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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)?
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.
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.
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?
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.
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:
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!
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 Calculator "Taxation of 2nd pillar and pillar 3a lump-sum payments" from PostFinance.
Transparency note: This article on "Pillar 3a withdrawal?" and the calculations in the examples were produced in collaboration with frankly.
frankly is the pillar 3a app from 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.
33 Responses
Hello Eric
Thank you very much for the very helpful information. I have a question regarding the tax advantage of 3a accounts with equity/ETF investments. I am now in my late 30s and would like to save for my 3a pillar on 100% shares if possible, due to the long investment horizon. I somehow have the impression that the tax rules surrounding the 3a account date back to a time when there was only normal fixed interest in the 3a account. Because if I now really receive an average global ETF interest rate of 7%, then within 30 years with full utilisation as an employee, 30 tCHF becomes approx. 700-800tCHF. If I now have to pay full tax on this large sum again when I reach retirement age, would it not be wiser to invest in ETFs outside the 3a pillar, as the capital gains there are tax-free? And can you please explain to me why a 3a account should be capped at around CHF 30 thousand? I understand that you can make staggered withdrawals in the last 5 years before retirement (i.e. 6 times), but why should the total volume be limited? Perhaps I have misunderstood something.
Many thanks and best regards,
Christian
Hello Christian
thank you very much for your feedback!
It really is the case that the tax rules are older than the current possibilities.
Here it is shown that you can also Build up CHF 1 million in pillar 3a can. However, the tax burden can be brought under control with a staggered structure.
Nevertheless, you are right, in the free area (quasi 3b - even if it doesn't exist) there is no reference tax. The only question is what else you do in 3a. Is that why an account solution? Doesn't make sense either, does it?
If you need risk insurance (e.g. because you own a home or have a dependent family), this could be an idea. But avoid mixed life insurance policies at any price!
As a rule, the ETF savings plan is worthwhile in pillar 3a for tax optimisation (simply stagger correctly) and also in the free area if there is still money available.
The rules of thumb with the 30t per 3a pot etc. are all useless, but are simply intended to give a direction. In the end, the important thing is to have as even an income as possible. However, this must always be considered specifically and individually 🙂
Kind regards
Eric
Hello Eric
Thank you very much for the very helpful information. May I ask you another question: I recently had a consultation with UBS regarding pension planning. I was told there that they advise a maximum of 3 3a pots for staggered withdrawals, as the tax authorities in Zurich would not accept more than 3 different pots for staggered withdrawals. I was very surprised by this statement because I thought that such a withdrawal rule must surely be laid down in legal texts or something similar. Have you ever heard anything about this or can I chalk it up to misinformation from the clerk?
Kind regards
Christian
Hello Christian
thank you very much for your feedback!
In some cantons there are supposedly different "limits" here, but I have not yet found a written statement on this.
As far as I know, you shouldn't have any problems with 5 pots in Zurich.
If anyone has reliable information that says otherwise (also for other cantons), please link it here!
Hi, Eric,
I am 37 working already 2 years in Switzerland.after reading your article I am very keen on opening a 3a pillar account. You recommend to open up to 5 accounts in the same or different providers.my question is would each and every account would have the same max deposit limit per year of 35280(5*7056CHF)or the amount you are allowed to deposit across all accounts is 7056 and nothing more than that?
Thanks in advance
Hi Peter
thanks for your question!
The maximum stays at CHF 7056 per year for normal employed people. Consider also this article about the tax reduction for foreigners.
Thank you for the information. My question: When transferring a 3a account from one provider to another, can I split it into several accounts?
Hello Markus, no, unfortunately splitting is then no longer possible. Only entire 3a pots can be transferred.
Hello,
How were the pre-tax assets calculated - CHF 873 038 ? 40 years x 6883CHF -> 275 320CHF.
Thanks in advance
Hello Artur, you can find the basis for the calculation at the very end of the article
I am 26 years old and have around 28k in my 3a account.
I have an equity share of 95% (accumulating) with Viac and pay in the maximum amount there every year. If I were to spread these payments over 4 or 5 different 3a accounts, the capital and the compound interest effect would be significantly lower than with a high capital account. Don't you think I would be better off if I only paid into this account for the next 40 years? Of course, the progressive taxes are not a tax reduction on balance, but the annual return is higher and the income is ultimately greater.
Dear Ganni
There is a small error in your reasoning. The same sum spread over several pots will also yield the same total return overall with the same return (same strategy).
Staggering is therefore recommended in any case and is absolutely urgent from a tax perspective.
Here is a calculator so that you can check this for yourself: https://www.schwiizerfranke.com/etf-rechner-etf-sparplan-rechner
What if I work beyond retirement age? Would it then be worth paying directly into 10 accounts? Would this result in even greater tax savings? Then I would have 10 accounts with 2 different providers?
You may still have the pension fund (capital withdrawal) in one year, in which case there would be a maximum of 9 pots. If you are married, the pots are combined, then half is enough. For most people, therefore, 5 pots are enough 🙂
Hello Eric
Does it make sense to have all 5 portfolios with the same provider? E.g. with VIAC, up to 5 are possible, which can then also be obtained on a staggered basis.
