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- Pension planning
- Third pillar
- Pillar 3b
- Life insurance
Life Insurance In Pillar 3b: Additional Protection for Old Age
If you want to make the right choice for retirement, it’s important to become informed about various investment options within the bound and free pension provisions in pillar 3 and to make careful comparisons between each. The so-called free provision (3b) is used above all else to close any precautionary gaps which remain open despite the mandatory precautions with pillars 1 and 2, as well as in pillar 3a. For example, with a life insurance policy in 3b, it is possible to ensure that the life expectancy achieved during professional working life can also be maintained going into the pension age.
Life insurance in 3b: The precautionary class
In principle, there are also offers for a life insurance by means of pillar 3a for which the usual tax advantages result (deposits can be deducted from taxable income). However, in pillar 3b there are many attractive offers with lucrative interest rates and high returns. It can be used to compensate for the financial consequences of incapacity to work caused by accidents or illnesses, as well as to provide protection for the survivors in the event of death. Depending on the offer and the type of insurance, there is a savings portion which is used to set up capital for old age through life insurance 3b. These offers are called mixed insurance and are one of the most popular pension products in Switzerland, although they offer numerous disadvantages as well as numerous advantages. For example, the insurance solutions can not be changed or dissolved as flexibly as is the case with banks’ precautionary measures. In the case of the insurance solution, this is often not worthwhile, since deposits into the insurance usually cover only the insurance part at the beginning and you lose your deposits at the end. The early change therefore only pays off if the new savings solutions yield so much return in the long term that the loss is compensated and offset.
Insurance options for free pension plans
A distinction must be made between capital insurance and pension insurance. Among the capital insurance companies, there is a difference between asset-based offerings and pure risk insurance. A mixed form of both insurance types is commonly referred to as mixed insurance and is a life insurance policy in column 3b—a frequently chosen form of insurance.
- Endowment Insurance
In the case of capital insurances, these are life insurances which, when prematurely terminated, give rise to capital in the event of an insured event, ie. upon the occurrence of the insured event or after the term of the contract. They can be terminated prematurely and can be financed either by a one-time premium or by regular payments.
- Risk Insurance
In the event of death, disability or invalidity, insurance coverings are intended to close gaps. Correspondingly, there are death insurances and disability insurances which support the policyholder himself and/or survivors financially when the insured event occurs. These insurances are financed by periodic payments and are not recoverable.
- Mixed Life Insurance as a 3b Compromise Solution
The compromise solution for mixed life insurance is therefore chosen as a pillar 3b pension option. The offer includes both capital and risk insurance. Although the savings potential is considerably lower than for alternative offers presented by a bank, the risk insurance component covers many unforeseen scenarios and ensures an additional level of security.
Advice on Life Insurance 3b from MoneyPark
There is a great deal of variety for pension products in the 3rd pillar. Bank solution in pillar 3a and life insurance in pillar 3b—the combinations and solutions that will be the most useful for you depends entirely on your needs and financial possibilities and responsibilities. At MoneyPark, we help you with an independent consultation to find the optimal solution and the best interest rates. Make an appointment today with one of our consultants and take advantage of the expertise of the MoneyPark team to ensure a peaceful and worry-free retirement.
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