Saving for children with the 3rd pillar

Building capital for your children is a major concern for parents in Switzerland. While pillar 3a is reserved for persons earning AHV/AVS income, pillar 3b offers flexible and advantageous solutions for saving for your children's benefit. Discover the available options and the most effective strategies.

Why save for your child with the 3rd pillar?

With the rising cost of education, driver's licenses and first homes, building capital for your children has become a wise financial choice. The 3rd pillar, particularly pillar 3b, offers several advantages:

• Guaranteed capital: with life insurance, capital is paid even in case of the parent's death
• Savings discipline: regular payments guarantee capital accumulation
• Family protection: premium waiver in case of the subscriber's death or disability
• Flexibility: choice of duration, amount and beneficiary

Savings options for children

1. Endowment life insurance (pillar 3b)

Endowment life insurance (or mixed life insurance with fixed term) is the most suitable product for saving for a child:

• The parent takes out the contract and pays the premiums
• The child is designated as beneficiary at maturity
• Capital is paid at a fixed date (e.g., the child's 18th or 25th birthday)
• In case of the parent's death, the insurer covers the remaining premiums and the capital is guaranteed
• Generally modest but secure returns

2. Fund-linked life insurance (pillar 3b)

For parents willing to accept more risk in exchange for potentially higher returns:

• Premiums are invested in investment funds
• Higher return potential over the long term
• Capital is not 100% guaranteed (depends on fund performance)
• Suitable for long time horizons (15-20 years)

3. Youth savings account

As a complement to pillar 3b, a youth savings account offers:

• Total flexibility for deposits and withdrawals
• Often enhanced interest rates for young people
• No protection in case of the parent's death
• Ideal for small amounts or supplementary savings

How much to save for your child?

Here are some projection examples for a regular monthly payment, with an average annual return of 2%:

Use our 3rd pillar calculator for a simulation tailored to your situation.

Tax aspects of saving for children

The taxation of child savings via pillar 3b varies by canton:

• Premium deduction: in some cantons, 3b life insurance premiums are partially deductible (as part of insurance premium deductions)
• Capital taxation: at maturity, the capital paid may benefit from advantageous tax treatment depending on the contract conditions
• Wealth: the surrender value of the life insurance is declared in the subscriber's wealth

To optimize taxation, see our guide on 3rd pillar tax deduction.

Comparison of child savings products

The best strategy often involves combining several products: a 3b endowment insurance for security and protection, supplemented by an investment fund for returns. See our page on the differences between pillar 3a and 3b for more details.

3b tax deduction by canton: what to know

Unlike pillar 3a, whose deduction is identical in all cantons, the deductibility of 3b life insurance premiums varies by canton of residence. 3b premiums fall under the insurance premium deduction, whose ceiling depends on family status and canton.

General principles

• The insurance premium deduction covers health, accident, life and other private insurance premiums
• The deductible amount is capped and includes all combined insurance premiums (not just 3b)
• Taxpayers with children benefit from additional deductible amounts

Cantonal ceiling examples (married couple with 2 children)

• Geneva: maximum insurance premium deduction of approximately CHF 6'200 (couple) plus CHF 1'550 per child
• Vaud: maximum deduction of approximately CHF 7'000 for a couple plus CHF 1'300 per child
• Zurich: maximum deduction of approximately CHF 5'200 for a couple (with 2nd pillar) plus CHF 1'300 per child
• Bern: maximum deduction of approximately CHF 6'000 for a couple plus CHF 1'200 per child
• Fribourg: maximum deduction of approximately CHF 6'400 for a couple plus CHF 1'500 per child

Note: these ceilings are shared with health insurance premiums and other private insurance. If your health insurance premiums already exceed the ceiling, the 3b premium will not generate additional tax deduction. See our guide on 3rd pillar tax deduction for updated amounts.

Estate planning and child savings

Capital built for a child via pillar 3b has estate planning implications that should be anticipated.

Asset ownership

As long as the 3b contract is in the parent's name, the assets are part of the parent's estate. In case of the parent's death, the capital is paid according to the contract's beneficiary clause, generally to the child. This payment occurs outside the estate for life insurance, meaning it is not subject to ordinary inheritance sharing rules.

Impact on forced heirship

If you have multiple children, a 3b endowment insurance taken out for only one child may create an imbalance regarding forced heirship shares:

• Forced heirship protects each child at 50% of their legal share (since the 2023 inheritance law revision)
• 3b capital paid to a specific child may be considered an advance on inheritance in certain cases
• To avoid conflicts, you can take out equivalent contracts for each child or specify in a will that the 3b capital is charged to the disposable portion

Gifts and advances on inheritance

If you wish to transfer capital to your children during your lifetime, pillar 3b is an effective vehicle. At contract maturity, the capital paid to the child may qualify as a gift. In Switzerland, gifts between parents and children are tax-exempt in most cantons (Geneva, Vaud, Zurich, Bern, etc.). In the rare cantons that tax gifts between parents and children, the rates are generally very low.

For an optimal estate strategy, combine pillar 3b with a clear will and consult a notary or estate planning specialist. Also discover how the subscriber's death is handled in our guide on 3rd pillar in case of death.

Child savings strategies

1. Start early: the earlier you start, the greater the effect of compound interest
2. Combine products: endowment life insurance for security + savings account for flexibility
3. Adapt amounts: start with a modest amount and increase gradually if your finances allow
4. Think about protection: favor a contract with premium waiver in case of death or disability
5. Involve the child: as soon as they work (apprenticeship, summer job), encourage them to open their own pillar 3a

When your child becomes an adult

As soon as your child starts working and earns AHV/AVS-subject income, they can open their own pillar 3a and benefit from tax advantages. This is the ideal time to pass on good pension-savings habits. See our guide 3rd pillar for young people for more information.

To find the best savings solution for your children, request a personalized offer and compare 3b products suited to your situation.

Related guides

• Pillar 3b guide — the ideal pillar for saving for your children
• 3rd pillar life insurance — endowment insurance for children
• Pillar 3a or 3b? — understand the differences
• 3rd pillar for young people — when your child starts working
• 3rd pillar returns — compare performance to grow savings