LG
Hello Georg,
There is nothing generally wrong with that 🙂 Not all providers offer that. Furthermore, the offers and strategies differ, which is why many rely on a combination ...
But you say, optimally, choose the same strategy in all 5 portfolios. That would be best with 1 provider where this is possible. Since the strategy is then really 1:1 the same everywhere 😉
Of course, it always depends on the respective goals. It may be that you want to pursue a different goal with a 3a pot (for your WEF, for example), in which case an adapted/different strategy makes sense again.
Very nice article on pillar 3a! I already (unfortunately) have only 2 pillar 3a accounts and pay in the maximum amount.
Can I still change this to 4 accounts now?
Thank you very much for your answer.
John
Hello John,
Yes, you can open more accounts at any time.
In my opinion, it makes more sense to have only four 3a accounts. This is in view of the fact that the pension fund is not taken as an annuity (always decreasing conversion rate) but is to be paid out once.
Even if the PF is then paid out (as you plan to do) 5 or more accounts do no harm, as multiple accounts can be drawn in one year....
Finally, there are of course some individual special cases or special constellations. For example, if someone switches to 80% in the last 2 years of work, this should be taken into account. Another special case would be if someone continues to work beyond retirement age. Then the pillar 3a can be drawn up to 5 years after the regular retirement age ... but this would go beyond the scope of this article.
In the end, you should always look at the individual case 🙂 and have the graduation in mind from the beginning.
Hello Schwiizer Franke,
many thanks for your cool report. For me, at first glance, the color scheme and the amount CHF 75'120 was somewhat unclear. But this has then settled in the detailed reading.
Personally, I have ported the pillar 3a to viac and am currently saving for a second account. Let's see how many more will follow, as the investment horizon is not that long anymore.
LG Mike
How many 3a accounts should I open if I only started with the 3a pillar from the age of 35? I have opened 2 accounts, is it still worth having 5 accounts?
Even if you start only a few years before the withdrawal, it is worthwhile to pay into 5 accounts for tax purposes. So a clear yes to your question 🙂 You can open the next accounts now and, for example, first see that the 5 then become the same size.
By the way, moving a 3a account is easy. If you switch to Frankly, for example, they'll take care of the hassle for you.
Hello and thank you for the super contributions! Also coming from D was here already one or the other eye opener. With a question I'm still on the hose - I have so far deposited with my house bank on a 3a account (hello negative interest🙊). Does it make sense now to transfer the total amount already collected into a new 3a pillar (custody account), for example at frankly?
Hello Sabrina 🙂
Thanks for your question! I'm not allowed to give you advice here. But you have correctly recognized that the 0 interest gives you no return. Furthermore, we have an inflation (currently about 5% in Switzerland) so you lose on an interest account without interest every year 5%.
If you are about to draw your 3a, you should not select 100% shares, as shares can also fluctuate downwards in the short term. Do you have more than 10 years until you draw your 3a? For me personally everything speaks for a high share quota. Frankly certainly offers itself here & if you want you get with the code SWISS FRANC even CHF 50 in fees for free 🙂
Sorry, but inflation in Switzerland is about 1.50% in 2021, not 5%. I think you're confusing something with the US...
Thank you for pointing that out.
Of course, it always depends on which groups are used for the price comparison. For example, prices in the transport sector have increased by 8% compared to the previous year (not absolute). In the housing & energy sector by 2.9% compared to 2020.
I agree with you that it's totally not that high - I had the number wrong in my head (in Germany it's 21 in November). according to Statista at 5.2%). Incidentally, how high inflation is for each personally, can be measured with the Inflation calculator be charged by the federal government.
Very exciting, thank you! The topic of even deposits: Would you open a standing order each month on the 5 accounts, alternating month to month with depositing the accounts or always filling one account annually? Which makes the most sense?
Hello, Sandro,
as we all know, there's more than one way to skin a cat.
Let's say someone starts saving for 3a today and decides to invest in securities in the 3rd pillar because the person has a long investment horizon. Then the person could open 5 custody accounts with the same strategy today (so that they grow evenly) and automatically pay into each of the accounts monthly by standing order. In the last years before retirement, the person should minimize the equity risk by gradually reducing the equity portion of the strategy. For the very precise: Shortly before withdrawal, the person could pay more into the accounts to be withdrawn next (because the others will run for longer).
Those who already have accounts can calculate how much they will roughly pay in until retirement. The sum divided by 5 then gives the rough size of the respective reference pots. Accordingly, the size can be aimed at by alternating payments. How this is done is ultimately irrelevant. Remember, there can be more than 5 accounts. However, you can only ever close whole accounts and this within a maximum of 5 years before retirement, so the respective size of the withdrawal is decisive in order to arrive at the 1/5 per year.
Does that help you?
Merci for the tip about the staggering! The next time I talk to my house bank, I ask why I was not pointed out more clearly until now. Currently I have filled 2 columns. The balance of 2021 I pay into a new account.
... I would not wait too long for the house bank ... 😉