Third pillar: investment or welfare?


Third pillar: investment or welfare?

The uncertain future, and the hopes and fears that accompany it, are universal feelings that bind us all, regardless of our geographical location or social status. 
In Switzerland, a nation known for its economic stability and well-structured welfare system, the subject of financial future is central to many people. 
The third pillar, a key component of the pension system, plays a crucial role in shaping our financial future. However, it is often misunderstood as simply an investment tool, neglecting its fundamental role as a pillar of retirement planning. 

Is it correct to think that opening an investment account (bank or app) is doing "retirement planning"?

People often confuse the concept of investment with that of pension plan, but let's clarify by starting with the definition of pension plan.
According to the dictionary, a provident is defined as "A quality of one who takes precautions, protects himself in time against possible future difficulties."
And when we think about our income, these "possible future difficulties" are:

So, saving and investing are only one part of the concept of retirement planning, but in order for them to make sense, we need to accompany them with adequate risk coverage.
This "combination" of savings and risk coverage is found in the Insurance Third Pillar.

Pension provision as a fundamental basis

Pension provision is more than just a financial investment. It is the safety net that protects us from the uncertainties of the future. Pension provision is not only about building retirement capital, but also about protecting against unforeseen events such as serious illness, disability or death. When we consider the third pillar, we need to take this broader perspective into account and understand its crucial role in our overall financial security.

Invest yes, but with awareness: the importance of insurance coverage

When planning for the future, it is essential to invest with awareness. This means not only focusing on growing our wealth, but also making sure we have the coverage we need to protect ourselves from the unexpected. 
Insurance policies that cover events such as loss of earnings are core elements of a solid retirement planning strategy. 
Integrating these coverages in the context of the third pillar is critical to ensuring complete and lasting financial security.

Case study:

Mr. Rossi, age 30, starts today paying CHF 3,000/year into a third-pillar bank, while Mr. Bianchi, also age 30, pays CHF 3,000 into a third-pillar insurance scheme. 
Since they are 35 years away from 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 would happen if they both become disabled only after, say, 7 years? 
Mr. Rossi, who has been paying into his third pillar bank for 7 years, will receive CHF 21,000 (plus evv interest) when he retires. 
Mr. Bianchi, on the other hand, who paid his third insurance pillar for 7 years, will receive CHF 105,000 (plus evv surplus) when he retires. 
This is the big difference produced by the waiver of premium payment present in an insurance third pillar.


The third pillar in Switzerland represents more than just an investment tool. It is the foundation upon which our future financial security is built, offering both the possibility of realizing our dreams and protection from life's uncertainties. 
It is important to embrace a broader view of retirement planning and invest with awareness, making sure we have the insurance coverage we need to deal with any unforeseen events along the way. 
In this way, we can look to the future with confidence and security, knowing that we have built a solid foundation we can rely on. 
Therefore, reducing Pillar 3 to a mere investment tool is a serious mistake that can have major consequences for our future well-being.
So, in a few words, "bank" or "insurance"? If we are talking about retirement planning, and you want to look to the future without worries, insurance is certainly for you.

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