Withdrawal pillar 3a account close pillar 3a payout staggered save taxes 3a withdrawal

Pillar 3a withdrawal? Staggered withdrawal!

More and more Swiss citizens have opted for securities in their 3a accounts in recent years. Due to low interest rates and of the Long investment horizon in pension provision this is the most profitable form of old-age provision for many. The payments into 3a Deposits can be deducted from taxable income, which drastically reduces the tax burden during working life.

The 3a savings or investment is To close one's own pension gap on a voluntary basis is therefore very effective. What many people only consider too late, however, is that the withdrawal of Pillar 3a should also be made correctly and prepared accordingly over the payment years.
Those who do not do this run the risk that the Tax savings of the payment years is wiped out by the tax burden on withdrawal.

The Pillar 3a In addition to the obvious benefit of supplementing the pension or making up for the pension gap, it is often opened up in order to Save taxes. You benefit from the tax savings during the employment phase. But what about the savings when I draw the money (early or as a result of retirement)?

Table of contents

Pillar 3a payout by means of graduation

When you draw on your pillar 3a, the Capital gains taxes on. It doesn't matter whether you use your 3a in retirement, early to buy your own home or to start your own business.
In order to Keep the tax burden on capital withdrawals from your 3a as low as possible, you can hold several 3a accounts/deposits and then withdraw them in stages. This means that you do not withdraw all of your 3a assets at the same time, but rather staggered over a number of years.

To Opening of several pillars is the advice given everywhere. In the process, one also receives tips again and again on the account balance from which a new pillar 3a should be opened. But why is it important to open several pillars and when is the right time?

In this article, you will find out how to optimally pay into your pillar 3a and how to make the withdrawal in order to ultimately also Actual tax advantages for your pension provision to obtain.

Now you might ask yourself whether another 3a account or 3a custody account is even necessary for you today? And if so, whether you should use the same strategy for all custody accounts in order to let them grow evenly? All these points will be clarified in this article, and further down you will receive a "How To: Withdrawal pillar 3a" instructions.

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We use: Pillar 3a with ZKB Frankly

Taxes when dissolving pillar 3a

The Pillar 3a is tied pension assets and can for example early in the context of the acquisition of residential property or self-employment be obtained or from 5 years before the normal retirement age. Since taxation is progressive, the percentage tax rate increases with larger withdrawals of assets. It therefore makes absolute sense to Spread the tax burden over several years.

It's not complicated, and it's not particularly time-consuming. If you don't withdraw your Pillar 3a on a staggered basis, you will be heavily penalised in terms of tax, as we have shown in chart 1.

Pillar 3a staggered withdrawal Save taxes_withdrawal_without_staggering 3a comparison
Graph 1 (see below for basis of calculation)

Chart 1 shows the lump-sum withdrawal of a typical pillar 3a with CHF 873,038 in pension assets. In the case of a full lump-sum withdrawal in one year, CHF 138,038 in taxes are due here, which is more than the tax savings during the payment period.
The tax burden for a one-time withdrawal is therefore greater than the tax savings over the entire payment period! 

Pillar 3a withdrawal = tax burden due to capital withdrawal. The popular wisdom that you can save taxes with Pillar 3a is therefore only partially correct. Namely, only if the withdrawal is staggered. Anyone who does not draw down their Pillar 3a on a staggered basis runs the risk of having made a tax loss.

But what exactly does staggered mean? When should another 3a custody account be opened and how many of them?

3rd pillar payout optimal? Withdrawal from 5 equally sized 3a accounts

Since you have Pillar 3a may be withdrawn a maximum of 5 years before the normal retirement ageLet's look at the reference of 5 accounts. Your tax burden is then distributed over the 5 years accordingly and thus reduced.

We have already mentioned that the Capital gains tax progressive and therefore depends 1:1 on the size of your 3a accounts. So let's look at how a withdrawal from 5 exactly equal 3a accounts would look from a tax perspective.

3rd pillar payout withdrawal taxes capital withdrawal taxes 3a withdrawal staggered taxes 3a withdrawal taxes_with_staggering
Graph 2 (see below for basis of calculation)

The pension fund assets of CHF 873,038 were Saved evenly from the beginning on 5 different accounts of CHF 174'608 each. Thus, the tax burden for a withdrawal over 5 years is now only CHF 50,220. Now the capital withdrawal tax is lower than the tax savings over the deposit period and we can actually speak of a net tax saving. Pillar 3a withdrawal? Clearly, therefore, staggered.

