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Old 19.03.2011, 10:09
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Best option for an expat Between a 3 Pillar A and B.

Hi all!
Let's resurrect this thread which was dealt with before in the Finance/Banking/Taxation space.

First of all, a real attention has to be put in the choice of the Bank or Insurance Company where your money is going to be invested, the type of the product (as usually, there is great confusion between a normal Investment Plan in financial funds, Investments in 3 Pillar B which is a saving like in normal Banks, and the genuine Life Insurance in the case of a 3 Pillar A). Avoid not to confused by an Agent.

Let's deal with a range of benefits which are attached to each of the two main types of 3 Pillar (A&B):
- 20% Tax deduction: this is common to both 3 A & B (In fact, depending of the situation of each person and their Canton of residence, the rate of the deduction will differ.
- Obligation to contribute or to pay your premium: 3 Pillar B is similar to a Bank saving; that is, you are not obliged to contribute till your retirement. 3 Pillar A is obligatory (at least for the 3 first years - this period can differ in the case of certain Banks). During the first 3 years, if you stop the payment, you loose all your money.
- Low tax rate at the removal of the funds: this is common to both types but more convenient in the case of 3 Pillar A. The rate is very very convenient.
- In the case that you want to leave the country: certain companies nowadays accept you to transfer your 3 Pillar A to an account in the new country where you are planning to settle in. No problems with a 3 Pillar B that can be stopped at any moment.
- Interest rates: these are more advantageous with a 3 Pillar A (an average of 4% depending of the Placement funds).
- In the case of the death of the contributor: a 3 Pillar B will pay what you have contributed; a 3 Pillar A (genuine Life Insurance) will pay the Guaranteed capital plus. (always pay attention while subscribing your 3 Pillar A; as in certain cases, the sum can be guaranteed only in case of death)
- In the case of total Invalidity: 3 Pillar B remains as a normal Bank saving; 3 Pillar A will pay you your premium and at the term of your contract, you will still be paid the Guaranteed capital.
- At the retirement: 3 Pillar A can be paid totally at once or the contributor can choose to receive a monthly payment till the age of 84 (85 for the ladies).
- Please if you are planning to open a 3 Pillar A account and are unsure to be be able to pay your premium till the end, better ask for advise; as it can be unpleasant to quit it before the first 3 years. As I always say, better ask the consequences of the impossibility to pay your premium.

Hope it wasn't too long!!!!!
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Old 19.03.2011, 12:13
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Re: Best option for an expat Between a 3 Pillar A and B.

Unfortunately, your post just adds to the confusion, by making a number of erroneous statements. I suggest you read http://www.postfinance.ch/en/priv/pr...pare/3a-b.html which gives a comprehensive set of accurate information.

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there is great confusion between a normal Investment Plan in financial funds, Investments in 3 Pillar B which is a saving like in normal Banks, and the genuine Life Insurance in the case of a 3 Pillar A).
Firstly pillar 3a and 3b do not primarily define types of investment, they are tax wrappers for investments, with different tax advantages.

Pillar 3a is a sometimes called a 'tied' or 'fixed' policy, with limited per-annum contributions, up-front tax advantages and then tax-imposed restrictions on withdrawal. There are also tax advantages for the growth of your capital within the pillar 3a (interest/financial returns and wealth are not taxed during the life of the 3a). Because of the up-front tax relief your withdrawal will be taxed as income, separately from earned income. The rate will vary according to your canton of residence at the time of withdrawal (other rules apply if you are non-resident at that time). Withdrawal is allowed only after retirement, or for specific reasons (e.g. house purchase, definitive emmigration etc.).

Pillar 3b is a 'free' policy with little or no up-front tax advantage, but it can attract tax benefits during the growth of your capital in the same way. As there were no up-front tax advantages, the withdrawal is tax free and may be taken at any time.

Quoting from the Postfinance site:
"In the case of third pillar provision, we distinguish between fixed (Pillar 3a) retirement savings schemes, which offer tax benefits, and flexible retirement saving schemes (Pillar 3b) which are savings vehicles that do not normally offer tax advantages"

According to the link supplied, Postfinance offer a variety of savings or investment products which can be taken in 3a or 3b form. Initial reading suggests 3a is like a cash savings account, but on further reading you see the value can also be invested in their retirement funds. Other providers offer a wider choice of funds for 3a.

Initially 3b looks like a fund investment, but again it can take the form of a normal savings account (but see insurance element below).

According to Postfinance, their Pillar 3b appears always to be in conjunction with a Life Insurance policy, whereas 3a appears to have this as an option. It is these insurance related policies which attract conditions about minimum number of payments, may not get as much back as you paid if you withdraw early, etc.

