The Pillar 3a Tutorial

Dude, just count pillar 3a as part of your nest egg. So you will have lower dividends and higher sales until you reach 60, so what? Imagine all the people who invest in accumulating ETFs. They ONLY get money from selling and get no dividends. It really doesn’t matter if the money is stuck in 3a, because you will not need it anyway.

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You begin with selling other shares to complement your dividends until you can touch 3a

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I have now read through the entire thread and there seems to be one argument missing in my opinion:

@nugget mentioned many times, that it comes down to tax savings VS the fact that the money is locked away. There is a third argument for the 3a pillar with VIAC, which is further diversification and risk spreading. There are also threads on this forum about the risk of going with only one Broker (IB) and whether it makes sense to split the cash and go with 2-3 brokers. The 3rd pillar can in my opinion be seen as one additional basket to put the eggs in.

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Totally agree with that and that’s the main reason why I actually use 3rd pillar. I feel safer with this.

it may have a point but it’s not big, if you check on the underlying assets. Apart from the CSIF funds that you cant get as private investor, it’s the same etfs as you can buy with IB or other brokers. Paying excessive fees for the same underlying isn’t my idea of diversification. on top of that (in my view) th US-based vanguard funds outperform any underlyings of swis 3a pillar products.

and for life insurence: superb diversification! but an entirely horrible thing to invest in…

@nugget I’m not talking about diversification of the securities, but rather of not entrusting a single broker with your entire fortune and life savings for decades. This is the thread I mentioned before: Interactive Brokers - all eggs in one basket?

and as I see it, if IB should disappear, for whatever reason, maybe at least VIAC will still be around with the 3rd pillar money I put aside. It’s just my paranoia, I undertand if others see it differently :slight_smile:

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Does anyone have experience with 3a contributions while being taxed a source in Zurich?

I’ve read that reclaiming the taxes is a simple process. I think the form to be used is Antrag auf Neuveranlagung der Quellensteuer at https://www.steueramt.zh.ch/internet/finanzdirektion/ksta/de/spezialsteuern/quellensteuer/arbeitnehmende_arbeitgebende/formulare_merkblaetter.html

It has a field named Vermögenserträge, which probably means investment income.Does it mean that you have to send them papers for every bank interest and every dividend, which would be equivalent to making a full asset declaration? That doesn’t seem to be worth the hassle.

Also is there any risk that they make you do a full declaration if you are close, but still below, to the limits of 120000 income, 200000 assets or 2500 investment income?

In Zurich city the taxes are much higher with the normal declaration than tax at source, so it seems very risky just for a few hundred deduction for 3a pillar to risk paying thousands more in taxes, it’s like playing with fire.

You might be right about being taxed at the source. I guess you can get an estimate using comparis.ch for the taxes and removing the 6700CHF 3a contribution from your revenue to see the difference and see if it is worth it.

Yes that should be the field. I took me some time to understand it but with software provided (online version as well) it calculates all the dividends for you. You only need to enter what security you bought and sold during the year. All the rest is calculated automatically by the tax tool so it is actually not that much work.

Yes, I did use comparis and found a big difference between the tax at source and the regular declaration rates, so it’s clearly worth it. :slight_smile: Even more since you confirmed my fears that you have to declare dividends there, close to a full tax declaration.

So I’ll skip 3a this year and wait for next year when I’ll have to do a declaration anyway, and probably have to look to move to a lower tax town than Zurich.

Hi all,

at which point do you decide to start feeding your 3rd pillar money into a 2nd (or 3+ etc.) 3rd pillar account?

So far I have ~24k with VIAC, am 30 y/o and could either use that money to pay for mortgage in the future (probably not in <5-10y), or leave it until retirement/leaving CH (probably not <20y).
Assuming 6% growth (random number, with Global 100 strategy currently), the final amounts would be:

  • 43k after 10 years
  • 77k after 20 years

I’ve seen the tax bar chart in nugget’s post, and started thinking at which threshold would it be clever to “cut the pipe” into this existing one and start feeding another (or more with different portfolios). :slight_smile:

Your thoughts/strategies?

Cheers and thanks,
D

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Hi dbu,

What I did is open 5 accounts at once (at viac) and put in an equal amount in all five.

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What was the reason for this?

Main reason for multiple accounts: “Kapitalauszahlungssteuer” as oulined in the article below.

Main reason for 5 accounts: All accounts have to be withdrawn within 5 years.

My personal reason for 5+ accounts: You would gain additional flexibility which accounts to combine when closing them. Benefits might be marginal but I also do not see any negative effects.

Cheers, Mr. Lean Life

For info, this article is no more mandatory since the 1 october 2017. An exception has been included under the Article 19a FZG

Hi all!
I’m considering to contribute to my 3A (better late than never, right? :smiley: )
I’ll probably use Finpension for now, because I can open my account online, send them the money on Monday, which they receive before the end of this year.
Two questions:

  1. When do I usually get the form (which I have to include to my tax declaration) about my contribution? I guess it should arrive before March, right?
  2. I’m using the following online calculator to determine my tax burden*: https://swisstaxcalculator.estv.admin.ch/#/calculator/income-wealth-tax . Is this calculator reliable? I know it’s on the official site, but each online calculator shows me different taxes. I need to know which is outdated or trustworthy.

*: I moved to CH this january and this is my first time doing this. I’m taxed at source, but have an income >120k, so I have to fill tax declaration anyways.

Thanks,
Swinkx

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Which other calculators shows different rate? Looks roughly correct, but you could check your canton’s tax office website as well.

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Hi,
Would you know where I can read more to close my 3A insurance to migrate to VIAC or Finpension? Thank you

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For example at viac:

After you have downloaded our app and completed the opening process, you will enter your personal VIAC cockpit. There you click on the function element “Deposit”, select “Transfer” and you will see your ready-made transfer order, which you can send to a desired e-mail address. All you need to do is print this order, complete it with the details of the existing pension relationship and the number of the retirement savings account to be closed and send it to the Terzo Pension Foundation.

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The calculation of the wealth tax in the wiki post doesn’t look correct to me. Let’s assume a single tax resident in the city of Zurich without church taxes (total 219%).

  • With a taxable net worth of CHF 308k, the marginal wealth tax rate is 0.22% up to CHF 694k.
  • With a taxable net worth of CHF 694k, the marginal wealth tax rate is 0.33% up to CHF 1.3M
  • With a taxable net worth of CHF 1.3M, the marginal wealth tax rate is 0.44% up to CHF 2.2M

The marginal wealth tax rate is what you save each year on your 3a assets by having your money in 3a instead of taxable accounts. If it crosses into the next tax bracket, you need to calculate a mixed tax rate, however, unlike what the current graph in the wiki would suggest, the wealth tax in Zurich is progressive. The maximum marginal wealth tax rate is 0.66%.

I.e., depending on your tax residency, the savings in wealth tax are far from negligible if you have significant taxable assets as well. I think of the wealth tax savings as roughly compensating the higher fees of Viac or finpension (compared to low cost ETFs at an inexpensive broker).

Haven’t looked at / used the Wiki, but totally agree with your conclusion. I’m in wealth tax hell, and my wealth tax marginal rate is over the Viac fee. Which leads me to emphasise that the wealth tax marginal rate should be considered, not just the wealth tax rate.