Third Pillar retirement savings

Switzerland has a comprehensive system of citizens’ pension and personal use funds that is predominantly based on three pillars, each of which pertains to different aspects, but all of these are meant to deliver a more secure resort for individuals living and working in the country.

While the first and second pillar together protect against loss of income, the third pillar is meant to provide tax relief and benefits for when people retire.

People who pay tax and have a pension fund at their disposal can pay larger amounts into their retirement accounts, while others have the option of saving up to 20% of the yearly remuneration through this mechanism.

Withdrawing from the Third Pillar

Individuals contributing to the third pillar in Switzerland have the option to make withdrawals before they enter their retirement life, but this is limited to certain purposes. 

The list includes setting up a commercial entity, buying property to live in, or to move abroad on a permanent basis. The other option is to obtain these funds when someone cannot work.

In most cases, the pension funds can be accessed five years preceding the retirement age, and if someone chooses to continue working beyond this point, they have to obtain the full amount within five years after this point.

For a better idea, you should contact the third pillar provider and find out about the amount of fund available to you, and what conditions apply in case you decide to make full or partial withdrawals.

In cases where the withdrawal takes place before reaching the retirement age, taxes applicable will be lower than those that pertain to your income.

Third Pillar advantages

Avid planning and consultation with regards to your third pillar savings can give you an edge in the long-term, and position you to take advantage of the facilities attached with it better.

One of the most noteworthy aspects of the third pillar system is that none of these funds can be taxed, unless they are withdrawn, and the interest you are able to accumulate on this money need not be declared for the 3a savings or investment accounts, and insurance policy. 

In addition, the money that you contribute to your third pillar fund is capable of being subtracted from your taxable income, which means the more you contribute, the more you are in a position to benefit from lower taxes.

Individuals could chose to operate multiple 3a accounts which has its own basket of advantages, on top of the fact that it will prevent you from accumulating too much within a small timeframe, and therefore become subject to a higher tax rate.

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