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20% Tax deduction: this is common to both 3 A & B (In fact, depending of the situation of each person and their Canton of residence, the rate of the deduction will differ.
Not true. For 3a your contribution (which is capped to 6682 sfr in 2011 for those with pillar 2 BVG, or 20% income for those without) attracts tax relief at your marginal tax rate. In other words, the amount you pay in can be deducted from your gross income and save you the tax you would pay on that top part. This may be anywhere from zero to 30% plus depending on your earnings and income tax rates. There is NO SUCH relief for contributions to 3b. It is NOT TAX EFFICIENT in this regard.

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Obligation to contribute or to pay your premium: 3 Pillar B is similar to a Bank saving; that is, you are not obliged to contribute till your retirement. 3 Pillar A is obligatory (at least for the 3 first years - this period can differ in the case of certain Banks). During the first 3 years, if you stop the payment, you loose all your money.
Not true. As mentioned above, these restrictions do not relate to 3a or 3b, but whether a life insurance element is attached.

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Low tax rate at the removal of the funds: this is common to both types but more convenient in the case of 3 Pillar A. The rate is very very convenient.
Not true. Pillar 3b attracts no income tax at withdrawal as there was no relief provided on the capital you invested.

Pillar 3a withdrawal attracts tax in the form of a special 'non-earned' income. The rate is dependent on your canton of residence and the amount being withdrawn in that year. If you are in a low tax canton and withdraw e.g. 20,000 your tax will be virtually nothing. If you are in a high tax canton and withdraw e.g. 200,000 in a single year you might attract a 10,000 tax bill.

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Interest rates: these are more advantageous with a 3 Pillar A (an average of 4% depending of the Placement funds).
Not true. Whether it is 3a or 3b has no direct effect on the financial return you receive from the investment product. It is the investment product (cash, fund etc.) that will determine this. Cash returns are currently around the 2% mark depending on your provider. Returns on funds can vary hugely.

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In the case of the death of the contributor: a 3 Pillar B will pay what you have contributed; a 3 Pillar A (genuine Life Insurance) will pay the Guaranteed capital plus. (always pay attention while subscribing your 3 Pillar A; as in certain cases, the sum can be guaranteed only in case of death)
Not true. In the case of death a non-insurance related savings account will return you the cash or value of the investment at that time. An insurance related account will offer different payouts according to the terms of the insurance product.

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In the case of total Invalidity: 3 Pillar B remains as a normal Bank saving; 3 Pillar A will pay you your premium and at the term of your contract, you will still be paid the Guaranteed capital.
Again, for insurance based policies this is totally dependent on the insurance aspect of your policy. For a non-insurance based 3a, the value of your savings can be withdrawn in the event of total disability (part of the early withdrawal conditions, akin to house purchase etc.)

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At the retirement: 3 Pillar A can be paid totally at once or the contributor can choose to receive a monthly payment till the age of 84 (85 for the ladies).
I do not think this is true so please check it. AFAIK 3a can be withdrawn as lump sums only, and also I believe there must be a 5-year gap between withdrawal from the same account.

As 3b is a 'free' account, there is no restriction at any time on withdrawal, other than the terms of the insurance or financial product invested in. Accordingly a 3b product might indeed offer a monthly payment option, but it would be product specific.
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Old 19.03.2011, 16:13
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Re: Best option for an expat Between a 3 Pillar A and B.

Will reply you soon!!!!

Have a nice day!
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Old 20.03.2011, 09:03
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Re: Best option for an expat Between a 3 Pillar A and B.

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Unfortunately, your post just adds to the confusion, by making a number of erroneous statements. I suggest you read http://www.postfinance.ch/en/priv/pr...pare/3a-b.html which gives a comprehensive set of accurate information.

I understand your point.

Firstly pillar 3a and 3b do not primarily define types of investment, they are tax wrappers for investments, with different tax advantages.

who says the contrary?

Pillar 3a is a sometimes called a 'tied' or 'fixed' policy, with limited per-annum contributions, up-front tax advantages and then tax-imposed restrictions on withdrawal.

kindly include (Mr/Ms All Savvy) that it's the contributor who decides to make a "tied" or "fixed" policy and thank you for the precision of contribution limit.

There are also tax advantages for the growth of your capital within the pillar 3a (interest/financial returns and wealth are not taxed during the life of the 3a). Because of the up-front tax relief your withdrawal will be taxed as income, separately from earned income. The rate will vary according to your canton of residence at the time of withdrawal (other rules apply if you are non-resident at that time). Withdrawal is allowed only after retirement, or for specific reasons (e.g. house purchase, definitive emmigration etc.).

So what have you added?

Pillar 3b is a 'free' policy with little or no up-front tax advantage, but it can attract tax benefits during the growth of your capital in the same way. As there were no up-front tax advantages, the withdrawal is tax free and may be taken at any time.

