Last update: 17.09.2024 08:32
How many pillar 3a accounts make sense? From what amount should I open a new pillar 3a account? And: How many pillar 3a accounts can I have? Can I have several pillar 3a accounts at the same bank? We hear these questions again and again. The answers depend on various factors. Discover the five-account rule for pillar 3a and how you can make huge tax savings.
For the sake of simplicity, we will refer to “pillar 3a account” below. In this article, we are referring to all forms of pillar 3a, such as funds, securities, savings accounts or insurance policies. You can find out more about pillar 3a on the topic page.
Why are several 3a accounts worthwhile?
Because of the progressive tax burden. The fact is that lump-sum payments from pillar 3a are taxed at a reduced rate for federal tax purposes. This is also the case in all cantons. Withdrawals from the pension fund, vested benefits account and pillar 3a in the same tax year are added together; the total amount determines the tax rate.
You can compare the capital tax on pension benefits with the income tax on your salary. Like income tax, it is progressive in most cantons. Tax progression means that a higher tax rate applies to higher pension assets than to lower pension assets. In short: the more you withdraw in a year, the higher your tax rate will be.
You can avoid the additional burden of progressive taxation by paying out your pillar 3a accounts in different tax years. This almost always saves taxes.
Yield or security? Both!
bench is the innovative 3a solution that offers you an attractive return and protects your deposit with a guarantee at the same time. Visit the website and see for yourself.
How many pillar 3a accounts can you have? How many pillar 3a accounts are permitted?
The law does not limit the number of 3a accounts – it allows any number of accounts.1 You can open 3a contracts with several banks or insurance companies.
However, this recommendation does not bind the cantons. Individual tax administrations limit the number of accounts and thus restrict withdrawals in tranches. Specifically: Geneva and Zug do not accept more than three accounts. All other cantons have no limit.
How much can I pay in per year if I have several 3a accounts?
The maximum tax-deductible amount does not change if you split the deposit between several 3a accounts. You decide where you pay in how much, but in total you may not pay in more than the maximum amount per year.
When can I close 3a accounts?
You can withdraw money from pillar 3a from the age of 60. You can postpone the withdrawal date until you finally give up your gainful employment, but no later than the age of 70. Each account must be closed in its entirety. Partial withdrawal from the account is not possible.
How many pillar 3a accounts make sense? – The five-account rule for pillar 3a assets
Many people say “five 3a accounts” because of the possibility of drawing from 60. Even though there are actually six years until normal retirement, because the retirement year also counts (age 60, 61, 62, 63, 64, 65).
Our five-account rule is based on the following consideration: from the age of 60, you close an account each year and withdraw capital (in part or in full) from the pension fund in your 65th year. If you work longer than 65, you could close accounts in up to 11 tax periods (age 60 to age 70). However, as this applies to very few people, let’s remember the five-account rule.
When it comes to taxation, the tax authorities don’t care where the pension money comes from. It adds up all declared capital benefits (e.g. pillar 3a, pension fund, vested benefits, insurance) for a year and assesses tax on the total amount. It can be even worse if you are married or living in a registered partnership. Then your payments are assessed together. Example: you receive money from the pension fund and a 3a account and your (spouse) partner dissolves their pillar 3a – holy shit!
Our tip: Plan staggered withdrawals of pension assets
Married couples and registered partners are best advised to make a plan together as to when which assets from the pension fund and pillar 3a should be withdrawn. In this way, they avoid an unnecessary accumulation of payouts in one year.
Staggering the withdrawal of pension assets over time is important from a tax perspective. However, this is only possible if you have several accounts. What’s more, you don’t know today what your life will look like in – let’s say – 25 years’ time.
Five accounts therefore make sense. This way, you remain flexible and can not only smooth out the withdrawal over six tax periods, but also organize it with your (future) partner so that the payouts from the pension are distributed evenly over the years. Smart 😊 If your years are close together, close the smallest 3a accounts together in the same year. The same applies if you say goodbye to your boss at the age of 63. The aim is to achieve the most even capital payouts possible over your joint reference period.
