Investing your Pillar 3a money with an insurance company is generally safer in Switzerland than with a bank, as insurance companies are strictly regulated and supervised. The Swiss Financial Market Supervisory Authority FINMA is responsible for ensuring that insurance companies meet certain capital requirements and implement risk management processes to ensure that they can meet their financial obligations to their customers. In addition, with an insurance company, Pillar 3a funds are generally protected by deposit insurance, which pays out up to the full amount per customer in the event of the company's insolvency. With a bank, on the other hand, deposit insurance in Switzerland is limited to CHF 100,000 per client, and the risk of bank failure or insolvency may be higher than with insurance. However, it is important to note that the investment decision depends on individual and personal factors.
Transfer of funds from the bank to the insurance company:
It is very easy to make a transfer, and we will be happy to advise you in this regard. In principle, the existing capital can either remain with the bank or be transferred in full.
Waiver of premiums in case of disability:
In contrast to the bank, the Pillar 3a insurance solution offers continued pension payments if the insured is no longer able to pay premiums due to disability. If the insured suffers a permanent disability, the insurance company will continue the agreed pension payments and take over the premium payments for the insured. This ensures that the insured can continue to provide for his or her retirement needs even if he or she becomes disabled, without having to stop making pension payments due to his or her financial situation.
Death benefit insurance:
Unlike a bank solution, a death benefit can be integrated into an insurance solution. In the event of the death of the insured, a certain sum is paid out to the surviving dependents, thus providing financial support. Especially if the insured has little or no other survivorship, or if the survivors are financially dependent on him or her, death insurance can provide an important safeguard.
Pillar 3a contributions can be deducted from taxable income. This means that the payments reduce the taxable income and thus lead to a tax saving. In addition, there are higher maximum amounts for self-employed persons and persons who are not insured under the second pillar. The tax advantages of pillar 3a can be an important incentive for many Swiss residents to make provisions for their retirement.
For the year 2023, the maximum annual contribution to pillar 3a for employees with a pension fund connection in the 2nd pillar is CHF 7,056 (for self-employed persons, the maximum is 20% of net earned income, but not more than CHF 35,280). It is important to note that the maximum amount of payments into pillar 3a can be adjusted every year, so you should regularly check the current regulations.
Bank products often offer more flexibility as it is relatively easy to change banks and there is no obligation to make annual deposits. Insurance policies, however, are long-term contracts where the annually agreed deposit amount must actually be paid in. However, this does not necessarily have to be negative, as many people want to benefit from this "savings compulsion" and feel motivated to make regular deposits as a result.
Indirect amortization of mortgage in pillar 3a:
Indirect amortization of a mortgage by means of pillar 3a makes it possible to use pension funds for the purchase of residential property. The Pillar 3a funds are pledged as collateral to the bank to repay the mortgage and gain tax benefits. If the borrower is unable to repay the mortgage, the retirement funds serve as collateral for the bank.
Investing Pillar 3a funds with an insurance company is generally safer than with a bank because insurance companies are strictly regulated and monitored. In addition, the insurance solution provides death insurance and continuation of retirement payments in the event of disability, which is an important safeguard for the insured and his or her family. It is also important to note that the tax advantages of pillar 3a can be an important incentive for many Swiss to provide for their retirement. Overall, the insurance solution offers a better pillar 3a solution than a bank, which is, however, a less flexible and long-term investment.
If you would like to take out a Pillar 3a pension or transfer your existing Pillar 3a from a bank to an insurance solution, we would be happy to advise you without obligation.