Pillar 3a - In the future maybe additional payment possible

Banks, Insurances & Third Pillar
44

I recently came across this table of maximum possible 3a amounts depending on age, published by the federal social insurance office. Well, that you’re „supposed to be able to have“, I guess, since they‘re using a technical interest rate for calculation, not actual portfolio performance.

Even if and when the above-mentioned law came into force, I wouldn’t be surprised if any contributions were limited to up to these maximum amounts (in fact, I would be surprised by the contrary).

Me, I‘m currently just about 10% below the maximum amount for my age group (my pillar 3a developed quite well recently). If there’s another two or three good years for equity, I could surpass the maximum amount rather soon. So there’s a good chance I‘ll be unable to benefit from this even if this change of law came into place.

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45

For me it’s 41’870, so I would be able to contribute ~22k assuming only 1% returns from now on. Not thaaaat much.

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46

But if you drop those 22K as a lump sum, we can expect the market to drop and that would free additional room for more buying. :stuck_out_tongue:

Looks like it’s taking shape. Thanks @San_Francisco for the link.

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47

I just wrote an E-Mail to Erich Ettlin (the guy who came up with the idea) with several questions that are relevant for the FIRE community. Lets see if he replys.

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48

Indeed I wonder how they envisage to determine how much everyone can pay:

-Check historical tax statements for up to 45 years?
-set a max 3P amount like you suggest. But how will they control people having made withdrawals for property purchases? To my knowledge this is not monitored anywhere

49

I asked him the following questions:

  1. When will it get implemented?
  2. Is this table the sole basis for the possible contribution? What about those that are invested in stocks and starting paying from the beginning (initially no gap), can they use a stock market crash for a tactical contribution? And those that started later and experienced great returns?
  3. Is the gap calculated on a yearly basis (end of year) and thus the possible contribution valid for the whole next year?
  4. Do we have to transfer the funds in one go or can we split it up over several months)
  5. Will it be possible to split it up to several 3a accounts or does it have to be transfered to one 3a account?
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50

I’m quite a bit older (probably) and have always had my 3a in the “highest risk” funds, but alas in sh*tty-performing high-cost funds (until Viac) for many years, including also already substantial amount invested during financial crisis 2007/8.
→ I have a gap of approx. 60k to my “grösstmöglichen 3a-Guthabens”.

51

It‘s based on amount paid in as far as I know. So doesn‘t matter how well your portfolio performed.

53

How to you get to that conclusion? How are they going to know that for a 50 years old person that started with 30?

55

I‘d assume through their tax declarations (deductions).

This is what I remember from reading the proposal.

57

Just wait for the next major crash and then fill in your “gap”.

58

„ Nachzahlen können Sie nur für Jahre, in denen Sie nicht bereits den Maximalbetrag in die Säule 3a einbezahlt hatten. Wenn Sie zum Beispiel in einem vergangenen Jahr 1000 Franken weniger als möglich einbezahlt hatten, können Sie (für dieses vergangene Jahr) höchstens 1000 Franken nachzahlen.“

Source: Säule 3a: Nachträglicher Einkauf - moneyland.ch

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59

I suppose the finer details are still to be figured out. But I doubt it.

Relying on tax declarations too cumbersome, especially if you’ve changed cantons, been abroad, etc. If they could, the argument about early withdrawals for home ownership wouldn’t hold up, since these are reported to tax authorities.

Also, the original proposal does say: “Zur Bestimmung des Einkaufspotenzials dient die 3a-Tabelle des Bundesamtes für Sozialversicherungen”

Additionally, if you’re over these maximum amounts published, your potential for voluntary 2nd pillar contributions is reduced by the difference (as TeaCup already pointed out above).

Going by the logic of how these pension/old age savings work, I can’t imagine them not restricting it to the 3a maximum amounts. It doesn’t make sense to restrict contributions in other pillar - but then open up a new big door for overcontributions in 3a.

Although…

…I could imagine that the new rules will be leaving (some) such leeway to “time” the market.

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60

Do you think this is not reported to the „Bund“? How else would they be able to claim how many people are able to max it out?

61

I am well above that calculated maximum amount. Not (only) because of returns, but because I started contributing before the age of 25, the point in those calculations that pillars 2 and 3 kick-in.

You make very valid points on the technical setup of the three pillar system. But I’d highly disagree with the conclusion. It is completely unfathomable in Switzerland for the state to repurpose your own, individual gains. Ultimately even if decided by parliament, there certainly would be a public vote. That purely theoretical risk is not worth losing decades of good investment returns.

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64

There is no dependency between a persons second pillar capital and 3a pillar capital to my knowledge. Assuming the person is not self employed anyway.

The table does not state that there is a dependency. What is your source?

The values in the table are only used to determine the maximum amount which can be contributed additionally.
It does not regulate the maximum amount of the 3a pillar capital in total. That can be any amount.

I never heard that the maximum amount to contribute in the 2nd pillar depends on the persons 3a pillar capital either.

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65

I would like to highlight that we are talking about the political instrument of a „Motion“. This is a request to the federal council to prepare a proposal to adress the issue. → very early and not technical precise stage of the political process.

So far the two chambers have approved the motion. I.e. instructed the federal council to prepare such a proposal.

Technical discussions will be possible after the federal council has published the according Botschaft. The whole political process in the parliament starts afterwards.

For those who want to dig in the details of the process I recommend:https://www.parlament.ch/de/ratsbetrieb/suche-curia-vista/geschaeft?AffairId=20193702
There you find also the original text of the Motion (which will be adapted in the political process).

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66

As far as I understand, the claim is based on tax statistics from 2015. Just like in the proceedings to a similar proposal in 2018.

Do I believe cantons and the federal government collect and keep some statistics? Absolutely. But do I believe they’re keeping a full register of tax deductions granted across all cantons for every taxable person, from age 25 and up? I doubt it. If they did, the implementation would be quite simple. Also, the maximum loss of tax could be estimated - which they claim they can’t.

You can easily google that and find the media reporting on it.

But for a more official source, see the law:

“Der Höchstbetrag der Einkaufssumme reduziert sich um ein Guthaben in der Säule 3a, soweit es die aufgezinste Summe der jährlichen gemäss Artikel 7 Absatz 1 Buchstabe a der Verordnung vom 13. November 1985 über die steuerliche Abzugs­berechtigung für Beiträge an anerkannte Vorsorgeformen vom Einkommen höchstens abziehbaren Beiträge ab vollendetem 24. Altersjahr der versicherten Person übersteigt.”

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68

Finally I (closely) beat someone else to something on this forum. :grinning:

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70

Side note: There seems to be no wording restricting this so the formerly self-employed (though in practice pension funds might not bother to check on and “enforce” it on others).

So as far as I understand it, it should also apply to 3a accounts that are above the limit only to due having had high equity investment returns.