable income, while self-employed persons who are not affiliated to a BVG pension fund can deduct a maximum of CHF 33,840 a year.
Pillar 3A is also characterised by its limitations. Firstly, the law provides for only two forms of pillar 3A, namely life insurance policies taken out with insurance companies and pension contracts taken out with bank foundations. The second limitation of pillar 3A is the unavailability of the savings, with the aim of making the money available at retirement or for part-financing a home, or even for repaying a mortgage. Finally, the choice of beneficiaries for this form of pension provision is restricted.
If the policyholder is alive when the policy expires, he or she will be the beneficiary. In the event of the policyholder's death, the law stipulates that the beneficiaries are, in order, the surviving spouse or registered partner, failing which the direct descendants, or the person who has lived with the deceased in an uninterrupted relationship for at least 5 years, then the parents, brothers and sisters and finally the other heirs.
