Pillar 3: Bank or insurance company – which is better?

The right solution for your savings and pension goals.

Private pension provision (Pillar 3) in Switzerland consists of two parts: Restricted pension savings (Pillar 3a) and unrestricted pension savings (Pillar 3b).Solutions from banks and insurance companies are available for both.

But how do the offers differ and which solution suits your individual needs? We give you a comprehensive overview.

Comparing banks and insurance companies

Banks

Savings account or fund solution 3a/3b

Insurance companies

Pillar 3a/3b pension policy, e.g. AXA’s SmartFlex pension plan

Pillar 3 with a bank or an insurance company – what are the differences?

Bank solutions and insurance policies differ mainly in terms of security, flexibility, and tax treatment. Both can secure your standard of living in retirement. Under Pillar 3b, bank solutions offer no tax advantages, while with insurance solutions, the earnings can remain tax-free. Which pension solution is right for you depends on your personal needs.

A comparison of pension provisions: bank and insurer

	BANK (Savings account)	BANK (Fund solution)	INSURANCE (AXA SmartFlex pension plan)
Return opportunities	No	Yes, Return opportunities thanks to equities and other asset classes	Yes, return-oriented capital: Return opportunities thanks to equities
Interest	Negative interest possible	No	No negative interest on the safety capital fix (negative interest possible on the safety capital flex)
Customer investment risk	No	Yes	No, for safety capital Yes, for return-oriented capital
Insurance coverage	No	No	Yes, risk protection, e.g. in the event of death (lump sum) or incapacity for work (pension or exemption from premiums)
Security in the event of bank or life insurance company bankruptcy	Bank account (3b): Protected up to CHF 100,000 Bank account (3a): Privileged in second creditor class (not protected) Fund investment: Protected Securities custody account: Protected	Yes, to the extent of the current market value of the fund units	Yes, contractual claims to 100% of the contract balance are legally protected

Pillar 3a: What investment opportunities do I have with banks?

At a bank, there are basically two options available to you in Pillar 3a: A traditional pension account or a securities account. Banks manage around two thirds of all Pillar 3a funds in Switzerland. The best option for you depends above all on your investment horizon and risk tolerance.

Pension account

A pension account is the secure and straightforward way of systematically saving for retirement. The opening is easy and often possible directly online. You remain flexible with the amounts, receive interest, and save on taxes. However, you should note that interest rates are currently at a low level and, depending on the bank, are sometimes well below 1%.

Pension provision with securities

Pension provision with securities is a good idea if you want to focus on higher returns. Instead of simply paying interest, your money is invested in funds or securities, allowing you to combine investments and pension provision flexibly – sustainable investments can also be included if you wish. Over the long term, the returns on Pillar 3a savings accounts are lower than those on equity-heavy investments such as 3a retirement funds. In exchange for the greater return opportunities, you are taking a higher risk. This option is therefore particularly suitable for long-term pension provision, where short-term fluctuations can be balanced out again.

Pillar 3a: What investment options do I have with insurance?

With insurance, you combine pension provision with additional risk coverage, such as disability or death. Insurance products also promote regular saving, while banking solutions generally offer more flexibility. Here, too, you can choose between a classic and a unit-linked solution, or even combine both approaches.

Pension policy (classic)

The classic pension policy combines risk coverage with guaranteed retirement capital. You will receive a guaranteed interest rate on your deposits. Surplus participation may be added depending on the insurance’s operating result. Many policies also offer flexibility when it comes to contributions, for example through premium breaks or flexible payments. This way you can plan your savings and you’re covered at the same time.

Unit-linked pension policy

The unit-linked pension policy combines risk protection with a securities investment and therefore offers higher return opportunities than the classic option. However, these opportunities are countered by a greater risk, as losses are possible. This is why guaranteed minimum capital is often included as protection that guarantees you a certain amount. However, this protection comes at a price and entails additional costs.

Hybrid pension policy (combined form)

The hybrid pension policy combines the security of the traditional solution with the return opportunities of the unit-linked option. Part of your premium goes into security-oriented capital with guaranteed interest, the other into a fund investment with higher return opportunities. You decide for yourself how much weight to give to each of these two components and what risks you’re willing to take in exchange for a certain return. However, the fund unit is exposed to greater risk as it is exposed to fluctuations in value, whereas the safety-oriented capital is not subject to market fluctuations.

Make targeted provision in Pillar 3 with SmartFlex

The different versions in detail

The following comparison shows the advantages of Pillar 3 with a bank or insurance company – and where the disadvantages lie.

