Can I keep my 3a life insurance if I become unemployed?

Can I keep a Swiss 3a whole life insurance policy when I become unemployed? I took out a 3a whole life insurance policy some years ago when I was young and single. Recently I got married and both of us want to have kids. Since my wife is a career woman and I love kids, I will most likely be the one to quit working to care for the baby.

From what I understand, only employed people can save with the 3a category. Will I have to surrender my life insurance policy when I become unemployed?

Hi there,

In order to contribute to the Swiss 3a category of retirement savings, you must earn an income. As a stay-at-home dad without an income, you will not be able to continue contributing. That means you will have to surrender your 3a whole life insurance policy, which almost always results in a significant loss.

This is not the case with term life insurance which does not have any cash value. If you hold a 3a term life insurance policy and you become unemployed, you can keep your policy. You simply will not be able to claim the 3a tax deduction for premiums.

Best regards from Moneyguru

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Interactive term life insurance comparison

I'm looking for an investment which I can use to save for my old age. Capital insurance and annuity insurance seem to be the right fit. Real estate is often said to be a good retirement investment, but isn't in my financial reach. Would you recommend capital insurance and annuity insurance?

The insurance policies marketed as capital insurance, savings insurance and retirement insurance in Switzerland are all permanent life insurance with living benefits.

This kind of insurance typically combines a guaranteed benefit payable at retirement with a variable return. Depending on the structure of the life insurance, the return may be interest paid by the insurance company on the cash value of the policy, or it may be derived from the investment of all or part of the cash value in a certificate or mutual funds.

Permanent life insurance is a relatively secure investment because the insurance company is obligated to pay out the guaranteed benefit with very few applicable exclusions. However, the guaranteed benefit is typically lower than the sum total of the premiums you pay. You will only recover your premiums and/or earn a return if interest or investments perform well.

Another problem with permanent life insurance is that you are tied into an insurance contract. Over the first years of a policy's life in particular, the guaranteed benefit is generally very low in relation to total premiums paid. This means you will likely lose money if you surrender your policy ahead of retirement. Committing to a contract for many years or even decades is risky because it is difficult to predict what may happen financially over that long term.

When you save money in a pillar 3a retirement account, the sum total of deposits paid in is guaranteed by the retirement foundation. You can transfer your pillar 3a assets to a different pillar 3a solution at any time.

Many permanent life insurance policies with living benefits bundle cash value insurance with term life insurance. However, if you need life insurance, taking out stand-alone term life insurance and using pillar 3a savings accounts to save is generally more favorable.

If you want to invest pillar 3a assets to achieve a higher return than the interest paid on retirement accounts, using a pillar 3a retirement fund for that portion of retirement assets is generally more favorable than using permanent life insurance.

Life annuities are a form of insurance which guarantees a lifelong annuity from the time the policy matures (when you reach a predefined age). This insurance can be taken out as a cash value insurance or as an insurance-only product.

Premiums for cash-value life annuities are high in relation to the annuities you receive after maturity, and there are few cases for which this insurance makes financial sense. Premiums for insurance-only life annuities are more favorable, and in some cases this kind of insurance can be used to bridge gaps in pensions or retirement savings.

There are tax considerations related to life annuities. Read the guide to life annuities in Switzerland for more information.

Lost my job recently and trying to figure out what happens with my 3a. I heard you can pause payments, but I really don’t wanna mess things up long-term.

The pillar 3a is a tax-privileged category of retirement savings. There are pillar 3a savings accounts, retirement funds, asset management services, and life insurance products. What makes these different from regular financial products is that your money is held in trust by a retirement foundation.

There is no specific obligation to make payments into the pillar 3a. If you use a pillar 3a savings account, retirement fund, or asset management service, you can simply stop making additional payments at any time you choose. Your existing pillar 3a assets will remain as they are, and continue to earn interest or returns.

If you use a pillar 3a life insurance product, things are more complicated, as the terms and conditions of your insurance policy add another layer of limitations. As a general rule, insurance companies give you the option of putting your insurance premiums on hold. In this case, the existing equity (cash value) that you have already accumulated in your policy will remain intact, but you will not build additional equity in your policy while your premiums are on hold. We at moneyland.ch generally recommend avoiding pillar 3a savings products based on insurance because these products are often complicated.

When you become unemployed, you can continue making payments into the pillar 3a as long as you are receiving benefits from Swiss social unemployment insurance, as the unemployment benefits are subject to OASI contributions. If you do not earn an income on which you have to pay OASI contributions (a salary or Swiss unemployment benefits, for example), then you cannot contribute to the pillar 3a until you begin receiving an eligible income again. Your existing pillar 3a benefits will remain intact. If you use a pillar 3a solution based on life insurance, the insurance company will generally put your insurance policy on hold, or give you the option of converting it into a pillar 3b policy (a normal life insurance policy outside of the pillar 3a).