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Old 17.07.2021, 15:03
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Third pillars

Hi all.

Can someone briefly describe how a third pillar works in Switzerland?

Should I go to a bank or insurance company.

Thank you.

Best regards,

Nick.
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  #2  
Old 17.07.2021, 16:24
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Re: Third pillars

Disclaimer: I'm new in town, this post may contain incorrect information.

There's Pillar 3a and 3b. I only know 3a and was told to ignore 3b when I moved here. If you're from the US, this is like your IRA. Tax deductible retirement savings contributions managed by private institutions.

Specifically Pillar 3a is accessible through any financial institution that provides it. But you're capped at CHF 6883 contributions for this year. You can have various accounts but the aggregated contributions cannot exceed the cap.

Banks, insurance and dedicated Pillar 3a companies are around for you to sign up for an account with.

Traditionally banks and insurance that offer it don't really let you invest in anything, and the interest rates they give are abysmal. So I personally use one of the newfangled companies out there that allow you to invest in the stock market through index funds:

https://viac.ch/en/
https://finpension.ch/en/
https://www.frankly.ch/en/home.html
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  #3  
Old 19.07.2021, 10:09
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Re: Third pillars

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Hi all.

Can someone briefly describe how a third pillar works in Switzerland?

Should I go to a bank or insurance company.

Thank you.

Best regards,

Nick.
You can invest 6800 something which is taken off your taxable income. It's taxable on the way out (retirement, buying a house or leaving Switzerland), but at a much reduced rate (single figure %).

If you earn below 120k, you'll have to fill in a tax form to get the money back. This is normally not required as a foreigner. Exceptions are if you married to someone earning over 120k, or is Swiss, or has a C permit.

General advice on here is to use finpension or viac, and to avoid the insurance companies like the plague.
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Old 19.07.2021, 10:40
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Re: Third pillars

Note: If one is also a US tax payer a 3a is of no benefit. The contribution will still be US taxable. In the end one will pay full US tax now and then on distribution the CH tax.
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Old 19.07.2021, 15:32
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Re: Third pillars

If you are employed, only 3a accounts are applicable. I've never understood the point of a 3a insurance policy, as you get tied in until retirement. A 3a bank account is nothing more than an ordinary savings account with tax benefits and if you don't pay in one year, it has few consequences (except that obviously you won't get the tax deduction for that year).
It's recommended to open more than one 3a account, again for tax reasons when you close them. The tax applied goes up exponentially, so try and keep the total to less than about 50k CHF per account. Once you get there, open a new account and then start closing them, one per year, once you get to 60.
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Old 19.07.2021, 15:44
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Re: Third pillars

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If you are employed, only 3a accounts are applicable. I've never understood the point of a 3a insurance policy, as you get tied in until retirement. A 3a bank account is nothing more than an ordinary savings account with tax benefits and if you don't pay in one year, it has few consequences (except that obviously you won't get the tax deduction for that year).
It's recommended to open more than one 3a account, again for tax reasons when you close them. The tax applied goes up exponentially, so try and keep the total to less than about 50k CHF per account. Once you get there, open a new account and then start closing them, one per year, once you get to 60.
I think the correct amount of 3a accounts is 5 (with equal capital in each), as you have 5 years in which you can close them.
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Old 19.07.2021, 16:53
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Re: Third pillars

It will probably be possible soon for employees to pay in for past years they didn't pay into 3a yet. IIRC the maximum applies to those born in the early '60ies, the maximum is 200-250k (the sum of the yearly maximum pay-in).

As it looks like, you'll be able to buy up to 31k (the yearly maximum for someone without pillar 2) every five years.

This is work in progress and may be subject to change.
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Old 19.07.2021, 17:34
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Re: Third pillars

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It will probably be possible soon for employees to pay in for past years they didn't pay into 3a yet. IIRC the maximum applies to those born in the early '60ies, the maximum is 200-250k (the sum of the yearly maximum pay-in).

As it looks like, you'll be able to buy up to 31k (the yearly maximum for someone without pillar 2) every five years.

This is work in progress and may be subject to change.
Would expats be able to backpay years before they arrived in Switzerland?
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Old 19.07.2021, 17:40
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Re: Third pillars

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Would expats be able to backpay years before they arrived in Switzerland?
I have the same question!
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Old 19.07.2021, 19:30
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Re: Third pillars

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It will probably be possible soon for employees to pay in for past years they didn't pay into 3a yet. IIRC the maximum applies to those born in the early '60ies, the maximum is 200-250k (the sum of the yearly maximum pay-in).

As it looks like, you'll be able to buy up to 31k (the yearly maximum for someone without pillar 2) every five years.

This is work in progress and may be subject to change.
Where to watch for such news?
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Old 19.07.2021, 20:55
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Re: Third pillars

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Where to watch for such news?
To answer my own earlier question on whether expats can pay - the answer appears to be probably yes (or at least you didn't need to be working in Switzerland in those earlier years - not clear about residence):

From finpension - https://finpension.ch/en/is-it-possi...trospectively/

Political proposal by Councillor of States Ettlin wants to enable retrospective 3a purchase

Erich Ettlin, representative of the Canton of Obwalden in the Council of States, submitted a motion (DE, FR, IT) on 19 June 2019 calling for this rule to be changed. He wants subsequent purchases to be possible in pillar 3a as well. He proposes the following rules:

You must have earned income subject to AHV at the time of the subsequent 3a purchase.

No income from employment subject to AHV is required for earlier years. It is therefore also possible to make a retrospective payment for a year without earned income.

A retrospective 3a purchase is only possible every five years.

A retrospective 3a purchase is limited to the large 3a deduction of currently CHF 34,416 per case.

All advance withdrawals for home ownership are deducted from the purchase potential.

In the year of purchase, one should be able to make the ordinary 3a deposit in addition to the purchase and deduct it for tax purposes.
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Old 20.07.2021, 22:15
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Re: Third pillars

So you can just stop paying into the fund when it reaches 50K, open another one and let the original account sit there until your 60 something?
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Old 20.07.2021, 23:23
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Re: Third pillars

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So you can just stop paying into the fund when it reaches 50K, open another one and let the original account sit there until your 60 something?
Maybe, maybe not (more like, switch at 20k). An alternative is to open 5 accounts and pay into the smallest one, as you may want (should, aka would be well advised if you did) invest it, so each balance may grow differently.
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Old 21.07.2021, 09:40
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Re: Third pillars

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Note: If one is also a US tax payer a 3a is of no benefit. The contribution will still be US taxable. In the end one will pay full US tax now and then on distribution the CH tax.
I believe if you have left CH you could reclaim the withholding tax & choose to pay just US tax which has already been paid, other than on the last years interest.
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