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Old 24.09.2016, 13:25
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Indirect Amortization Pillar 3B

Apologies if this has been answered previously in another tread but having spent all morning look long for clues including this forum I gave up and thought it is better to ask:

What are the specific advantages of using Pillar 3B (not Pillar 3A) for indirect amortization of a mortgage? And what products are available for this purpose?

Background: I am taking out a mortgage and the Bank is asking me if and how much how much I would like to amortize direct vs indirect. I have decided to opt for the max possible indirect amortization via Pillar 3A. The Bank asked me if I also plan to do more indirect amortization via Pillar 3B? So I am asking myself if it make sense to do more via Pillar 3B? To clarify, I do not have any significant funds existing under Pillar 3B that I could use. So any indirect amortization via Pillar 3B would still be an out-of-pocket payment for me.

I had mistakenly heard that there were some tax benefits of investing via Pillar 3B Insurance products but this I learnt subsequently was not true. So I am and wondering what possible benefit could there be for indirect amortization via Pillar 3B deposits?

If it does makes sense possibly to do so, could anyone advise if there are also any Pillar 3B cash accounts available or only Investment Funds and Insurance policies? Any suggestions or watch-outs to consider using these given my intended purpose?

Thanks!
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Old 27.09.2016, 11:22
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Re: Indirect Amortization Pillar 3B

So I have been investigating the same and the marginal benefits i can see are 2 fold:

1. You can benefit on the differential of returns on the pillar 3B (which in some cases you can or might want to combine with life insurance) vs. the mortgage interest rate
2. The tax offset in "tax on benefit of living in your own house" offset against interest payments.

In the end i decided it was too much faff and too restrictive and decided to directly amortize above the 3a sum.
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Old 27.09.2016, 11:27
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Re: Indirect Amortization Pillar 3B

Pillar 3b products are: Your saving account, the money under the mattress, shares and bonds in your portfolio, funds, real estate, life insurance products, etc, etc.
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Old 27.09.2016, 13:33
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Re: Indirect Amortization Pillar 3B

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Pillar 3b products are: Your saving account, the money under the mattress, shares and bonds in your portfolio, funds, real estate, life insurance products, etc, etc.
Exactly. Even the term "3B" appears to be bogus, being invented by the financial service industry to give it the same apparent weight as the recognised pillars of the formal Swiss retirement savings system which have a defined tax treatment. The so called "3B" is money under your control which the financial institutions would like to see you sink in their life insurances (or other) products and can talk vaguely about preferential tax treatment.
Anyway, with any indirect amortisation, there is the significant risk that after everyone, whose hands your money has passed through, has creamed away and pilfered their share out of it, there is nothing left when the time comes to pay off the mortgage.
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Old 27.09.2016, 18:26
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Re: Indirect Amortization Pillar 3B

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Anyway, with any indirect amortisation, there is the significant risk that after everyone, whose hands your money has passed through, has creamed away and pilfered their share out of it, there is nothing left when the time comes to pay off the mortgage.
Nothing wrong with 3A indirect amortization - you save 20+% on tax, get a miserable 0.5% interest rate on your P3 contribution while paying 1% mortgage interest on the same amount, then pay some 4.5% tax on the accumulated amount 5 years later when you withdraw it to amortize the portion of your mortgage principal. You're still better off than with direct amortization using your after-tax cash.
3B is useless as the contribution is not tax-deductible and that's where the (only) 3A advantage over direct amortization comes from.
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Old 20.12.2020, 12:16
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Re: Indirect Amortization Pillar 3B

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Nothing wrong with 3A indirect amortization - you save 20+% on tax, get a miserable 0.5% interest rate on your P3 contribution while paying 1% mortgage interest on the same amount, then pay some 4.5% tax on the accumulated amount 5 years later when you withdraw it to amortize the portion of your mortgage principal. You're still better off than with direct amortization using your after-tax cash.
3B is useless as the contribution is not tax-deductible and that's where the (only) 3A advantage over direct amortization comes from.
Sorry to dig out old post but very useful read.
I'm discussing with insurance company on mortgage as they offer indirect amortisation without needing to payback the 85% principle.
But keeping 85% mortgage seems a bit dumb even thought interest rate is low now, because withdraw 3a cash accounts always need to pay tax even when retires, so not much value keeping money in 3a cash account?
After getting the tax benefit in the year investing in 3a, seems better withdrawing with a small tax rate to pay back mortgage?
Or am I missing something?
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Old 20.12.2020, 13:00
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Re: Indirect Amortization Pillar 3B