Bank

Securities custody account (3a/3b) remains protected in the event of the bank’s bankruptcy.
Pillar 3b bank account protected up to CHF 100,000 by deposit insurance. 3a assets up to CHF 100,000 are privileged in the event of the bank’s bankruptcy (second creditor class).
Fund solution opens up return opportunities via equities and bonds
No payment obligation, deposits are freely configurable

Savings account: Low or even negative interest rates, limited return opportunities and, depending on the bank, a closure fee when withdrawing money.
Fund solution: Price risk
Pillar 3b: Fewer tax advantages than Pillar 3a
No insurance coverage for death, disability, or incapacity for work
Fund solutions incur management and custody fees, transaction costs as well as possible subscription and redemption fees
Irregular payments can jeopardize the accumulation of pension provision

Insurance (with the SmartFlex pension plan)

For the safety capital, the investment risk lies with AXA
Safety capital and return-oriented capital can be combined individually. Reallocations from return-oriented capital are possible at any time.
Return-oriented capital: Return opportunities via equities, free choice of investment theme, no trading fees
Full legal protection for contractual claims to the contract capital
No negative interest on the safety capital thanks to the guaranteed technical interest rate of 0%
Insurance protection in the event of death (lump sum) and incapacity for work (e.g. exemption from premiums, i.e. capital accumulation and insurance protection continue) possible
Consistent savings model with regular premium payments but still flexible with additional payments or breaks

In the return-oriented capital, the investment risk lies with the customers
Contract and investment costs (fund costs)
Premium payments and a fixed contract term mean an obligation to pay

Frequently asked questions about banks vs. insurance companies

All in all, solutions from banks offer greater flexibility, while pension solutions from insurance companies offer supplementary coverage in the event of disability or death. Pension products such as the SmartFlex pension plan also offer the advantage of greater savings discipline due to defined monthly payments.

In general, you can deduct payments into a Pillar 3a pension plan – whether from a bank or an insurance – up to a total annual amount from your taxable income. This reduces your annual tax burden. A Pillar 3a pension solution is therefore an excellent tool for reducing taxes.

Regardless of the tax advantages of Pillar 3a, it makes no difference whether you make provision with a bank or an insurance company: In both cases, the contributions are deductible from your taxable income, which means you save on income tax. The Pillar 3a payout is subject to income tax at a later date, but is advantageously taxed separately from other income and at a reduced rate (pension rate).

In Pillar 3b, on the other hand, there are only tax advantages with life insurance. The premiums are not tax-deductible, as the flat-rate deduction is already exhausted by health insurance premiums. On the other hand, the earnings remain tax-free both during the term and when paid out: Always for life insurance with regular premiums, and for life insurance with a single premium, provided certain conditions are met (such as a payout after age 60).

On average, equities have historically offered a higher return opportunity than a savings account or bonds, making them an attractive option for investors. This is why most pension solutions nowadays include modules with return-oriented investments in the stock market. If you want to make sustainable provision for your retirement and close pension gaps, you can hardly ignore equity investments.

In the case of the SmartFlex pension plan, there is the option of channeling part of the premium payments into the fixed-interest safety capital and the other part into the return-oriented capital, which is invested on the equity market. Investors can flexibly reallocate their funds between their flexible safety capital and return-oriented capital at any time.

Whether you take out your Pillar 3a account with a bank or an insurance depends on your personal needs. Bank solutions such as a pension account or a fund solution score points with flexibility: You pay in freely and with no fixed commitment. Insurance solutions such as AXA’s SmartFlex pension plan, on the other hand, combine capital accumulation with risk protection (e.g. in the event of incapacity for work or death) and promote savings discipline thanks to fixed premiums. Both options offer tax advantages. In short: A bank solution for maximum flexibility, insurance solution for additional protection, consistent saving, and tax privileges in Pillar 3b.

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The Swiss 3 Pillar system

Find out more.

Pillar 1: OASI / DI / LEC

The purpose of Pillar 1 is to secure your livelihood after retirement, in the event of disability and incapacity for work, or after a death.

To Pillar 1 solutions

Pillar 2 – occupational benefits insurance

Pillar 2 includes occupational benefits insurance, occupational accident insurance, daily sickness benefits insurance, and the vested benefits institutions. It’s intended to enable people to maintain the standard of living they’re accustomed to after retirement.

To Pillar 2 solutions

Pillar 3 – personal pension provision solutions

By making voluntary payments into a tied (Pillar 3a) or flexible (Pillar 3b) pension solution, you can close any income gaps from Pillars 1 and 2 of the Swiss pension system to the fullest extent possible.

To Pillar 3 solutions