Quoting from the Postfinance site:
"In the case of third pillar provision, we distinguish between fixed (Pillar 3a) retirement savings schemes, which offer tax benefits, and flexible retirement saving schemes (Pillar 3b) which are savings vehicles that do not normally offer tax advantages"

According to the link supplied, Postfinance offer a variety of savings or investment products which can be taken in 3a or 3b form. Initial reading suggests 3a is like a cash savings account, but on further reading you see the value can also be invested in their retirement funds. Other providers offer a wider choice of funds for 3a.

In the case of the Postfinance 3a as well as in the case of other providers, there is a choice provided at the subscription of the contract. Thanks for the quote by the way!

Initially 3b looks like a fund investment, but again it can take the form of a normal savings account (but see insurance element below).

According to Postfinance, their Pillar 3b appears always to be in conjunction with a Life Insurance policy, whereas 3a appears to have this as an option. It is these insurance related policies which attract conditions about minimum number of payments, may not get as much back as you paid if you withdraw early, etc.

Please keep in mind the real difference between any 3 a&b made in Banks (are those products life insurances?)and the one with an Insurance policy attached.

Not true. For 3a your contribution (which is capped to 6682 sfr in 2011 for those with pillar 2 BVG, or 20% income for those without) attracts tax relief at your marginal tax rate. In other words, the amount you pay in can be deducted from your gross income and save you the tax you would pay on that top part. This may be anywhere from zero to 30% plus depending on your earnings and income tax rates. There is NO SUCH relief for contributions to 3b. It is NOT TAX EFFICIENT in this regard.

I did an error when I said 20% was in both 3 a&b; the idea was related to a 3a invested in a Bank product and 3a invested in Insurance. I thank you for the correction.



Not true. As mentioned above, these restrictions do not relate to 3a or 3b, but whether a life insurance element is attached.

In fact, in my writing, the consideration was put only on a 3 a&b in insurance (as it's why I called in 3a a genuine life insurance).

Not true. Pillar 3b attracts no income tax at withdrawal as there was no relief provided on the capital you invested.

so does it mean according to you that it is totally "all" tax free? (as I didn't talk of income tax anywhere in my previous post.

Pillar 3a withdrawal attracts tax in the form of a special 'non-earned' income. The rate is dependent on your canton of residence and the amount being withdrawn in that year. If you are in a low tax canton and withdraw e.g. 20,000 your tax will be virtually nothing. If you are in a high tax canton and withdraw e.g. 200,000 in a single year you might attract a 10,000 tax bill.



Not true. Whether it is 3a or 3b has no direct effect on the financial return you receive from the investment product. It is the investment product (cash, fund etc.) that will determine this. Cash returns are currently around the 2% mark depending on your provider. Returns on funds can vary hugely.

In that case, what is the difference you made between 3a ("fixed" and "tied" types) and a normal 3b investment? You are wrong at that level.

Not true. In the case of death a non-insurance related savings account will return you the cash or value of the investment at that time. An insurance related account will offer different payouts according to the terms of the insurance product.

so what will the difference between a 3a and a 3b both made in Insurance?

Again, for insurance based policies this is totally dependent on the insurance aspect of your policy. For a non-insurance based 3a, the value of your savings can be withdrawn in the event of total disability (part of the early withdrawal conditions, akin to house purchase etc.)

In that case, your non-insurance based 3a is non thing different than a normal bank account. Please keep in mind what I called the "genuine life insurance" and other types!


I do not think this is true so please check it. AFAIK 3a can be withdrawn as lump sums only, and also I believe there must be a 5-year gap between withdrawal from the same account.

Have a look at Generali products for example when it comes to 3a withdrawal modalities!

As 3b is a 'free' account, there is no restriction at any time on withdrawal, other than the terms of the insurance or financial product invested in. Accordingly a 3b product might indeed offer a monthly payment option, but it would be product specific.
Not true to repeat your words; both 3 a&b can be withdrawn monthly!

Have a great day!
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Old 20.03.2011, 09:35
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Re: Best option for an expat Between a 3 Pillar A and B.

Stan4 - I'm sorry I don't intend to go through, find, pickup and reply to each of your comments hidden in that quote. In fact many of your comments are non sequitur. It is quite clear you have not really understood my post (apologies if it is not clear enough), nor the post finance link (they can make their own apologies for lack of clarity, but it's a better description than I've seen elsewhere).

I would love to check out your source, which although you provide no links appears to be Generali, but their website unfortunately is down.
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Old 20.03.2011, 09:58
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Re: Best option for an expat Between a 3 Pillar A and B.

HI Jaudi!

As I already said in my post yesterday, it's always a pleasure to be corrected when someone say something unclear in the Forum.I really don't intend to "fight in posting" with you.
As you said, It's unfortunate that the Generali website is down today; let's hope that it will up tomorrow.
May I only recall your attention concerning a 3 a&b products; they are originally "(Life)Insurance" based even if they are becoming more and more usual in the Bank sector, if you need clear informations you will better look at Insurances websites. though, I have to admit that they have a huge variety of those products.
We will definitely meet at once and share ideas when we will find some spare time.

