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Third Pillar
Third Pillar
What will your standard of living be once you reach retirement age?
Can the third pillar also be convenient for planning the purchase of a house or starting your own business?
We answer your questions.
What will your income be?
The Swiss pension system: The Swiss pension system is based on three pillars. State, professional and private. The first pillar is mandatory and includes: old age and survivors insurance (AVS); disability insurance (AI); complementary services (PC); unemployment insurance (AD); Maternity insurance (AM) and compensation for loss of earnings during military service (IPG). Financing is done through the pay-as-you-go system. Active people finance the pensions of those who are already retired and receive AVS. The contributory obligation for workers begins on 1 January of the year in which they turn 18. People who do not carry out a gainful activity are also subject to the contribution obligation, starting from 1 January of the year in which they turn 21 until they reach ordinary retirement age. If the spouse who is gainfully employed pays contributions corresponding to at least half the double amount of the minimum amount, the contributions of a spouse who is not gainfully employed are considered paid. The years of unpaid contributions may lead to a reduction in the AVS or AI pension. Once you reach retirement age, the AVS pension can vary from a minimum of 1,185 francs and a maximum of 2,370 francs per month for singles. Married couples together receive a monthly income of 2,370 to 3,555 francs. Since this is a generational pact, the generation that contributes today will in the future depend on the next to do the same. This is why discussions continue to rage about whether the next generation will be able to finance the growing number of pensioners due to increasing life expectancy. The second pillar is occupational pension provision. (Mainly BVG and LAI)The occupational pension supplements the AVS. Together, the AVS and the Pension Fund (LPP) should enable the maintenance of the usual standard of living after retirement. It is not mandatory for all persons who are not gainfully employed, for self-employed workers and for employees with a fixed-term employment contract lasting a maximum of three months. The third pillar is optional in Switzerland: we are therefore talking about voluntary individual pension provision. However, it is essential to fill the pension gaps of the first and second pillars. It can be tied (pillar 3a) or free (pillar 3b). 3a (tied individual pension) has a maximum limit determined by the Federal Social Insurance Office (currently 6,826 Chf for employees and 34,128 for self-employed); it is deductible from taxable income. Since it is tied, it can only be withdrawn in some cases: for the purchase or construction of a home, to leave Switzerland permanently, or to start an independent economic activity. Pillar 3b (untied individual pension) Being untied, the amounts can be paid without limitations and are not deductible. At the time of withdrawal the amount has no tax penalties. Why is it worth saving with the 3rd pillar as soon as possible? The third pillar has several advantages: the Accumulation of wealth is favored by taxes from the state and private pensions can also be used to cover the risks of disability and death. The earlier it is subscribed, the more capital is accumulated, thanks to the compound interest effect. It is therefore advisable to secure old age early with an additional pillar. Contact us for a personalized insurance consultation, completely free of charge, where we will evaluate your situation with all the possible variations, carefully evaluating the various opportunities and needs.
