3a for a registered partner with no income

Hi,
I’ve opened last year a 3a for my wife who is not currently housewife with no income and our Kanton refused it. I don’t understand, I though you could fill up you 3a without condition up the the maximum limit (with higher limit if you are independent).

Firstly it’s extremely detrimental for couple that live with one income, you can deduce much less on your taxes (3a and other deductions not even related to work expense of course), not like it’s already hard enough to support a family with one salary.

Secondly, the wife cannot easily put money on the side for retirement, or yes but she had to do a trading account and (usually) it cost more in fee than a 3a like Finpension. And it will push couple to fill up the 3a of the one working, leaving even less money to the partner in case of divorce (hopefully we will not have this situation but I guess it could happen a lot of time). Or 3a are split in case of divorce? In in case of death of the one with 3a, is it going 50% to the partner and 50% to kids?

Now I don’t know what’s next, fortunately we couldn’t put much last year in 3a but I would have put all in mine if I would know that, now I guess it’s too late and our taxes will increase on what planned. Then I have continue to send money to it with year, again not sure if I can get it back to put on my 3a and I’ll open a trading account for my wife for her part then, but we will be forced to fill up my 3a first, because of taxes.
If the account will be convert to 3b, it will really be a waste of money…

You thought wrong.

You get specific deductions for families / children.
Whether they are high enough is a separate matter.

The deduction for 3a contributions is for employed persons. You can think of it as a tax-privilege for persons that pay income tax in the first place - which your wife doesn’t, if she has no income of her own. Also, it’s largely a temporary tax-shelter, since the payout will be taxed later.

No problem: Your pillar 3a will generally (unless agreed on separation of property) be split between you and your wife in case of divorce. Tax-free.

Probably depends on the age of the children and/or whether they are eligible for an orphan’s pension.

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The standard 3a deduction of CHF 6’883 is only accepted for people that pay into a pillar 2 and for everyone else it’s limited to 20% of the AHV net income (max. CHF 34’416). Based on that it’s clear that people can’t pay into 3a if they don’t have any AHV income at all.

Wealth accumulated in pillars 2 and 3a (and also payments into AHV) during marriage are split on divorce the same as 3b. And the money from pillars 2 and 3a will remain in tax-free accounts. This is assuming Errungenschaftsbeteiligung, which is the default.

If you want to increase tax-deductible pension payments, additional payment into your pillar 2 might be an option and your wife wouldn’t be at a disadvantage if you were to get divorced. You have to decide whether this makes sense based on the returns you expect from your pillar 2.

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You should keep in mind that married people with a single income typically save a lot of taxes due to the reduced tax rate.

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In the end, occupational insurance (and 3a) is a provision for “retirement”.
If you don’t work, there’s no job to retire from.
Accordingly, there’s no deduction for the non-working.
The logic somewhat checks out.

In my personal opinion though, I think…

  • married partners should be taxed individually
  • there should not be any deductions or different tax rate/bracket just for being married.
  • …though there should be for alimony of children
  • everyone should be able to make provisions for old age (not calling it retirement) individually
  • …which can (should) be tax-privileged, but not tied to income from employment activity only
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Taxes system will always be perfectible (like taxing more the very large income… it’s another story).

I was mostly under the emotion of how much we could have been wrong after:

  • Reading so many blogs post about 3a, Mr. MP book and articles about 3a like in FRC or “Bon à Savoir” magazine (never read a mention of the situation with registered partner without income)
  • Reading carefully condition when opening 3a (but yes, I let my wife open her Finpension 3a account herself on the phone, I see now that they are 2 questions and if you answer no you are blocked but maybe it’s new or it was not working properly last year, I give her the benefit of the doubt)
  • Tax declaration software doesn’t put any warning or prevent me to deduct 3a when the partner has no income (thus we are now in a German speaking only Kanton and my mother language is French, so tax was quite difficult to do the first year).
  • I told about opening 3a for me and my wife to my ex-accountant father who was marred his entire life to my mother who stopped working when I was born (didn’t light any warning to him apparently)
  • My wife best friend is a tax specialist and was surprised when we told her that, she told us she need to double check

Apparently family with one person earning an income is still a taboo in Switzerland.