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Sorry to dig out old post but very useful read.
I'm discussing with insurance company on mortgage as they offer indirect amortisation without needing to payback the 85% principle.
But keeping 85% mortgage seems a bit dumb even thought interest rate is low now, because withdraw 3a cash accounts always need to pay tax even when retires, so not much value keeping money in 3a cash account?
After getting the tax benefit in the year investing in 3a, seems better withdrawing with a small tax rate to pay back mortgage?
Or am I missing something?
Why don't you just keep the mortgage at 85% and invest in equities in your 3a?
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Old 20.12.2020, 17:11
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Re: Indirect Amortization Pillar 3B

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Why don't you just keep the mortgage at 85% and invest in equities in your 3a?
How do I invest in equities in 3a? I thought itís either cash, or insurance.
What about fees for equity 3a? Saw someone said quite heavy?
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Old 20.12.2020, 17:19
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Re: Indirect Amortization Pillar 3B

Are you old enough to withdraw from your 3a?

Tom
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Old 20.12.2020, 17:24
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Re: Indirect Amortization Pillar 3B

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How do I invest in equities in 3a? I thought it’s either cash, or insurance.
What about fees for equity 3a? Saw someone said quite heavy?
One option is through your bank. It is not the most cost efficient option and you are very limited in funds you can choose from. Also insurance companies offer fund based options w/o any life insurance attached to it.


Frankly, Selma, and specially Viac offer more choices and freedom.
https://www.finanzdepot.ch/2020/08/2...nden-anbieter/

You can find a lot about Viac here on EF:
Best 3rd pillar account investment possibilities

But, this thread is about pillar 3b. Pillar 3b all non tax preferred savings and investments including but limited to your saving account, the money plucked in your mattress, shares and bonds in your portfolio, funds, real estate, life insurance products, the collection of classic cars, valuable art, gold, diamonds, etc, etc.
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Old 20.12.2020, 17:28
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Re: Indirect Amortization Pillar 3B

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Are you old enough to withdraw from your 3a?

Tom
Not close to retirement, but buying property now so can do it through mortgage
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Old 20.12.2020, 17:29
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Re: Indirect Amortization Pillar 3B

"Pillar 3b" is a nonsense term just meaning "everything else".

Personally I think FINMA should ban it, so people aren't mislead into thinking there are some sort of tax breaks or advantages in something labelled "3b".
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Old 20.12.2020, 17:44
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Re: Indirect Amortization Pillar 3B

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One option is through your bank. It is not the most cost efficient option and you are very limited in funds you can choose from. Also insurance companies offer fund based options w/o any life insurance attached to it.


Frankly, Selma, and specially Viac offer more choices and freedom.
https://www.finanzdepot.ch/2020/08/2...nden-anbieter/

You can find a lot about Viac here on EF:
Best 3rd pillar account investment possibilities

But, this thread is about pillar 3b. Pillar 3b all non tax preferred savings and investments including but limited to your saving account, the money plucked in your mattress, shares and bonds in your portfolio, funds, real estate, life insurance products, the collection of classic cars, valuable art, gold, diamonds, etc, etc.
Thank you, very useful
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Old 20.12.2020, 17:48
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Re: Indirect Amortization Pillar 3B

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Thank you, very useful
Viac used to be considered the market leader but now the consensus is that Finpension are better (
due to:

slightly lower fees
higher % in equities (99 rather than 97)
No fx spread
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Old 20.12.2020, 18:12
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Re: Indirect Amortization Pillar 3B

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Viac used to be considered the market leader but now the consensus is that Finpension are better (
due to:

slightly lower fees
higher % in equities (99 rather than 97)
No fx spread
Good to see more options coming.
Will take a look at this one
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Old 20.12.2020, 18:15
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Re: Indirect Amortization Pillar 3B

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Viac used to be considered the market leader but now the consensus is that Finpension are better (
due to:

slightly lower fees
higher % in equities (99 rather than 97)
No fx spread
Are they also backed by a bank and provide account guarantee?
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