Linked 3rd Pillar 3A - 2023

Name: Sparta Group S.A.
Rating: 5.0

Operation and benefits of third pillar 3A

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introduction

The 3rd pillar
3A

The 3rd pillar 3A is also called linked 3rd pillar. It operates as private savings that can be made with a bank or an insurance company. Warning : it is mandatory to get a revenue from a lucrative activity to be eligible for the 3rd pillar A. The State encourages us to make savings through the 3rd pillar A by giving important tax advantages. Indeed, the premiums are deducted from the taxable income, which therefore reduces our taxes. In return, the 3rd pillar A is subject to some conditions that we will detail. Switzerland is one of the countries where the proportion of private retirement savings is the highest. It even represents almost one third of the pensioners income, whilst in other countries most of it comes from the State. In Switzerland, around 65% of the active workers have a 3rd pillar. This solution offers huge benefits that you will find below.

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Duration and
Withdrawals

The first 3rd pillar A’s goal is to improve retirement incomes. Indeed, it is necessarily correlated with retirement till 64 years old for women an 65 years old for men.

It’ important to notice that on average, pensioners receive around 55% of their last income with AVS + LPP. If the monthly income overtakes CHF 7’000.-, the percentage decreases even more. Therefore, the question is to know if this is enough to maintain your living standards when you retire or if you need to compensate this lack. In this purpose, it is required to make private savings via the 3rd pillar.

It is still possible to withdraw the amount saved in a 3A before retirement in the following cases :

To become the owner of your principal residence.
To become an independent in the sense of the AVS.
To leave Switzerland permanently.
From 5 years before the age of retirement.
To be 100% disabled in the sense of the IA.

Amounts and
Taxation

The 3rd pillar A taxation is very advantageous as all the amount invested yearly is deductible for the taxable income.

Logically, there is a maximum amount you can put every year, which is no the case with the 3B :

Max. 7’056.- each year for a single worker.
Max. 14’112.- each year for a couple where both work.
Max. 35’280.- each year for an independent in the sense of the AVS.

The capital invested in the 3rd pillar is not taxed on the wealth, and is submitted to a preferential tax rate appart from the other incomes the year you withdraw. The amount is however derisory compared to the tax gains that are made during the contract on a yearly basis.

Beneficiary
Clause

In the 3rd pillar A, the beneficiary clauses in case of death follow a specific order:

1. The spouse/husband
2. The direct descendants and the person with whom the deceased had lived with at least 5 years continuously
3. The parents
4. The brothers and sisters
5. The other heirs

It is possible to change the order for the points 3, 4 and 5 and adapt the proportions. If points 1 and 2 are inexistent, and knowing that we can change the points 3, 4 and 5, the beneficiary clause becomes free.

Guarantee and
Pledging

The 3rd pillar A is often used to become property owner.
Warning, the 3A can only be used for a principal residence. It can be used as equity capital or as a pledge for the amortisement. (repayment of debt).
You can also withraw it for home renovations in your principal residence under certain circumstances.

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3rd pillar A or 3rd pillar B.
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Sparta Group SA

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I used the service for advice on third pillar and I definitely recommend them. I got in touch with David which was very transparent and efficient and gave me a clear overview of the possibilities I have in front of me.

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