Closing 3a & 3b life insurance (looking for a best way)

Banks, Insurances & Third Pillar
1

Hello everyone,

I’m new here and have been exploring mustachian posts. I stumbled upon an article discussing a problem similar to ours.

Here’s our situation:

My wife, who worked for over 20 years, was advised by a family member to open a 3a life insurance account with Generali, which she did. In 2018, she stopped working but started a 3b account, and the company labeled it as a “combination of 3A & 3B life insurance” account. Currently, she pays around 320 CHF monthly into this 3b account.

We’re planning to buy a house this summer using a mortgage and would like to use our 3a accounts for this (I’m about to open one myself). Recently, my wife contacted Generali to inquire about her account. They mentioned she has 39,600 CHF, which can be transferred to another 3a account or used for a mortgage. If withdrawn in 2044, she might receive around 70,000 CHF (or possibly 117,000 CHF, but she wasn’t sure). We’re unclear if this amount is from the 3a account alone or both accounts (3a&3b). We plan to meet with them to get all the details.

We feel that Generali is not being transparent, as my wife has likely contributed more than 70k CHF. After reading a blog post, we realized we might have been uninformed about such practices.

My wife is frustrated and wants to terminate the account as soon as possible, but I am looking for the best solution.

Here’s where it gets interesting:

As a dual citizen of Switzerland and Turkey, I can help my wife in obtaining Turkish citizenship through our marriage (we haven’t applied yet). If she deregisters in Switzerland, moves to Turkey, and registers with my family there, can she withdraw all the money from her 3a & 3b accounts without a high fee of Generali? We understand there might be taxes by the state, but we’d rather pay those than let the company profit unnecessarily.

This idea came to me from a comment I read about deregistering in Switzerland to access 3a funds, then returning and reregistering to potentially pay less tax.

I’m open to any suggestions you might have.

PS: I also wanted to mention that we’re aware of the option to invest in ETFs through her 3a at VIAC or finpension. However, we’re considering this as our last resort/plan.

Thank you in advance.

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I’m going to make a few assumptions, do correct me if I’m wrong.

Going from buying a house (presumably in Switzerland) to moving to Türkiye because of the behavior of an insurance company seems a bit extreme to me, and giving that insurance company way too much power over your lives.

The missing amount in her 3a&3b policy is part fee but likely also part insurance policy against the risks of death and disability. You (gratefully) haven’t needed that part, but whatever you do moving forward, it is gone. Moving to Türkiye won’t change it, there’s no additional money to be taken out of the insurance by making that move. On top of that money that is already gone, the insurance will likely take a small fee for terminating the contract. It is tame and likely to be the same whether the reason for termination is buying a house or moving abroad.

Your options are:

A) Terminating the 3a&3b policy before having to contribute an additional amount and moving the funds either to a bank 3a account (or another 3a solution in cash) if currently in a 3a solution, or a regular bank account in a 3b one, in order to use it to buy a house next year (or whenever, I’m suggesting a cash account because your investing horizon is very short term if the purchase happens next year).

B) Keeping the policy until next year and using it directly to buy the house (ask the insurance company for comparisons and choose the option that gives you the most buck for your money).

C) Moving to Türkiye (or elsewhere) and withdrawing the funds.

D) Keeping things as is.

The decision is first and foremost a life aspirations one: do you want to live in Switzerland, do you want to live in Türkiye, do you want to buy a house? Those are the questions I would try to answer. You also need to both be on the same page regarding this decision and no partner should exert pressure on the other in order to have them weigh one way or the other. What you need is to know your numbers (ask the insurance for a written statement stating the value of the policy, after fees, if you terminate it now, if you terminate it next year and if you carry it until its term) and have a genuine conversation as a couple, with a clear mind.

I would let some time pass before taking this potentially life altering decision, coming apparently out of spite for an insurance company. It’s your life, I wouldn’t let an insurance company have such a sway on it.

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3

The intended “move” would be temporary, just enough to trigger the 3x withdrawal; not a permanent life change - if I read correctly.

It might be considered fishy by the (tax) authorities though.

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4

When I read this on my small mobile phone screen, I stopped right there, thinking “Oh my… here we go again“.

Generali may charge a fee for early payout - whether it’s for home ownership or due a («fake») emigration. Could even be the same fees - and the difference may just be the paperwork to provide. I‘d guess the surrender value will be the same.

