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Old 01.06.2021, 11:11
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pillar 3a life insurance-based pensions, disadvantage if you leave Switzerland?

Many financial advisors have told me about the benefits of their life insurance based pensions in pillar 3a


They key challenge of these pensions is that you have to make the agreed deposit into the pension every year until you retire. If you miss a payment then all your previous deposits can be lost.


The payments are tax deductible and this makes the whole system worthwhile


There is one catch, none of the advisors ever emphasize this: if you leave Switzerland and you send the annual payment into pillar 3a from another country, it will not be tax deductible in the country where you live. As far as I know, no other country recognizes any of the Swiss pension pillars. Most countries only give the tax deduction if you buy a life insurance in that country.


Does anybody have ideas about this? For example:


- do any of the pension providers have a means to shift a pillar 3a insurance-based policy to any other country? For example, AXA is a French company, if a policyholder relocates from Switzerland to France, can they efficiently move their policy to the French system so the policyholder can continue making the annual payment and getting the tax deduction in France?



- some of us who have a Swiss company of our own may be able to use that as a vehicle to pay a salary and remain in scope of Swiss taxes even while working on short projects abroad, people in this situation could potentially continue making the annual contribution every year until they retire, even if they split their time between different countries


- are there any countries that do give the tax deduction for contributions back to a Swiss pillar 3a pension?


- any other ideas about how to benefit from pillar 3a life-based solutions for people who don't know if they will stay in Switzerland?
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Old 01.06.2021, 13:08
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Re: pillar 3a life insurance-based pensions, disadvantage if you leave Switzerland?

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Many financial advisors have told me about the benefits of their life insurance based pensions in pillar 3a
Are you clear what would be the benefit of such a plan to you? These combined products give quite good benefits to the sales person

If you are employed first check whether you need life assurance at all because 2nd pillar usually has life insurance.

If you need life insurance it is usually better to get separate life insurance and third pillar because the costs are much lower this way

If you are looking for the tax saving from 3 pillar the loswest fees are are VIAC, Finpension or Frankly.

With the 3a life insurance you are committed to pay for the duration of the contract, there are early exit penalites and if you move country there will almost certainly not be any tax deduction

With any 3 pillar, watch out if you plan move to another country before retirement because you may have to pay more taxes when you withdraw it than you initially saved in CH. It depends on the bilateral dual tax agreement with each country.

Last edited by jim1; 01.06.2021 at 13:09. Reason: typo
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Old 01.06.2021, 13:11
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Re: pillar 3a life insurance-based pensions, disadvantage if you leave Switzerland?

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Many financial advisors have told me about the benefits of their life insurance based pensions in pillar 3a


They key challenge of these pensions is that you have to make the agreed deposit into the pension every year until you retire. If you miss a payment then all your previous deposits can be lost.


The payments are tax deductible and this makes the whole system worthwhile


There is one catch, none of the advisors ever emphasize this: if you leave Switzerland and you send the annual payment into pillar 3a from another country, it will not be tax deductible in the country where you live. As far as I know, no other country recognizes any of the Swiss pension pillars. Most countries only give the tax deduction if you buy a life insurance in that country.


Does anybody have ideas about this? For example:


- do any of the pension providers have a means to shift a pillar 3a insurance-based policy to any other country? For example, AXA is a French company, if a policyholder relocates from Switzerland to France, can they efficiently move their policy to the French system so the policyholder can continue making the annual payment and getting the tax deduction in France?



- some of us who have a Swiss company of our own may be able to use that as a vehicle to pay a salary and remain in scope of Swiss taxes even while working on short projects abroad, people in this situation could potentially continue making the annual contribution every year until they retire, even if they split their time between different countries


- are there any countries that do give the tax deduction for contributions back to a Swiss pillar 3a pension?


- any other ideas about how to benefit from pillar 3a life-based solutions for people who don't know if they will stay in Switzerland?
RUN RUN RUN fast, this is not a savings / investment product it's an expensive life insurance plan where a couple of years payments go as commission / charges
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Old 01.06.2021, 13:16
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Re: pillar 3a life insurance-based pensions, disadvantage if you leave Switzerland?

The tax advantage comes from pillar 3a, not from it being an insurance product.
In most cases you're far better served with one (or more, up to 5 IIRC) 3a bank account.
And yes, the tax advantage disappears once you emigrate.
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Old 01.06.2021, 13:46
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Re: pillar 3a life insurance-based pensions, disadvantage if you leave Switzerland?

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There is one catch, none of the advisors ever emphasize this: if you leave Switzerland
The scheme has many more downsides that you won't hear from them, because their main interest is just to get you to sign asap and pocket their finder's fee for finding another sucker who signed up. They are not acting in your best interests - especially if you didn't pay for the advice, their only loyalty is to the insurance who pays their commissions.

