3b Pillar account

Banks, Insurances & Third Pillar
1

i understand 3b is the flexible pillar (compared to 2nd and 3a which are really designed for the old age pension). Contributions are not tax deductible (with below exception), but the withdrawls are tax free, and much more liberal - unrestricted.

if my understanding is correct, there is a tax benefit for residents in the Cantons of Geneva and Fribourg specifically.
but i’m not clear how exactly , are the contributions tax fee ?

is it a good idea as an addition to a 3a account ?
any opinion / experience please ?

2

First of all: a 3b account is only deductible in Geneva (CHF 2’200.-) and in Fribourg (CHF 1’000.-).
Second of all: don’t get a 3b.

That’s it for the advice.

Now some explanation: a 3b account is everything that you can consider a saving. For exemple, your saving account, an investment fund account (Targeted saving and investing | UBS Switzerland), an investement solution like Selma, Truewealth, CleverCircle, or a private broker (Swissquote, DeGiro, Interative Brokers).

However, theses providers can’t be deductible because the only way to deduct a 3b is by having a shitty 3b life/disability-insurance, the one which is like the shitty 3a life/disability-insurance :slight_smile:

5 Likes
3

thank you Yanikuza

doing some more research on the subject
maybe that 3b doesn’t sound so bad (for geneva /fribourg residents with the tax deduction)

i agree with you, that i will never sign a 3a with a life-disability insurance , and i feel sorry for friends that did before VIAC was made available.

But to have cash in a bank account, and having a 3b (even with a life-disability insurance ) both will return a big fat zero at the end of the year.
My next thought is , why don’t you investment them yourself on the usual ETF’s and get a 7% annual return .

But the point here is not about investment but tax saving via pension.

As long as you can do a 3b for 5y contract (as minimum) with a max deductible of CHF 2,200 for single person
(or 3,300 for a couple + 900 per child) looks like is more beneficial to reduce tax than wait for market return on this for that 2-5k a month ( cash in a bank account is out of the window).
So with a 3b i get to reduce my tax , considering a marginal tax rate (taux d’imposition marginal) of 30-40%

so for a 5y contract , a 3b account will not be worst off than to have them invested. (or at least the tax benefit is certain, the market return is not)
do i see it wrongly here ?

4

In theory you are right, but in pratice I don’t know any provider in Switzerland that offer you a 3b that is not a life/disability insurance, that’s the problem :upside_down_face:

That’s why in the end, this option is not interesting.

5

The term “pillar 3b” just denotes private providence. It pretty much means any savings or insurance which isn’t tax-preferred (pillar 1, pillar 2, pillar 3a).

Insurance is the only product which is actively marketed using the “pillar 3b” term. This is to differentiate regular old insurnace from “pillar 3a” insurance which is tax-privileged.

In the case of term life insurance or disability insurance, using the “pillar 3b” variant can make sense (if you want to choose a beneficiary other than your legal heir, or if you already use your full 3a deduction for retirement savings, for example).

In the case of permanent life insurance equity-based insurance with a cash value), using this is suboptimal, whether they are pillar 3a or pillar 3b (or foreign with neither of those designations).

Regarding the tax deduction, there is a tax deduction for combined health and life insurance premiums separate from the pillar 3a. All cantons have this AFAIK. But the deduction is so small that it’s generally taken up completely by your health insurance (in fact, even the cheapest mandatory health insurance available anywhere in Switzerland should use it up, AFAIK). In the unlikely case that you have some of that deduction left over, then you can deduct insurance premiums for pillar 3b insurance there. This is beneficial if you have term life insurance (like I do) or disability insurance (like I don’t).

But do please stay away from pillar 3b permanent life insurance (Kapitalbildende Versicherung, Gemischte Lebensversicherung, Sparversicherung, etc.)

1 Like
6

Hello and thank you very much for all the useful information. I would like to piggyback on the thread to ask the following questions:

1./ if I cancel my 3erd pillar B (which I regret opening) do I have to pay taxes? My understanding is that that is not the case specially since I believe I am losing money with this 3b

2./ Here is my situation: over the last 8 years I have put 22,750 CHF and as of today the “fund value” is 15,978 CHF and this is all the information I can get.

The problem is I don’t understand the meaning of this number: does it mean that if I cash out today this is the money I will get (effectively losing 6781 CHF)?

Everytime I have asked to the guy who sold me this financial product (with whom I don’t have any more contact) or the company with whom I have this 3B (liechtenstein live insurances) I get some answer that involves some finantial jargon on it and that I don’t understand. At the end of the conversation the idea coming from these two ends is: in order for you not to loose money you should keep on investing and some time from now you will break even, and some time after that you will start making money which at this point in time (8 years after I started investing ) I don’t believe any more.

Any advice on this issue?

All the best,

Felix

7

Just ask them this clearly, they should give you a number. Ask it in writing.

You’ll lose money in the end, even if you break even due to opportunity cost.

Also be aware of the sunken cost fallacy.

I don’t think life insurance are taxed, but as usual might depend on Canton so you could ask your tax office.