Legality of lying about leaving Switzerland for good - when in fact she doesn’t - aside, that leaves the difference in taxation open.As I understand your plan, if she’s willing to lie about emigration, I assume that you’ll want her to not disclose to turkish tax authority either. You therefore may want to compare withholding taxes on the withdrawal to your local (cantonal/municipal) tax on withdrawal from retirement accounts.

Side note: The idea of acquiring Turkish citizenship only for such a withdrawal seems a bit far-fetched.

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Yes, there is a line saying “leaving Switzerland definitevely”. Sure, they can’t hinder you from coming back. If it has been 5y, I am sure there won’t be a problem. If you move out and then come back one year later, there might be.

Art.5 of the law below (This is for 2nd pillar, but the Ordinance for 3rd pillar is referencing this for the withdrawal).

https://www.fedlex.admin.ch/eli/cc/1994/2386_2386_2386/de

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I checked the law you linked and I cannot find information on the minimum time abroad before coming back to Switzerland.

I’m playing the devil’s advocate here, but what if I move abroad for 1 year (and I cash out 2nd pillar) and then I move back here. Maybe it was for tax avoidance, or maybe I simply changed my mind.

Am I not free to change my mind after having experienced 1 year abroad?

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No the 5y was just a guess (that is why I use the “might be” and not “will be”.

Fact is, that the lawmaker wants to see the wish to emigrate definitevely from Switzerland and you must be able to uphold it in court in the worst case. Maybe there are already court cases about this topic.

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8

Hello everyone,

Thank you for your responses. I’d like to quickly address some open points.

We had a plan in mind which involved my wife leaving Switzerland permanently, enabling her to withdraw all her funds, as I expected. A few months later, she would return, re-register, and possibly reinvest this money in another 3A scheme (although it’s not crucial if this isn’t feasible).

Our intention with this strategy is to retrieve the full amount owed by Generali (around 70k, not just 40k), and we’re fine with paying the necessary taxes. Our goal isn’t to evade taxes; we simply don’t want Generali profiting unfairly from us.

However, there are several issues with this plan:

  1. From my understanding, if she leaves Switzerland permanently, I, as her husband, and our child would also need to leave.
  2. Changing countries could jeopardize my retirement plans and complicate arrangements with my current employer. I’m also uncertain if they would even approve of this change.
  3. I’m not sure if Türkiye (and thanks, @Wolverine for using the correct name) would impose any fees on this transaction – I need to inquire about this.
  4. Some members have suggested that Generali might only pay out 40k instead of the expected 70k.

This idea was inspired by a comment suggesting a method to reduce tax payments. However, our primary concern is ensuring Generali pays the full amount due to my wife. We suspect she might actually be entitled to more than 110k, rather than the 70k mentioned, which makes a significant difference in our situation.

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Thank you

9

The thing is it makes no difference to your accrued 3a capital at Generali whether you withdraw to place it with another 3a provider or if you withdraw because you leave the country.
As explained by @Wolverine, the difference between what was paid and the accrued capital is premiums of the insurance component of the contract and fees. You won’t be able to recover it.

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10

70k is not the full amount owed by Generali, they only owe you the surrender value. Part of the contributions she made are for fees (a hefty amount of up to 10k for the agent that sold you the product) and for insurance (death, disability, …). They don’t owe you any more money. There is NO way to get the full contributions back, moving to another country will not work.

Also I assume the money she contributed was invested in some product with a lower boundary, meaning she gets definitely x, but if the product has a good performance she will get more.

My advice, bite the bullet and cancel the contract as soon as possible and get out of the 3a/b insurance scam.

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11

Thank you for the replies. I now have a clearer understanding. Unfortunately, I am quite unfamiliar with these matters, and they can be difficult to grasp.

From what I understand, there appears to be no way to receive more than 40k. It seems we must accept this and proceed with our plans to leave as soon as possible.

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Not if have an intention to return in the first place. Obtaining a payout would be illegal. There’s no definitive time span provided by law that you need to be out. On the other hand, you could have emigrated with no plan to return yesterday, receive your payout today (after having emigrated) and meet the love of your life tomorrow - and she happens to be Swiss and convince you to return.

We’re getting into „but how could anyone prove otherwise?“ territory here. Worst case, they‘ll turn the tabes on you and make you prove your actual intent and action to leave for good.

