MAXIMUM AMMOUNTS

Persons affiliated to a pension fund (generally employees): can make maximum contributions for the year 2023 of CHF 7'056 /year. Those who are not affiliated to a pension fund (generally self-employed): they can make contributions of 20% of their income, but up to a maximum of CHF 35'280/year.

2023 - How much can you contribute to the Pillar 3a?

For tax deduction purposes, the amounts paid into pillar 3a from 01.01.2023 to 31.12.2023 are taken into account. Then, between January and February 2024, you will receive the certificate from the company with which you have concluded the third pillar to attach to your tax declaration. If you have more than one third pillar, you will of course receive a certificate for each contract, but in any case the total may not exceed the maximum deductible for the year 2023. Thus, the sum of the premiums paid to the third pillar 3A will be deducted from your taxable income. If, on the other hand, you are taxed at source, e.g. B permits or cross-border commuters, you will have to apply for Ordinary Additional Taxation (TOU) at the withholding tax office by 31 March of the following year in order to be able to take advantage of the tax deduction.

Deducting the 3rd pillar from taxes

Maximum AHV/IV pension: CHF 2'450 /monthMinimum AHV/IV pension: CHF 1'225/monthBVG entry threshold: CHF 22'050BVG coordination sum: CHF 25'725THIRD PILLAR With second pillar, maximum deductible: CHF 7'056, &nbsp;Without second pillar (max. 20% of net salary): Max. CHF 35'280

Social insurance figures 2023

Terzo pilastro 2023, importi massimi, imposte e assicurazioni sociali

Troisième pilier 2023, montants maximaux, impôts et assurances sociales

2023.jpg

Third Pillar 2023, maximum amounts, taxes and social insurance

Third Pillar 2023

GENERAL INFORMATION

Moving to a new country can be fascinating, but it can also be fraught with uncertainty. In Switzerland, expatriates are often faced with many retirement issues.&nbsp; This article provides an initial overview to help expats with these important challenges.

Expat in Switzerland: Build your future pension

One of the hallmarks of the Swiss social security system is its robust three-pillar structure, designed to ensure a comfortable standard of living both during working life and old age.&nbsp;The first pillar, known as the AHV (or OASI in English), provides a basic retirement income in the form of an annuity. As the first pillar use a 'distributive' system, your current contributions are used to fund current pensions. For this reason, you will not accumulate any capital in the first pillar. The AHV is mandatory for everyone living or working in Switzerland.&nbsp;The second pillar, or occupational pension plan (BVG), consists of mandatory pension funds for working people and, like the first pillar, provides coverage in the event of disability, death and retirement. Unlike the first pillar, the second pillar uses a 'capitalisation' system, meaning that you will accumulate a capital during your working life, which is converted into a pension when you retire. This accumulated capital is yours and will follow you whenever you change jobs.In both, first and second pillars, those who have made full contributions will receive around 60% of their last salary.&nbsp;Finally, the 3rd pillar offers an individual saving option through Pillars 3a and 3b, providing additional financial security to cover any gaps in the events of disability, death or retirement. Pillar 3a also gives you an important tax advantage.

The three pillar system: Security and Freedom in Retirement

Thinking about the future is essential to think about it well in advance. While the first and second pillars cover your basic financial needs, it is advisable to aim for a retirement income of at least 80% of your last salary.&nbsp;Expats, who generally come to Switzerland late in their careers and therefore have not paid full contributions from the beginning, may find it advantageous to use the 3rd pillar to fill any pension gaps.However, the first step is to understand your current situation through a pension analysis, which will show you what you can expect from the 1st and 2nd pillars. This will enable you to conclude a contract for a third pillar to cover any possible gaps.

Plan your future with confidence

The third pillar is essential to cover your income in case of disability and to protect your family in case of death. Think about what would happen if, at some point, your family lose your income. Could they continue to pay the mortgage of your home? Could they maintain the same standard of living? Could you still pay for your children's education?These are the questions that need to be answered in order to plan your retirement properly. With a third pillar, you can cover all these events and plan your future with the peace of mind of someone who knows is covered in the right way.

The 3rd pillar and family protection

Ti sei trasferito in Svizzera? Attenzione alla previdenza

Expat-in-Switzerland.jpg

Expat in Switzerland? All you need to know about 3rd pillar.

