Retirement saving made simple

The three-pillar system of Swiss retirement saving

The Swiss retirement saving system consists of the first pillar (a state pension), the second pillar (an occupational pension) and the third pillar (private savings). The first pillar is meant to meet basic minimum living costs and is covered by the Old-Age and Survivors’ Insurance and Invalidity Insurance (OASI/IV). The second pillar (an occupational pension) is meant to ensure you can maintain your accustomed standard of living. It consists of pension fund and vested benefit assets and comprises both risk cover and savings contributions that are paid out in the form of a pension or a lump sum. The third pillar is the individual top-up and is made up of 3a tied retirement savings and 3b unrestricted savings.

The first two pillars are mandatory by law. Pillar 3 is voluntary. However, it will become increasingly important in future. At the moment, on average, after retirement the first two pillars only cover about 60% of normal income before retirement. So to be able to maintain your accustomed standard of living in retirement, you now need about 40% of your income to come from other savings, like pillar 3. As the OASI and pension funds are facing fundamental political and legal changes, the percentage of our accustomed standard of living that comes from the OASI and our pension fund is likely to get increasingly smaller, making personal retirement savings ever more important as time goes by. Dealing with personal retirement saving at an early stage gives you a crucial advantage, meaning you will have fewer worries about your financial security in your old age.

The third pillar

The third pillar in the Swiss three-pillar system is personal savings. There are two ways to save in the third pillar:

• You can just put your money in a savings account and enjoy the interest.
• You can invest your money in retirement funds and enjoy the return.

Contributions to pillar 3a enjoy tax advantages, as the amount paid in can be deducted from taxable income. Essentially, capital paid in cannot be withdrawn more than five years before and more than five years after you reach retirement age. But you also have the option of early withdrawal to finance owner-occupied residential property, set yourself up in business or if you leave Switzerland permanently.

Pillar 3b is unrestricted retirement savings. This is much more flexible than pillar 3a, as you are not bound by any conditions. The drawback is that there are no tax breaks. Pillar 3b contains everything that contributes to your financial security in old age. It might be a pension savings plan with a bank, a property or other assets.

So it normally makes sense to invest in pillar three. It’s important to tackle the issue when you’re still young, and even make your first contributions if possible – because even small amounts are worthwhile. The sooner you start, the better protected you will be for the future and you don’t just enjoy the tax break, you also enjoy interest and compound interest, or attractive returns.

3a retirement savings from Bank CIC are a way of matching your retirement solution perfectly to your personal needs. Alongside the 3a retirement account with an excellent interest rate, investing your existing and future savings in retirement funds is simple and flexible. Which solution best fits your needs depends largely on how long your savings can remain invested:

• A 3a retirement savings account is suitable if you are planning to withdraw the balance in the next four years. 
• For longer-term savings goals, putting your savings in a retirement fund is an attractive alternative. The basic investment principle is: the longer you can leave your money invested, the higher your prospects of return.​​​​​​​

A brief explanation of retirement savings

Do you have any questions? Contact our advisory team for an initial non-binding consultation.

Please also note our six tips on pillar 3a.