Who, if anyone, could challenge the legality of your payout? Some government authority (tax, welfare), possibly a pension fund. It’s still unlikely, if you stay under the radar (i.e. don’t claim social welfare).

Not that I have heard of that. Your wife can „move first“, for you to join her abroad only later. As long as immigration law doesn’t come into play, I can’t see anyone objecting to that. And I know for a fact that pension fund benefits have been paid out in such cases.

…unless you make a good case that your wife was wrongly advised by the whoever „sold“ her that contract (in a professional capacity).

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13

…unless you make a good case that your wife was wrongly advised by the whoever „sold“ her that contract (in a professional capacity)

Thank you for your response.

The individual who initially sold the plan is probably not there anymore, as it has been over 20 years. Understandably, he did not highlight the drawbacks of the 3a life insurance. There seems to have been some misleading information, particularly as my wife was quite young at the time and not very knowledgeable about these matters.

She placed her trust in a reputable Swiss company, and now she’s shocked and trying to understand the terms with the situation. This experience has significantly impacted her faith in the legal system, as she feels easily deceived and helpless even after realizing the truth.

Considering Generali’s resources, including their experienced lawyers, I’m inclined to believe that it would be challenging for us to win a case against them. No way :face_exhaling:

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14

I am really sorry for you and your wife.

Regards “reputable Swiss company”: Many countries banned commissions to intermediaries years ago but Switzerland has not :frowning_face:

From January 2024 independent insurance intermediaries are required to disclose such kickbacks

“Untied insurance intermediaries must, in particular, disclose compensation received from insurance companies or other third parties.”

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15

Thank you for your message @Barto

In my experience, I have never encountered such deceptive practices facilitated by state involvement.

Regarding the new regulation from FINMA, do you believe it will benefit my wife’s situation? Specifically, is it feasible to switch from a tied to an untied insurance policy without incurring additional fees, thereby allowing us to conclusively close this troublesome insurance matter?

Or are there any advantages to this approach? If so, we might consider waiting until the new year before making a decision

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After so many years I don’t think anything will change the situation. The extra money is gone, it paid for the insurance part of the contract.

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In the summary linked above I don’t see any changes impacting your wife’s situation.

The obligation to disclose compensation received from insurance companies or other third parties is a first step towards more transparency, but unfortunately not enough. While potential prospects may flare the scam seeing large kickbacks, two digits compensation may not seem that high considering those contracts are often signed for 30+ years. Additionally, it does not bring more transparency to contracts sold directly by the insurance companies.

Where we need more transparency imho is how much of the premiums are allocated towards the insurance and capital accrued components. Only then prospects may notice that the premiums paid for the insurance component are really high compared to a standalone contract outside of 3a.

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@nabalzbhf and @anneaun thank you for your replies.

Yesterday, my wife received a letter from Generali detailing the amounts she would receive from her 3a and 3b accounts. We’re unsure about the specifics, so I’m hoping for some clarity here.

From what I understand, if she withdraws her funds now, she’ll get 31,105 CHF from the 3a account and 8,495 CHF from the 3b account. However, if she waits until 01.12.2023 to withdraw, she’ll receive 43,653 CHF from the 3a account and 12,196 CHF from the 3b account.

Could you confirm if my understanding is correct, or if it implies something different?

3A

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3B

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As I understand it:

„Was bedeutet «Umwandlungswert»?
Ein Vertrag verfügt über einen Umwandlungswert, sofern er einen Rückkaufswert besitzt. Der Umwandlungswert entspricht der neuen Versicherungssumme, wenn Sie die Prämienzahlung Ihrer Lebensversicherung einstellen.“

„Wann erhalte ich die neue Versicherungssumme ausbezahlt?
Die Auszahlung im Erlebensfall bei gemischten Lebensversicherungen erfolgt bei Ablauf der Versicherung. Dieses Datum finden Sie auf Ihrer Police.“

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20

Thank you, @San_Francisco, for sharing the link.

I now understand the situation better. Of course, I wouldn’t expect anything positive from these scammers.

The next premium payment is due on the first of December. My wife has canceled it, and we’re opening an account at VIAC to transfer all her 3a funds. Additionally, we will withdraw the money from her 3b account.

I feel deeply saddened for my wife. It was her hard-earned money, and she had high hopes for the future. This disappointment is hard for her, but we’ll overcome it and learn from this experience as a valuable lesson.

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