3rd pillar 3B in 2023
What is a 3rd pillar 3B?
The 3B, also known as the free 3rd pillar, works like a savings account that you can build up freely to achieve a life goal, for retirement or to save while benefiting from guarantees and protection. This solution has many advantages, and we’re going to find out what they are.
Anyone living or working in Switzerland can make a 3B!
What makes the 3rd pillar 3B attractive?
On average, a retired person in Switzerland only receives between 50% and 60% of his or her last income, so we need to set aside additional savings if we don’t want to reduce our standard of living in retirement. Especially as we live longer and longer.
If you choose your 3rd pillar solution carefully, you can achieve excellent annual returns on the money you put aside. Which, over the years, represents an exponential return on your savings.
Unlike Pillar 3A, Pillar 3B is not deductible everywhere. That said, if you live in Geneva or Fribourg, you can even deduct part of your investment in 3B from your taxes.
What are the conditions for 3rd pillar 3B?
As its name suggests, the 3rd pillar 3B Libre is the most flexible form of 3rd pillar. There’s just one rule: 3B is exclusive to insurance companies, so it won’t exist in banking.
The duration is free, so you can achieve your project goals as you define them. As the 3B is part of an insurance policy, companies may set a minimum period of between 5 and 10 years. It generally takes 10 years for the solution to really pay off.
This time, there’s no limit to the amount you decide to save. You can therefore define it as you wish.
The 3rd Pillar B offers total freedom Unlike the 3rd Pillar 3A, the 3rd Pillar 3B offers total freedom for withdrawals. There’s no reason to withdraw your savings, and no minimum term. You can withdraw all or part of your savings at any time.
However, beware of redemption values. The solution and the guarantees provided by the company have a cost, and this is generally deducted in the event of premature termination of the solution. It is therefore important to check the surrender values, especially in the early years.
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What is the
3B beneficiary clause?
The 3B allows you to freely define the beneficiary clause and choose the order of succession in the event of death.
Even in the event of survival, you can decide who will receive the savings, so the policyholder, insured person and premium payer may be different, which can be interesting in some cases.
The fact that 3B is in the form of insurance also means you can combine income potential and/or security with the possibility of cover in the event of death or disability. In this case, you benefit from fully flexible insurance cover in the event of death or disability. Let’s find out how they work.
You may or may not include a death benefit in your 3B. As a matter of course, the death benefit will be equal to the life benefit, so your loved ones will be protected if anything should happen to you, right from the start of 3B.
It is also possible to define the amount desired in the event of death, and therefore to increase or decrease it.
Like the death benefit, this is an option you can decide to include or exclude. It protects you against the risks of disability resulting from illness or accident. The principle is simple: the insurance company undertakes to pay the premiums on your behalf for the duration of the contract, or for the duration of your disability, should you become disabled. You can choose between 4 waiting periods before the company takes over your premiums. 3 months, 6 months, 12 months and 24 months.
The disability pension is different from the exemption. This time you define in advance the amount the company will pay you if you become disabled. This coverage allows you to receive a lump-sum payment in the event of disability. This time, the waiting period is defined in advance, because this coverage kicks in when the DI kicks in and your income drops. It lasts 24 months.
What are the
3rd pillar Libre 3B?
Although it is a 3rd pillar and is encouraged by the Confederation, 3B does not provide for any tax deductions, unlike 3A. But as is often the case, there are certain tax exceptions in Fribourg and Geneva, which apply them. In these two cantons alone, it will even be possible to deduct your 3B for tax purposes, and thus generate a substantial tax gain, with no withdrawal constraints.
Although initially without tax deductions, the 3B retains certain tax advantages. In fact, unlike banking solutions, returns are not taxed if your 3rd pillar 3B meets certain criteria. What’s more, there’s no tax on withdrawals from your 3B, unlike 3A. For solutions with high yield potential, this is a major advantage.
You will still have to declare the savings accumulated in your surrender values for tax purposes, and pay a generally low wealth tax.
What kind of 3rd pillar investments are there ?
The classic investment guarantees a minimum contractual amount, regardless of the markets, a crisis or bankruptcy. This guarantee is generally supplemented by surpluses. By redistributing its The company pays you according to its results. Currently they are around 2%. It’s an interesting solution if you’re looking for a guarantee.
This is the solution with the highest yields. Currently, markets are averaging between 8% and 12% a year. You can choose the % of equities in your fund or its orientation. This is the riskiest solution, as there is no minimum capital guarantee.
This solution is similar to a mix between conventional and fund investments, hence its name. In fact, you can choose a % of guarantees between 10% and 80%, which will function as a minimum guaranteed base. The difference will then be invested in a fund to generate a substantial additional return. These mixed investments can achieve between 5% and 9% while benefiting from a minimum safety net thanks to the guaranteed capital.
How can I compare 3rd pillar products?
There are many different 3B solutions, but are they all the same? Absolutely not. Some companies are leaders in one type of solution or for a defined customer profile, and not in another form of solution. So it’s important to compare and obtain offers from as many companies as possible.
We also recommend that you analyze the projections and figures provided by the companies. In fact, the history of the solution and the % needed to achieve it are crucial.
With this in mind, we have developed an online solutions comparator, enabling you to define your investment profile and obtain a comprehensive comparison of the best solutions.