Choosing between an insurance third pillar or a banking third pillar depends, above all, on the purpose for which we do it.
We can say that the most important difference between a bank and an insurance lies in what is called 'waiver of premium in case of disability'.
This cover, typical of insurance companies, means that in the event of disability, the insurance company pays the premiums in your place until the end of the contract (i.e. until retirement age).
A concrete example: Mr Rossi, aged 30, starts today paying CHF 3,000/year with a banking third pillar, while Mr Bianchi, also aged 30, pays CHF 3,000 with an insurance third pillar. Since there are 35 years to go until retirement, we can say that both should arrive at age 65 with a capital of approx. CHF 105,000 (not counting interest, surpluses, etc.). But what happens if they both become disabled only after, say, 7 years? Mr Rossi, who has paid his banking third pillar for 7 years, will receive CHF 21,000 (plus interest) when he retires.
Mr. Bianchi, on the other hand, who paid his insurance third pillar for 7 years, will receive CHF 105,000 (plus surplus evv) when he retires.
This big difference is produced by the waiver of premium payments. This is why, for those who still have many years ahead of them until retirement, the insurance third pillar, or a mix of insurance and banking third pillar, may be the right choice.

Is it better to have an insurance third pillar or a banking third pillar?

Est-il préférable d'avoir un 3ème pilier d'assurance ou un 3ème pilier bancaire ?

E’ meglio un terzo pilastro assicurativo o uno bancario?

Assicurativo o bancario.jpg

Is it better to have an insurance third pillar or banking third pillar?

home_services_3p.riv

3rd Pillar Specialists

calculator_3p.riv

The answer is yes. The third pillar can be used to pay for the renovation of the primary house. Be careful though, because you can only use capital for certain types of jobs.

Can I use the third pillar to pay my home restoring?

The law provides that, within one year of becoming independent, the capital accumulated in the pension fund can be withdrawn.
To do it, you have to registrate your self as independent at the AHV office.
For further information, do not hesitate to contact us  by clicking here

Can I withdraw my BVG capital to start an independent business?

Certainly, if both are employed in the family, both can make a 3rd pillar (3a) and thus take advantage of a bigger tax advantage, as well as bigger security in case of disability or death.

Can both husband and wife make a third pillar 3a?

Of course yes, almost all life insurance policies, like the 3rd pillar, can be pawned and also serve as a credit instrument. In particular, the third pillar is used for indirect amortization.

Can the 3rd pillar 3a be pawned?

Not working, children and students do not enjoy second pillar covers. This is the reason why, in the event of disability, they are considered "early disabled" and will have a benefit only from the 1st pillar, equal to 133% of the full minimum pension, which today is equivalent to CHF 1562 / month.
Early invalidity is a problem that we do not think about (or do not want to think about), but which has very important repercussions on the life of our children and on the economy of the family in general.
However, there are coverages under the third pillar that solve this problem with very low costs, BUT YOU MUST THINK ABOUT IT..

Did you know that children and students are not well covered for disability?

Who stays at home is the real engine of the family and plays a very important role within it.
Just think for a moment of having to hire a full-time person who will wash, iron, cook, tidy the house, bring children to school and their after-school activities and much more.
This is why it becomes very important to cover a wife/husband who is not employed in case of disability and death.
With a very small premium you can give peace of mind to your family in a very difficult time. Think about it.

Is it worth insuring who is not working?

A special feature of insurance.
In the event of death, the beneficiaries of your third pillar will immediately receive the stipulated capital, without waiting for the division of the inheritance.
Furthermore, if the beneficiaries are the legitimate heirs, they will be entitled to the benefit even if they renounce the inheritance

Third pillar successor benefits

There are many factors to consider when talking about death.
When the source of income is lost, the family must adapt to a new lifestyle, cut costs, evaluate if the current mortgage is still sustainable, or if we can still finance the studies of our children.
With a pension analysis, we can answer all these questions and find solutions quickly.

What consequences would my death have for the family?

Depending on your needs and goals, you will choose the type of third pillar that best suits you.
For example, the third pillar 3a, does not allow major changes to the beneficiary clause as a precise order of beneficiaries is already provided by the law.
If, on the other hand, we take out a free third pillar (3b), we will be able to arrange the order of the beneficiaries as we wish.
During a consultancy interview we will go deeper into this important topic.

What is the better beneficiary clause for me?

Indirect depreciation through the third pillar offers us a double advantage. First: it allows us to accumulate the capital that will be used to pay off the mortgage when you retire, deducting the amount paid every year from taxes. Second: by keeping the debt unchanged until retirement (or mortgage expiration), you will have a greater interest charge, which you can deduct for tax purposes. Overall, this system is generally more advantageous than direct depreciation.

Have you already heard about indirect amortization?

Often and willingly there is the belief that, being married, the spouse automatically has the right to receive a widow's pension in case of death. But is not so.
In fact, in the first pillar (AHV), but also in the second pillar (LPP), the following conditions must be fulfilled in order for your spouse to be entitled to a widow's pension.
1) Having 1 or more children, or
2) Be 45 years old and have been married for at least 5 years.
For this reason it is important to understand your situation well through a social security analysis and, if necessary, to put the right remedies through, for example, a taylored third pillar..

