Introduction
When retirement in Switzerland comes up, attention naturally turns to the AVS and the LPP 2nd pillar. But a third pillar exists, and it is voluntary: the famous 3rd pillar, designed to top up the first two.
This pillar is often presented as a retirement savings product with a tax advantage, which is partly what it is.
But the reality is far broader: it can be used to prepare a property project, to protect your family, to pass on capital, or to optimise your tax position.
You still have to choose the right formula: 3A or 3B, bank or insurance, short or long contract, with or without death cover… And above all, it has to fit into a consistent strategy.
Here is a guide to understand, compare, and make the most of everything the 3rd pillar can do.
What is the 3rd pillar?
The 3rd pillar is an integral part of the Swiss pension system.
It rests on a simple principle: letting Swiss residents top up their retirement voluntarily, while benefiting from favourable tax treatment.
There are two main versions:
The 3rd pillar A is the most common. It is governed by law and intended for retirement (or for certain specific projects). It is tax deductible up to annual ceilings.
The 3rd pillar B, less widely used, allows completely free saving, but without systematic tax advantages (this varies from canton to canton). It is closer to a classic life insurance policy.
| Type | Name | Particular feature |
|---|---|---|
| 3rd pillar A | “tied” | Tax deductible, but regulated |
| 3rd pillar B | “free” | More flexible, but little or not deductible (except the cantons of Geneva and Fribourg) |
How it works: 3rd pillar A vs B
3rd pillar A – Tied pension provision
- Payments are deductible from taxable income, up to an annual ceiling
- The savings are locked until five years before the legal retirement age
- Early withdrawals are possible in certain specific cases: buying a main residence, starting a business, moving abroad, disability
| Status | 2024 ceiling |
|---|---|
| Employee who is a member of the 2nd pillar | 7 258 CHF/year |
| Self-employed person without an LPP or employee who is not a member of the 2nd pillar | Up to 20% of net income (max. 35 280 CHF/year) |
3rd pillar B – Free pension provision
- No payment ceiling
- Withdrawal possible at any time (or according to the terms of the contract)
- Limited tax advantage (except in certain cantons)
- Useful in a context of family protection or estate planning.
Bank or insurance: which should you choose?
In short
- A 3rd pillar with a bank is a savings tool: flexible, dynamic, but with no insurance cover.
- A 3rd pillar with an insurer is a pension tool: more rigid, but offering a secure framework that can be passed on.
The ideal? Match the channel to the objective: retirement savings, property project, death cover, tax optimisation, and so on.
| Length of the contract | Bank | Insurance |
|---|---|---|
| Guaranteed capital | No | Yes (depending on the contract) |
| Variable return | Yes (funds, equities) | No (guaranteed or mixed-rate products, also possible in Equities/Funds) |
| Death protection | No | Yes (included or optional) |
| Flexibility of payments | Yes | No (contractual term imposed) |
| Cover in the event of incapacity for work or disability | No | Yes (included or optional) |
Need personalised support?
The AVS (Swiss state pension, 1st pillar) is a fundamental pillar of the Swiss system, but it is not enough to guarantee a comfortable retirement. A good retirement strategy rests on planning ahead, contributing regularly, making the pillars work together and reading your entitlements correctly.
At WYP Consulting, we support you in choosing and structuring your 3rd pillar:
- Help comparing a bank contract with an insurance contract
- Optimisation of the deductible tax ceiling
- Choice of the right vehicle depending on your horizon and your situation (Swiss resident or cross-border worker)
- Planning the exit: taxation, retirement, property project, passing on wealth
Book an appointment with a WYP Consulting adviser
A full review of your situation, with no commitment..
