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Old 16.08.2017, 16:21
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Extra payments to pillar 2, or pillar 3a?

Hello,

This is my first time posting so I do apologise if I have missed something after searching through previous posts.

I am employed in Zurich but am under 25 so do not make any Sparpramie contributions to the pillar 2. I've been putting aside a portion of my income each month since I arrived, but am not sure what is best to do with it pension-wise.

I have recently opened a pillar 3a account, but understand that it is also possible to make extramandatory contributions to the pillar 2. Is there a general rule for which one makes more sense, or is this something I would have to talk over with a professional?

Thanks in advance!
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Old 16.08.2017, 17:02
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Re: Extra payments to pillar 2, or pillar 3a?

3a gives you much more flexibility, it makes sense to use that allowance first.

UNLESS - your employer has some sort of matching on pillar 2 contributions, in which case the decision is more finely balanced depending on what that matching is worth.

ps. and tax at source - you would not see the 3a tax benefit if you don't do a tax return, unlike pillar 2 which is done by the employer, I think
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Old 16.08.2017, 17:23
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Re: Extra payments to pillar 2, or pillar 3a?

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3a gives you much more flexibility, it makes sense to use that allowance first.

UNLESS - your employer has some sort of matching on pillar 2 contributions, in which case the decision is more finely balanced depending on what that matching is worth.

ps. and tax at source - you would not see the 3a tax benefit if you don't do a tax return, unlike pillar 2 which is done by the employer, I think
I doubt the OP can make any payments to Pillar II as he is under 25, there are no missing years or underfunding to fill up.
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Old 16.08.2017, 17:56
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Re: Extra payments to pillar 2, or pillar 3a?

The "best" advice, specially at that young age, heavily depends on your future plans. Short, mid, and long term as well. And also how likely you see your self grabbing into the cookie jar just to finance some lavish dreams.

Depending on that stock market, non pillar 3a fund, a standard bank account, or a pillar 3a bank account might be best. What for sure is the very worst, specially if you are young and specially if you have no kids, is any pillar 3a insurance product. Stay away from them as far as you can.
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Old 16.08.2017, 18:04
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Re: Extra payments to pillar 2, or pillar 3a?

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ps. and tax at source - you would not see the 3a tax benefit if you don't do a tax return, unlike pillar 2 which is done by the employer, I think
The canton may offer a specially form to get a tax benefit for 3a payments.
In the Kanton Zurich it is the "Antrag auf Neuveranlagung der Quellensteuer"
https://www.steueramt.zh.ch/internet...kblaetter.html
For a payment in the year 20XX you must fill in the year 20XX form (available around January 20XX+1) and sent it in no later than March 31st 20XX+1.

There will be ZERO refund if you miss the deadline!

Right now the 2016 form is available. Which must have been sent in by March 31 2017. Means the 2016 deadline has passed!
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Old 16.08.2017, 19:40
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Re: Extra payments to pillar 2, or pillar 3a?

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I doubt the OP can make any payments to Pillar II as he is under 25, there are no missing years or underfunding to fill up.
He can still pay in to finance early retirement benefits. Maybe even for missing years before 25 if salary's high enough and fund regulations permit it

But I wouldn't touch pillar 2 even with a long pole, returns are total shit. Unless you're reasonably certain you're going to take the money out soon, then it can a nice way to steal save some tax money. It'll be your only reward, so do the math beforehand.

Pillar 3a is not much better either, fees are usually humongous and capital inefficiently allocated
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Old 16.08.2017, 20:39
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Re: Extra payments to pillar 2, or pillar 3a?

Investment returns might be crap on savings contributions to either pillar 2 and 3a.

Pillar 2 has a minimum interest rate of 1.25%.
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Old 16.08.2017, 20:45
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Re: Extra payments to pillar 2, or pillar 3a?

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But I wouldn't touch pillar 2 even with a long pole, returns are total shit. Unless you're reasonably certain you're going to take the money out soon, then it can a nice way to steal save some tax money. It'll be your only reward, so do the math beforehand.
If you make a Pillar 2 buybacks and afterwards drawdown the money within 3 years of the buyback, the authorities will request reimbursement of the tax saved.

A pillar 2 buyback makes sense if you will stay for the long-term.
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Old 16.08.2017, 21:00
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Re: Extra payments to pillar 2, or pillar 3a?

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A pillar 2 buyback makes sense if you will stay for the long-term.
No it makes sense if you can withdraw the money asap after 3 years minimum holding period. Evey single year afterwards costs you big time in oppurtunity
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Old 16.08.2017, 21:01
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Re: Extra payments to pillar 2, or pillar 3a?

Whatever the case, you're showing great maturity for your age. I didn't give a monkey's about pensions when I was under 25. (Or, indeed, until I was a great deal older. Thank goodness for bitcoin...)
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