Did you know that being married is not enough to have a widow's pension?

Giving our children the opportunity to study in a prestigious university, perhaps even abroad, is the best contribution we can make to their future. Thinking about it in time is worthwhile. By saving small amounts every year, you will be able to accumulate, without effort, the money necessary for education.

Have you already thought about how to finance your children's studies?

We can't know what our children will do when they grow up, but whatever their dream, we parents can support them with an initial capital.
Using a policy to save a portion of family allowances every month, we will create a capital that can be used, for example, for studies abroad, or to start their own business.
The important thing is to think about it in time

Have you ever thought about using family allowances to create savings for your children?

If the bank has not already thought about it when granting the mortgage, you should think about it. In fact, one of the recurring problems in case of death is the fact that the family finds itself with an important debt, no longer having an income. Thinking about it in time is important!

Have you thought about covering the mortgage in case of death?

Not being subject to the 2nd pillar BVG, in case of disability, the independent worker are entitled only to the benefits of the first pillar.
Reason why, taking out a third pillar to cover the risk of disability could be the right choice.
Of course, before taking out a third pillar it would be appropriate to make a social security analysis.

How is a self-employed worker covered in case of disability?

An invalidity due to illness can have negative effects on family finances because, generally, with the coverage provided by law we are not sufficiently insured. The third pillar allows to fill this gap, giving us the peace of mind to overcome moments of difficulty. Through our social security analysis, you will be able to decide whether or not to include, in your third pillar, the coverage in case of disability.

In case of disability, will I still be able to pay the mortgage?

By law, independent workers are not obliged to join the second pillar but, depending on their professional activity and their family situation, it is possible that the BVG offers excellent advantages in terms of tax and coverage.
A social security analysis will answer all your questions.
For further information please do not hesitate to contact us  by [clicking here](/contacts)

Is better the 2nd pillar, or the 3rd pillar for a self-employed?

Death is a sensitive topic, but one that needs to be discussed as soon as possible. In case of the death of one of the parents (or both), our children would receive the benefits for orphans of the 1st and 2nd pillar, up to the 18th year of age (or 25th if they study). But these benefits are often not enough and leave our children in financial difficulty. With a pension analysis, you can predict possible scenarios and take the necessary measures to offer your children a peaceful future.

Parental death, how do I protect my children?

In the event of bankruptcy, your 3rd pillar insurance is not foreclosed and does not flow into the bankruptcy estate.
An important condition is that the beneficiaries of these contracts are the spouse and the children.
This way your family members are 100% protected.

What happens with the third pillar in case of bankruptcy?

There are many solutions to cover the death and, depending on the type of mortgage and amortization, we can choose a policy with constant capital, or with decreasing capital. For example, if you regularly make amortization, the most sensible thing would be to have a policy where the death capital decrease at the same rate as decrease your debt. During a personal consulting you will find answers to this and other topics.>

What type of policy is used to cover the mortgage in case of death?

Choosing between an insurance 3rd pillar or a banking one, depends, above all, on the purpose with which we do it.
We can say that the most important difference between a bank and an insurance is the "WAIVER OF PREMIUM FOR DISABILITY".
This coverage, typical of insurance, means that in the event of disability, the insurance company pays the premiums for you until the contract expires (that is, until the ordinary age of retirement).
A concrete example: Mr. Rossi, 30 yeras old, starts today to pay CHF 3,000 / year in a third pillar banking account, while Mr. Bianchi, also 30 years old, pays CHF 3,000 with an insurance third pillar. Since both have 35 years to retirement, we can say that both should arrive at 65 years old with a capital of CHF 105,000 (not including interest, surpluses, etc.). But, what if they both become disabled only after, for example, 7 years of payments? Well,Mr. Rossi, who has paid his third pillar for 7 years in a bank account, will receive when he retires CHF 21,000 (plus interest).
Mr. Bianchi instead, who paid his insurance third pillar for 7 years, when he retires will receive CHF 105,000 (plus surplus evv)..
This big difference is produced by the WAIVER OF PREMIUM FOR DISABILITY. This is why, for those who still have many years before retirement, the insurance third pillar, or a mix between insurance and banking, could be the right choice. For further information, do not hesitate to contact us by clicking here.

Is better an insurance 3rd pillar or a banking one?

Can’t find what you are looking for?

newsletter_3p.riv

Keep yourself updated

We do our best to give you the support you deserve. Each consultancy aims at transparency, professionalism and results, more than anything else.

3rd Pillar Specialists

Third Pillar 2023, maximum amounts, taxes and social insurance

Expat in Switzerland: Build your future pension

Is it better to have an insurance third pillar or a banking third pillar?

Quick & useful tips for your Third Pillar

Can’t find what you are looking for?

Do you need more informations?