Last edited by spark; 01.06.2021 at 13:58.
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Old 01.06.2021, 15:25
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Re: pillar 3a life insurance-based pensions, disadvantage if you leave Switzerland?

Yes, I generally agree with the points about not buying the life insurance unless it is really required


In practice, some of the companies offering these policies are also offering an annuity at the end of the term, similar to the automatic conversion of pillar 2 into an annuity. This means you can predict your monthly income in retirement.



For anybody who is underfunded right now, the annuity is an interesting way to guarantee your minimum income level after retirement. But as many people commented, it is really important to check the figures and separate the cost of life insurance from the expected final balance.


As mentioned in another topic, I'm also comparing pillar 2 vs pillar 3a. Pillar 2 may be better because they allow people to take a break, go abroad, come back and pay for missing years all while getting a tax deduction.


The downside with pillar 2 is that everybody pays the risk premiums for spouse and children, even if you have no children or if your children are grown up, you still contribute to the cost of the orphan's pension and similar things.
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Old 01.06.2021, 15:56
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Re: pillar 3a life insurance-based pensions, disadvantage if you leave Switzerland?

I would assume you must be able to get an annuity from life insurance bought outside the 3rd pillar wrapper too
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Old 01.06.2021, 16:04
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Re: pillar 3a life insurance-based pensions, disadvantage if you leave Switzerland?

If you buy the annuity when you retire then they will give you a conversion rate effective on that day in the future. You don't know right now what the rate will be.



If you sign a pillar 2 policy today or if the pillar 3 proposal includes a rate then the rate might be locked in the policy or it may be changed by some future political decision


I don't think anybody knows which of these rates will be better.


But if you just buy the savings plan then you only have half the solution, you have assets but no certainty about the annuity.
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Old 01.06.2021, 16:06
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Re: pillar 3a life insurance-based pensions, disadvantage if you leave Switzerland?

My guess is that AXA won't transfer it between countries.
I have AXA insurance for everything here in Germany, and I've contacted AXA CH to see if I can transfer all of them somehow / get a package deal, and nope, it's not possible (and I even can't get vehicle insurance with AXA because I'll have L permit), those two AXAs are independent entities. Based on that, I assume FR is also standalone one.
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Old 01.06.2021, 16:29
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Re: pillar 3a life insurance-based pensions, disadvantage if you leave Switzerland?

I must confess I never understood why anyone would go in for a 3a life insurance policy, as others have pointed out, you end up tied into the policy with obligation of making payments, come what may. I made my payments into a 3a savings account, principally because of the tax advantages even if the returns weren't that dramatic. You can stop paying into the account whenever you want, for whatever reason. I could never get an insurance salesman to explain what possible advantage there would be for me, compared with a bank savings account.
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Old 01.06.2021, 17:35
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Re: pillar 3a life insurance-based pensions, disadvantage if you leave Switzerland?

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In practice, some of the companies offering these policies are also offering an annuity at the end of the term, similar to the automatic conversion of pillar 2 into an annuity. This means you can predict your monthly income in retirement.

For anybody who is underfunded right now, the annuity is an interesting way to guarantee your minimum income level after retirement. But as many people commented, it is really important to check the figures and separate the cost of life insurance from the expected final balance.
Annuity is not a free lunch and payments will be most certainly proportional to what you had in the account to start with - if it's underfunded, then so proportionately lower will be your annuity payments. Conversion rate would likely be less favorable than pillar 2, because this is private pension - private sector dictates you the rate as opposed to government in case of pillar 2. And also you will be in a weak negotiating position vs a lifetime annuity offer from the free-market. It's going to be take our shitty rate or leave with a sum of money that underperformed the market for decades.

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The downside with pillar 2 is that everybody pays the risk premiums for spouse and children, even if you have no children or if your children are grown up, you still contribute to the cost of the orphan's pension and similar things.
No, not everybody. I most definitely don't.


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As mentioned in another topic, I'm also comparing pillar 2 vs pillar 3a. Pillar 2 may be better because they allow people to take a break, go abroad, come back and pay for missing years all while getting a tax deduction.
You're doing it wrong. While you're out of country your money's just going to rot at 0% interest in CH. Instead you transfer the monies to a fund in schwyz just before leaving, empty out the account the next day and invest it properly, paying just some 4-5% tax in process. Just watch that your new country doesn't accidentally see the payout as income taxing it at 30-50% rates as some do. Take a nice long vacation in some other tax haven country maybe. And once you come back you can restock your pillar 2 as much as you want, backfilling all way back to the age of 25.

Last edited by spark; 01.06.2021 at 17:47.
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