Compared to before, this is how it looks fiscally:

Pillar 3a staggered withdrawal Save taxes_withdrawal_without_staggering 3a comparison
Graph 3 (see below for basis of calculation)

Tax savings thanks to graduation 24'900 CHF ✔️

Tax burden without graduation 62,963 CHF ❌

How to: Pillar 3a withdrawal staggered

  • From the beginning 5 Open accounts and pay in contributions evenly
  • Choose in the depots same strategyso that they grow evenly
  • Those who still have more than 10 years until they move in may apply to high shareholdings Trust without problems (the providers support you in this)
  • Before retirement: The closer you get to the withdrawal date, the lower your equity allocation may be in order to reduce the risk.
  • Pillar 3a withdrawal: The yield of the accounts that have not (yet) been drawn continues to change. As a result, the accounts do not show exactly the same amount when they are drawn. You can counteract this somewhat in the last year of payment. For example, by making an increased payment into the account to be withdrawn at the expense of the other 4 accounts.

Conclusion

Planning ahead pays off The effect is very strong in monetary terms and can make a serious difference to your pension in old age.

Maintaining several 3a accounts is only minimally more work than a single account and yet the difference in tax burden is considerable. Because Without graduation, the tax advantage of pillar 3a is not always available (see calculations).

Pillar 3a withdrawal? We hope that we have been able to answer many of your questions. If you are still missing something, we would be happy to receive your comments!

What are you waiting for? Open your second, third, fourth or fifth 3a account now!

Frankly voucher code Promotion code Refer a friend referral 2023 Promo ZKB
* We use: Pillar 3a with ZKB Frankly

Calculation basisThe calculations were made on the assumption that the person in question is a man, 25 years old, single without children, reformed, living in 8000 Zurich, with an average annual income of CHF 90,000. He pays CHF 6883 (here the Current pillar 3a maximum amount) and pays in until 65. The data comes from the Calculators "Taxation of 2nd pillar and pillar 3a lump-sum payments" from PostFinance.

Transparency note: This article on "Withdrawal Pillar 3a?" and the calculations in the examples were created in collaboration with frankly.

frankly is the pillar 3a app of Zürcher Kantonalbank. With frankly, you can open your pillar 3a easily and completely digitally - without having to visit the bank. frankly invests in securities and only in high-quality Swisscanto investment products. With your strategy, you decide yourself how much risk you want to take. You can choose from five investment strategies and nine products. With frankly, you benefit from the community discount, whereby the fees are reduced the more people invest with frankly. The current all-in fee is 0.45% on the account and securities balance.

52 responses

  1. Hi Eric, I’m 22 years old and still at university, but I’ve completed an apprenticeship and earn a bit of extra money through that alongside my studies. I’ve also previously worked full-time (100%) and made contributions to the 3rd pillar with Frankly. Now I was wondering whether it makes sense to open 3–4 more accounts with Frankly (using the same strategy), or to set up the additional accounts with other providers using different strategies? Are there any pros and cons to having accounts with different providers?
    Thanks for your feedback and the informative post!

    Reply

    1. Hello Jan,
      That’s brilliant – you’re already so committed and well on your way. Very few people your age can say the same. Keep it up!

      Now that you’re at university, I’d take a step back and ask yourself whether the 3a scheme really makes sense for you at this stage. Or whether the money would be better off in your personal assets at the moment (it’s more flexible if you need it, and the tax savings are likely to be negligible at present).
      Have you given this some proper thought for yourself?

      Reply

      1. Hello, Eric,
        Thank you very much for your prompt reply. You’re right – as I’m currently a student, the third pillar is a secondary priority and the tax savings it offers are also negligible at the moment. Since I turned 18, I’ve been investing a certain amount each month – in addition to my third pillar – in a standard MSCI World ETF via yuh, so that I remain flexible and could sell some of my shares if I needed to in an emergency. At the moment, I’m mainly investing in this ETF. I also have a bit of a nest egg that I can fall back on at any time.
        I would still be interested to know, however, what strategy I should adopt for my various investment portfolios in future, once I’ve graduated.

        Reply

        1. Hello Jan

          That sounds like a well-thought-out plan!
          On the portfolio strategy: The purpose of having several 3a accounts is to allow for staggered withdrawals; to this end, they should grow at the same rate. In theory, adopting the same strategy across the board helps to achieve this (this is not investment advice).

          Whether everyone uses the same provider is of secondary importance. Using the same provider is simpler (one app, one login). A second provider does not offer any greater security; your securities are separate assets and belong to you. You can switch at any time in the future, so you’re not tied in for life. In the case of home ownership, having two separate pension funds can still offer advantages, but that is a special case.

          Good luck and best wishes
          Eric

          Reply
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