Pillar 3b

In Switzerland, the term pillar 3b refers to a category of private retirement savings which are not tightly regulated and are not tax-privileged. This category includes 3b life insurance policies, 3b retirement funds and 3b retirement accounts.

There are major differences between the pillar 3b and pillar 3a categories of retirement savings: Contributions made to 3b solutions are not tax deductible; there is also no limit on how much can be contributed to 3b retirement savings or to withdrawals of 3b assets; some 3b solutions can be held by individuals who do not reside in Switzerland. The only limitations on the size and frequency of contributions or withdrawals are those set out in the terms and conditions of individual 3b life insurance policies, investment funds or retirement accounts.

3a assets are held in escrow until you either reach retirement age, buy a home or leave Switzerland permanently. 3a assets can be transferred from one 3a solution to another (from a life insurance policy to a 3a retirement account or a 3a retirement fund, for example) ahead of retirement, but they cannot be cashed out. 3b assets, on the other hand, can be cashed out at any time.

In Switzerland, life insurance typically falls under either the 3a or 3b categories. In the case of whole life insurance products, the category dictates the premiums which can be paid, the conditions under which the benefit can be paid out, and who can be names as a beneficiary.

Premiums paid for a 3a life insurance policy are tax-deductible, while those paid for a 3b policy are not. 3a policies are only available to employed or self-employed individuals in Switzerland, while 3b policies are available to anyone who qualifies, including unemployed individuals and individuals residing outside of Switzerland.

The beneficiaries of 3a policies are limited to legal heirs, while any person or entity can be named as beneficiary of a 3b policy. 3a life insurance policies mature when you reach legal retirement age, while 3b policies can mature after you reach legal retirement age. The cash value of 3a policies is held in escrow until you reach retirement age, while 3b policies can be cashed out at any time or borrowed against using policy loans.

The same rules apply to Swiss term life insurance products, which also fall under either the 3a or 3b categories. The only difference is that term life insurance policies do not mature, but only pay out a benefit if you die within the insurance term.

More on this topic:
Private retirement fund comparison
3a retirement account comparison
Term life insurance comparison
Swiss life annuities explained

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