Finpension should have check at the account opening if your wife was working or not.

As the deduction was not accepted by the tax authorities, you should contact Finpension. They must reimburse you and close your wife’s account.

The law is crystal clear:

and OPP3 art 7

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Yes, I contact them, it’s not an issue. Apparently at opening you have 2 questions that you should answer (I tried now), if you answer that you have no income subject on AVS/AHV and you are not independent you cannot create the account. So either it was not working last year or my wife did answer wrong by mistake.

Now the main issue is that we did 50/50 and the total is still less than 6883CHF so we could have put all on mine and have the full tax deduction, we lost a little money because of that mistake. But for 2021 we have time to rectify and change our strategy accordingly. Maybe I should deduce the lost money as education expense in the next declaration :wink:

The parliament has voted to allow additional pillar 3a contributions in arrears for past years in which you did not already pay the maximum into 3a. This is not in effect yet but should become possible within the next couple of years.

See Pillar 3a Contributions in Arrears Coming Soon - moneyland.ch

By the way:

Even though it failed to catch the original poster and his wife in this particular case :
I kind of like the fact that they only make you self-declare that in Switzerland (same as VIAC).

Other countries would probably require 3a foundations verify AHV contributions, have them keep records - and in the end force us to send in a proof of employment to the foundation every year (that you contribute), thus creating a whole lot of bureaucrat red tape around it.

As we started quite late with our 3a, I really hope that it will arrive soon (from the article I understand that it’s already approved). If I understand well my wife could not use it until she has again an income important enough to pay AVS, but it should happen evenutally, so she will be able to fill up even the year(s) she had no income. In the meantime we can fill up mine then place the rest to eventually fill up retroactively the previous years so she will have a similar level of 3a than me at retirement.

In the meantime I have asked the taxes if I could move everything to mine and still deduct in 2020 but I guess it will not be possible.

Thanks everyone for the replies and comments in this topic.

Respectfully disagree.

Why not? Transparency (Bias) Disclaimer: I’m married :slight_smile:

This I agree with…but probably not in the same way you intended it. I agree that anyone should be able to contribute to a minimum amount of 3a. Couples as well, independently of where the money originates (since the couple is taxed together anyway)

Sorry to hear about the bad surprise. Too bad either of the people you discussed it with didn’t correct you either. Either they misunderstood the explanation or weren’t actively listening.

Thank you for sharing! So I see 1x / 5 years and max 5x the limit (including the year you would be contributing)…makes sense in that context. I found it interesting that you can do it for years that you did not have an approved salary as long as you do when you make the buy back…“only 13% of Swiss at max amount”…I think its partly income partly educational. I know lots of people never taught or learned themselves about it.

Because it has lots of downside policy wise? Afaik dual income couples are punished, so it encourages having one partner (inevitably female) stay at home and not work.

Doing tax incentives for people supporting kids, sounds both simpler and fairer (also to non married couples eg same sex partners).

Specifically?

You are assuming all couples have kids. Ok in this context: why would taxing the couple individually encourage more people not to stay home with their kids? By definition: taxing the couple together, you optimise the overall marginal tax rate for the couple who normally share the income together thus and “should” optimise the tax benefits together. If we talk about kids, its child care costs and expenses that usually push one of the couple to stay home not taxes. If the lower income earner was taxed separately what advantage would they have if overall expenses are the same for the couple? Only beneficial financially speaking (if not socially) to go back to work would be if their income covered all expenses and additional taxes to make it viable…why work for a loss?

Why is supporting kids different than supporting a lower income partner? Some couples don’t have kids. One partner could just as easily support a partner in a lower paying profession.

