What is the Third Pillar?
Third pillar, its role in the Swiss pension system
The third pillar is one of the components of the Swiss pension system, together with the first and second pillars. The first pillar represents the state pension, it is mandatory for anyone residing in Switzerland, and is composed of AHV (Old Age and Survivors Insurance), IV (Disability Insurance) and IC (Loss of Earnings Compensation) and aims to guarantee a vital minimum . The second pillar represents the occupational pension and is made up of the LPP, insurance against professional and non-occupational accidents, daily allowance insurance in the event of illness and vested benefits institutions. In the collective ideal, it should be able to keep the standard of living of the beneficiary unchanged compared to when he worked. But the reality is very different in that, between the first and second pillar, those who have all the contributions would retire with about 60% of their last income. This is why the third pillar is worthwhile and highly recommended.
The third pillar represents the private pension
The third pillar is not mandatory and it will be up to the individual to choose whether to take it out with a bank or insurance. It is a safety buffer for the future and also for the present. In the event of death or disability, in fact, those who subscribe a 3rd pillar could have an income for themselves and for the family. So, is subscribe a third pillar convenient? Absolutely yes. With the 3rd pillar, the gaps in the mandatory social security system can be filled. More and more people decide to subscribe one, in view of the advanced age period (knowing, however, that they can benefit from it in the event of life changes such as buying a house, moving abroad or starting an independent business).
3A and 3B, the different types of third pillar
The third pillar is divided into pillar 3a and pillar 3b. There are many choices, adaptable to everyone's needs. Having the third pillar also allows you to save from taxes. If the first and second pillars are mandatory, the third is a choice that is however advisable to implement. If you opt for the "tied" 3a pillar, you should know that the money will be restricted and only in some cases, such as those mentioned, can it be withdrawn in advance. If you include cover such as lump sum death benefit or disability pension when you subscribe the third pillar, you and your family will have a financial coverage in a very dificult situation. Therefore, subscribe a third pillar is very important for both employees and self-employed persons. The various forms make it possible to set aside capital according to availability and there are also maximum limits imposed by law. For example, in 2022, an employee who chooses to have a 3a plan can pay a maximum of 6'883 francs annually. For the self-employed, on the other hand, the maximum is equal to 20% of income, but not exceeding 34,128 francs per year. There are no maximums for the 3B pillar plan.
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Banking or insurance Third Pillar? The difference comes in the event of disability
A tied 3rd pillar can be stipulated with an insurance company or with a bank. What is better? The key difference lies in the “waiver of premiums in case of disability” coverage. If you choose an insurance, in the unfortunate hypothesis of disability, even partial, the company itself will pay the premiums in place of the insured, up to the time of his retirement. The same does not happen with the bank, so when you retire you will only receive what has been paid.
Insurance 3rd pillar, how does it work?
The insurance 3rd pillar is, in fact, a life insurance with accumulation of capital, with a financial instrument inside, such as investment funds, index, certificates, etc. The operation is very simple, by paying a monthly premium throughout your working life, you will accumulate a capital that will be paid to you at retirement age. Each product has its own characteristics. There are products with or without capital guarantee, which focus more on performance, and others that focus on safety. But the choice of a product rather than another must be made, above all, on the basis of the specificity and uniqueness of each person. It must be said that there is no better or worse product than the others, but yes, there are products that respond greater or lesser to the needs of individual customers. Because the third pillar must be made to measure and after a careful analysis of the existing roofs. In this way, every possible scenario can be foreseen and, if necessary, include a coverage in the event of death and / or disability to protect you and your family