Pillar 3b: flexible pension planning explained
Pillar 3b, or flexible pension planning, is the flexible complement to the Swiss pension system. Unlike pillar 3a, it imposes neither a contribution limit nor withdrawal conditions. A complete overview of this often overlooked form of pension planning.
What is pillar 3b?
Pillar 3b represents all individual savings that do not fall within the framework of pillar 3a. It is called "flexible pension planning" because it is not subject to any specific legal constraints regarding contributions or withdrawals. It is the natural complement to pillar 3a for those who wish to save beyond the legal limit or who do not meet the conditions for accessing 3a.
Pillar 3b encompasses a wide variety of financial and insurance products:
- Mixed life insurance: combines savings and death coverage, with guaranteed capital at maturity
- Pure risk life insurance: death or disability coverage without a savings component
- Traditional savings accounts: bank deposits without specific tax advantages
- Investment funds: equity, bond or mixed investments
- Real estate: acquisition of property as pension provision
- Other investments: gold, commodities, structured products, etc.
Who can subscribe to pillar 3b?
One of the great advantages of pillar 3b is its universal accessibility. Unlike pillar 3a, which requires gainful employment subject to AHV/OASI, pillar 3b is open to any person residing in Switzerland, without any professional activity requirement:
- Employees and self-employed persons (as a complement to pillar 3a)
- Persons without gainful employment (students, homemakers)
- Retirees wishing to continue saving
- Persons not eligible for pillar 3a
Advantages of pillar 3b
No contribution limit
While pillar 3a is limited to CHF 7 258.- per year (for employees), pillar 3b imposes no limit. You can contribute as much as you wish, making it an ideal instrument for people with high savings capacity.
Total withdrawal flexibility
Pillar 3b capital is available at any time. You do not need to wait until retirement or justify a legal reason to access your funds. This liquidity is a major asset for people who need flexibility.
Freedom to choose beneficiaries
Unlike pillar 3a where the order of beneficiaries is set by law, pillar 3b allows you to freely designate beneficiaries in case of death. You can favour your unmarried partner, a friend, an organisation or any other person of your choice.
No activity requirement
Being open to all Swiss residents, pillar 3b is the only form of 3rd pillar accessible to persons without professional income.
Taxation of pillar 3b
The taxation of pillar 3b is more complex than that of 3a and varies considerably depending on the canton and type of product:
Deductibility of premiums
At the federal level, 3b life insurance premiums are partially deductible within the framework of the global lump sum for insurance premiums and savings interest. This lump sum is CHF 1,800.- for persons affiliated with a 2nd pillar and CHF 2,700.- without a 2nd pillar (amounts for single persons).
At the cantonal level, deductions vary significantly. Some cantons such as Geneva and Fribourg offer more generous deductions for life insurance premiums. Check with your cantonal tax authority.
Taxation of capital and income
Unlike pillar 3a, pillar 3b capital is not exempt from wealth tax. Interest on savings accounts is subject to income tax. For single-premium life insurance, the benefit is subject to a tax on returns (difference between the benefit and premiums paid).
However, periodic premium life insurance (regular payments over at least 5 years) benefits from more favourable tax conditions: the capital benefit is exempt from federal income tax if certain conditions are met (minimum duration of 5 years, conclusion before age 66, maturity after age 60).
Advantages in case of death
Life insurance 3b benefits paid in case of death may receive favourable tax treatment. Depending on the canton and the relationship with the beneficiary, these benefits may be partially or totally exempt from inheritance tax.
Pillar 3b vs pillar 3a: comparison
| Criterion | Pillar 3a | Pillar 3b |
|---|---|---|
| Limit | CHF 7 258.- (employee) | None |
| Tax deduction | Full | Limited / variable |
| Wealth tax | Exempt | Taxed |
| Withdrawal | Regulated | Free |
| Beneficiaries | Legal order | Free choice |
| Access condition | Gainful activity | None |
For an in-depth analysis, see our guide pillar 3a or 3b: which choice for your situation. You can also compare bank or insurance solutions for your pension planning.
When to choose pillar 3b?
Pillar 3b is particularly suited in the following situations:
- You have already reached the 3a limit: 3b allows you to continue saving for retirement beyond the legal maximum.
- You do not have access to pillar 3a: if you do not exercise a gainful activity, 3b is your only 3rd pillar option.
- You need flexibility: if you might need your funds before retirement, 3b offers total liquidity.
- You wish to protect an unmarried partner: 3b allows you to freely designate the beneficiary, including a cohabiting partner.
- You wish to plan your estate: 3b offers wealth transfer tools with potential tax advantages.
Pillar 3b as life insurance
The most common form of pillar 3b is life insurance. It combines a savings component and death coverage. Life insurance 3b exists in several variants:
- Mixed life insurance: savings + death coverage, with guaranteed capital at maturity
- Unit-linked life insurance: the savings component is invested in investment funds for higher return potential
- Pure death insurance: no savings component, only protection in case of death
Optimal strategy: combining 3a and 3b
The best approach generally consists of combining both pillars. Start by maximising your pillar 3a contributions to benefit from the full tax deduction, then complement with a pillar 3b if you have additional savings capacity. This strategy allows you to enjoy the tax advantages of 3a while benefiting from the flexibility of 3b.
To determine the ideal split between 3a and 3b, request a free personalised quote. Our advisors will analyse your situation and propose the most suitable pension strategy.