Our tip: the five-account rule for pillar 3a
Gradually build up five 3a accounts with 2-3 different providers. This will allow you to smooth out your capital withdrawal over more than just six tax periods (age 60 to 65). You can also plan with your (future) partner so that your pension payouts are spread evenly over the years. In addition, you have minimized the risk of default because pillar 3a deposits are only privileged up to CHF 100,000 in the event of bankruptcy.
From what amount should I open a new 3a account?
It makes sense to have several accounts so that you break the tax progression later on when you withdraw. The idea is that you receive roughly the same amount of pension payments each year so that the annual tax burden in your canton is roughly the same. How large an account can or should be in order to get off “best” in tax terms depends on the progression of your canton of residence at the time of withdrawal.
- In cantons with strong tax progression even for small capital payments , it makes sense to have as many accounts as possible. These include Appenzell-Innerrhoden, Aargau, Geneva, Lausanne, Lucerne, Solothurn and Schaffhausen.
- In cantons with strong tax progression from payouts of around CHF 50,000, several accounts make sense. These include Basel, Bern, Fribourg, Jura, Neuchâtel, Nidwalden, Schwyz and Zug.
- In cantons with little tax progression up to CHF 100,000, it also makes sense to have several accounts. These include: Appenzell-Ausserrhoden, Basel Landschaft, Glarus, Graubünden, Obwalden, Uri, St. Gallen, Thurgau, Ticino, Valais and Zurich.
From our point of view, you are in a good tax position in all cantons with accounts that do not exceed CHF 50,000 at the time of withdrawal. After all, you don’t know today whether you will be able to withdraw your 3a account in your current canton of residence at a later date? That’s why you should gradually build up five accounts in accordance with the pillar 3a five-account rule. And this is how you proceed:
- Either you build up a new account every year. You then pay into account 1 in year 1, account 2 in year 2, account 3 in year 3 and so on. In the 6th year, you pay into the smallest account again, which will usually be account 1.
- Or you can first save in an account for four or five years with the maximum pillar 3a amount (if possible) and then open a new account.
Our tip: open a new pillar 3a account every 5 years
Many people do not start pillar 3a until they are 30 or later. This leaves 30-35 years or (according to today’s maximum amount) around CHF 250,000 potential for 3a payments. If we assume that your 3a capital will grow by 6-7% per year from “today” until you retire with a 3a securities investment, it makes sense to open another account after 4 years of paying in the maximum amount (around CHF 28,000).
How many pillar 3a accounts can you have with the same bank?
As many as you like – except in the Jura. This is because the people of the Jura accept a maximum of two 3a accounts per bank. You can easily meet this requirement by opening another pillar 3a account with another bank or a digital 3a provider. Problem solved.
How much money is safe in pillar 3a accounts?
Several 3a accounts with at least two providers also make sense from a risk perspective. This is because assets in pillar 3a accounts are not covered by deposit protection. In the event of bankruptcy, such assets are privileged up to CHF 100,000 per customer and pension foundation. The privileged status applies in addition to and independently of the individual pension fund member’s other assets at the bank (e.g. a savings account).
Related content
Pillar 3a deposit protection: money safe in the event of bank bankruptcy?
What about the security of pillar 3a in the event of a banking crisis?
And how secure is the vested benefits account?
Is there depositor protection for pillar 3a?
Discover some surprising answers.
Summary: How many pillar 3a accounts make sense?
Several pillar 3a accounts are worthwhile because of the progressive tax burden. According to the five-account rule for pillar 3a, you should set up five 3a accounts with at least two different providers. Only Geneva and Zurich limit you to a maximum of 3 accounts, all other tax authorities accept any number of 3a accounts. This means you can later withdraw the capital you have saved in different tax years and thus legally avoid progressive taxes.
Yield or security? Both!
bench is the innovative 3a solution that offers you an attractive return and protects your deposit with a guarantee at the same time. Visit the website and see for yourself.
- FTA circular no. 18 on the tax treatment of pillar 3a pension contributions ↩︎
