For most people, AHV/IV (OASI/IV) and BVG (OPA) benefits from Pillars 1and 2 are not enough to enable them to maintain their accustomed standard of living when they retire. The primary aim of private pension provision (Pillar 3) is to give you financial freedom when you retire. If you also opt for the Pillar 3a/3b retirement solution, you can avoid income gaps in retirement and benefit from various other financial advantages.
As with many things, the sooner, the better. Even small monthly sums can add up over the years. Most people set up a private pension as soon as they are on a stable monthly income.
Although AHV (OASI) and Pillar 2 pensions do give you a basic income in retirement, the benefits from Pillars 1 and 2 only cover about 60% of your actual needs – fact is, most people require around 80% of their previous monthly salary to maintain their accustomed standard of living. So, it is unlikely that your Pillar 1 and 2 benefits will enable you to maintain the lifestyle you are accustomed to.
The Swiss pension system consists of three pillars: Pillar 1 (state coverage), Pillar 2 (occupational benefits insurance) and Pillar 3 (private pension provision). The main objective of Pillar 3 is to close any pension gaps. The Swiss pension system subdivides Pillar 3 into Pillar 3a (restricted pensions) and Pillar 3b (flexible pensions).
A pension gap occurs when income and the financial options in retirement are no longer enough to maintain your accustomed standard of living. The rule of thumb is that you should have around 80% of your last gross salary available every month. If the amount paid out is less than 80%, then there is a pension gap.
An overview of AHV (OASI) payments already made as well as potential contribution gaps can be obtained from your cantonal social insurance office. The benefits from your occupational pension plan should also be taken into account in order to identify any pension gaps. We recommend consulting a pensions expert to obtain a comprehensive analysis of your personal retirement situation. They will show you the best way to prepare for retirement based on your individual financial situation and personal circumstances.
Depending on the reason for the pension gap, there are a number of solutions for avoiding it: To prevent loss of income due to disability or death, it is advisable to take out term life insurance or an occupational disability pension. To maintain your accustomed standard of living in retirement, you will also need to contribute to Pillar 3 (private pension provision) in addition to Pillars 1 (AHV / OASI) and 2 (occupational benefits insurance).
The maximum amount for Pillar 3a tax deductions is adjusted annually. For 2023/24 it is as follows:
The federal government promotes saving under Pillar 3 by providing generous tax advantages, letting you save significant amounts on taxes while building your nest egg.
Pillar 3a in particular is considered to be a sensible measure for tax optimization and therefore saving.
Tax advantages of Pillar 3a:
Tax advantages of Pillar 3b:
Pillar 3 is ideal for saving money and providing for the future. A distinction is made between restricted pension provision (Pillar 3a) and flexible pension provision (Pillar 3b): Generally speaking, we recommend a combination of the two.
By opting for Pillar 3 from an insurance company, you are protecting yourself and your loved ones in the event of disability and death. In addition, with private pension provision from an insurance company, you are committed to making regular payments up to retirement age, which has a positive effect on the capital you accumulate as well as a compound interest effect. The differences are explained in detail in our article Building up a pension – a comparison of banks and insurance companies.
Do you have any questions, or would you like a no-obligation pension consultation? Our experts are there for you.