Saving in Pillar 3a: Do not underestimate interest rates

The three-pillar principle and the tax benefits in the Pillar 3a

The Swiss three-pillar principle is based on mixed pension provision, some of which is legally compulsory and some of which is voluntary. Pillar 1, old-age and survivors' insurance (AHV) as well as disability insurance (IV) and supplementary benefits (EL); and Pillar 2, occupational retirement, survivors' and disability insurance (BVG) and statutory accident insurance (UVG) are compulsory, state-supported and mandatory. However, they only cover the basic needs of the pension. If you want to keep your standard of living in retirement, you have to make some provision with the private Pillar 3. Assets are increased over interest rates in Pillar 3a in the long term in a dedicated fund, intended exclusively for retirement. Payments into the Pillar 3a are made regularly, while Pillar 3a is only available in exceptional cases before reaching pensionable age. The tax advantages for Pillar 3a are a good reason for private provision. All contributions to the investment are deductible from taxable income and deposits can be made up to the maximum amount into Pillar 3a. The investment options are, on the one hand, bank accounts, and, on the other hand, insurance policies, which have other differences in Pillar 3a, such as interest rates.

The losses that can be incurred in Pillar 3a even with small variations in the interest rate

Interest rates for Pillar 3a accounts and policies vary by up to one percentage point, which can lead to substantial losses. Over many years, thousands of francs could be lost under the wrong system so it is vitally important to consider your options carefully:

• Finding the highest interest rate: A detailed comparison to find the best 3a interest rates is indispensable - ideally on a regular basis. If you find a better offer, the amount already deposited can usually be transferred relatively easily to a new account, as long as it remains in the designated area.
• Checking fees: As many banks now charge fees for retirement accounts, it is also worthing having a good look at the details and making comparisons. Fees, for example, are often incurred when assets are redeemed prematurely for the amortization of a mortgage for residential property or a pre-financing account is to be prematurely surrendered and transferred to another bank.
• Always make a deposit at the beginning of the year: If you already know at the beginning of the year that you can afford to pay into the Pillar 3a, it is worth paying early purely because the resulting compound interest will lead to a higher amount of capital.

With a Pillar 3a calculator, you can calculate in advance how much capital you are able to absorb and the effects that seemingly minor differences in the Pillar 3a interest rates will have on your capital.