Wish you a great day!
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Old 21.03.2011, 20:58
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Re: Best option for an expat Between a 3 Pillar A and B.

Stan4

Your assertion "concerning a 3 a&b products; they are originally "(Life)Insurance" based even if they are becoming more and more usual in the Bank sector"

Well, I can't argue with that as I have not studied the history of pillar 3. However, I can tell you for the 10 years I have been in Switzerland, the cash-savings type of 3a with no insurance has been 'the standard' account that most people I have come across have been aware of. Anything linked to insurance is usually considered 'more complex' and avoided.

As for the Generali website, I have now been able to connect. I fail to see (on the German pages) any significant difference from the definitions of 3a I gave - indeed I believe they support what I said rather than the descriptions you gave. BTW, I find no mention of 3b at all !

I'm sorry, but I don't wish to discuss further unless you can provide some direct links to back up your assertions.
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Old 23.03.2011, 07:34
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Re: Best option for an expat Between a 3 Pillar A and B.

I will be back to you soon.
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Old 23.03.2011, 07:58
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Re: Best option for an expat Between a 3 Pillar A and B.

Withdraw 3a pillar monthly?!?

Sorry but every single banker and tax advisor I have spoken to has indicated that 3a pillar can only be drawn on for mortgage payments, at retirement (in one lump sum, hence important to have lots of smaller accounts rather than one large one) and on leaving the country (emigration rather than holiday, of course!).

Might I ask what your expertise is in this area?
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Old 24.03.2011, 10:34
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Re: Best option for an expat Between a 3 Pillar A and B.

The only thing you have to do is to make an arrangement at the term of your contract (that is at the retirement) to be paid monthly.
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Old 25.03.2011, 07:31
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Re: Best option for an expat Between a 3 Pillar A and B.

Stan4

It is common practice to open a whole set of different 3a accounts, rather than pay all into a single account. The reason ? At retirement the saver will usually want to draw down some value each year to supplement his/her pension income. The rules of 3a accounts do not allow withdrawals from the same account within a 5 year period. So, the norm is to take from account 1 in year 1, account 2 in year 2 etc. In the sixth year you can again withdraw from what is left in account 1 and start the cycle again.

Now, I guess what you are suggesting is that you have found a product which will withdraw the full amount in year 1 and place it into a normal savings/bank account, from which it can be paid monthly. That is fine, except that if your account holds a lot you will receive a sizeable tax bill in year 1, rather than almost nothing per year by the normal method.

Again, rather than constantly making assertions that people disagree with, please provide a link to your source of information. Then we can all be equally well educated.
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Old 07.08.2018, 15:31
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Re: Best option for an expat Between a 3 Pillar A and B.

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Withdraw 3a pillar monthly?!?

Sorry but every single banker and tax advisor I have spoken to has indicated that 3a pillar can only be drawn on for mortgage payments, at retirement (in one lump sum, hence important to have lots of smaller accounts rather than one large one) and on leaving the country (emigration rather than holiday, of course!).

Might I ask what your expertise is in this area?

HI

How much is it taxed when withdrawal is made while leaving Switzerland.
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Old 07.08.2018, 16:38
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Re: Best option for an expat Between a 3 Pillar A and B.

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HI

How much is it taxed when withdrawal is made while leaving Switzerland.
As a rule of thumb: Pillar 3a and 2 withdraw tax is around a fifth what the same amount would be taxed if it is taxed as income. But that may vary from canton to canton. For ex. Geneva has a pretty high income tax but a highly reduced payout tax.

Same rate apply for withdraw tax regardless of reason be it for real estate, retirement, or leaving the country.

It will be taxed at source in case you are taxed at source or if you are abroad at time of payout. Source is the canton where the institute has it domicile. For ex. PostFinance is located in Bern.

Here a handy calculator which uses normal taxation. Tax at source is similar, which means the calculator give you a ball park figure in such a situation.
https://www.postfinance.ch/en/privat...m-payment.html

WARNING: The initial post of this thread has many, many wrongs. See reply by jaudi.
Once again. Pillar 3a can be life insurance or bank account based. If insurance based it might tie you in for a very long time and might have severe early draw back penalties! Be careful, read AND understand (!) the fine print before you sign up. Only Pillar 3a has a tax advantage. Pillar 3b on the other hand is any other retirement saving which is not tax preferred, be it as simple as the money in your piggy bank, crypto currency, the valuable Picasso on your wall, a non Swiss tax preferred life insurance or non Swiss tax preferred pension schemes like a US 401(k).

For an more active and updated thread see 3rd Pillar Pension Fund
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