If you mean alimony when you say “supporting kids”, I am not literate in how that works but AFAIK the child support payments are indeed tax deductible already. But alimony means you are no longer in a couple by definition, so your support is more a minimum and not a maximum.

Fully agree that all legally recognised couples (same sex included of course) should benefit with and without kids since the incomes are usually shared in the couple.

For starters, it encourages people (who might have enjoyed very expensive but government-funded education) to drop out of the workforce and become dependent on their earning partner.

Children are unable to work - and legally prohibited from doing so.

So is income I share with my mother I‘m living with in the same household.
Or my sister who I‘m living with as both widows but unable to marry her.
Or me, my wife and my wife‘s boyfriend, who are letting me live in our basement.
Or our polyamorous patchwork family of seven (three males, two female, three kids).

Point being: tax law shouldn’t discriminate me based solely if and with whom I am entering an exclusive contract for long-term sexual relationship (or are legally allowed to have one at all).

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Totally agree with you on the last part. But the start of the discussion was on an established tax provision ( shared income as a couple or not ). If the argument is more on how to recognise all the different relationships in order to benefit from the same privileges than I agree with you although probably hard to quantify everything. So if that creates, “I can’t so why should you?” argument, then it’s not really the same discussion.

Not sure that you meant to imply that education shouldn’t be supported by the government since couples are taxes together or vice versa? The situation probably does happen but again policy is gonna be set for the majority or cases and not the minority.

Overall: The tax law for couples is because it happens already (look at countries that don’t tax as couples). So it’s a conscious benefit for the majority of cases that it would apply to.

Sorry, I don’t have a solution for the more specific/extreme/minority of cases.

And it was setup when the society was very different, women were usually stay at home and not earning income while taking care of kids. Hopefully now things are getting different, women have access to the same job opportunities and traditional couples don’t need an extra boost (or it can be done in a more equitable way e.g. with deductions for helping family members)

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Boy, that escalated quickly.

I will not pretend to have to perfect solution to have the fairest taxes rules possible, nobody should and it will never be. I’m quite convinced that we could have a more fair situation with universal basic income more or less like presented by Rutger Bregman in Utopia for Realists.

What I can add to the discussion is that decision to spend time to raise your kids yourself until they start school or even doing home school to some extend is not only a matter of money.

Some people (mother or father) would never want to miss the early years of their kids growing up and would not want someone else to take care of them while they are working, even if the total will end up in more income. It’s more or less my wife case and we decide to move very close to my work so I can also spend more time with our kids (and mandatory home office help even more).
Others doesn’t cherish these early years and see it as a chore. They just wait for their kids to be old enough to do activities with them, like sports, watching movies, playing video games, city sightseeing etc… I have friends that have 2 nannies, one for each kids and they never woke up at night for a crying baby, change a diaper, cook for them or anything (ok they live in Asia, it might be different culture but they are Swiss as well). And another friends is a mom at home without job but she pays daycare to have free time for herself (again it’s only possible if the income of the working partner can support this life style).

Everyone is different, every family have a different vision of family life and unless income is very low and the parents fight to survive and feed their kids (in this case they should be supported somehow, like UBI) it’s not the money and total income at the end of the month that will be the first decision factor for every life choice. Consequence is that taxes will never be able to accommodate every person, every family and every situation and be the fairest possible in each cases.

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Not really - I think there should be equal treatment. And the easiest way to do so is to abolish the privileges.

In an egalitarian society, tax privileges should be first and foremost for (and largely limited to) people who are economically disadvantaged without having made that choice: disabled, ill, children.

A wife saying (to herself) “Oh, now that I’ve married a high-earning male I can work less and become a stay-at-home wife or work much less” is not.

And that’s my answer to your question above: “Why is supporting kids different than supporting a lower income partner?”

Exactly. I’m recognising that status quo - but challenging it through arguments.

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