Last update: 17.09.2024 08:31
You save diligently in pillar 3a, but have you ever thought about what happens to your pillar 3a in the event of your death? Who benefits from your hard-saved money if you die unexpectedly? The answer might surprise you. Because pillar 3a inheritance follows its own rules. Find out now how you can ensure that your loved ones benefit.
What happens to pillar 3a in the event of death?
Imagine you have paid into your pillar 3a for years, but you die unexpectedly before retirement age. What then happens to your pillar 3a? Don’t worry, the money won’t be lost. After your death, the pension foundation will dissolve your pillar 3a and pay it out to your beneficiaries.
But there is one important point you should be aware of: Your pillar 3a assets are not included in your estate. They are bequeathed separately, regardless of your will or statutory succession. In concrete terms, this means
- Your pillar 3a is not part of the general division of inheritance.
- It is paid out to the beneficiaries irrespective of testamentary provisions.
- Even if you are in debt, creditors cannot access your pillar 3a assets.
The payment is made directly to the beneficiaries as a one-off capital payment. Who exactly receives the money is determined by the so-called beneficiary order. This order is regulated by law, but – and this is important to know – you can adjust it within certain limits.
Who will receive my pillar 3a in the event of my death?
Article 2 of the beneficiary order in the BVV3 Ordinance specifies who inherits your pillar 3a assets in the event of death . It provides for a cascade order: If there are no beneficiaries in first place, those in second place move up and so on until someone in the order of precedence comes first. If there are several people in the same rank, the allocation is made on a head-to-head basis.
1. your surviving spouse or registered partner comes first
You receive the entire credit balance, i.e. 100%. Point. Children are in the second ranking group; they can only be beneficiaries if there is no entitled person in the first ranking group. If you are divorced and remarried, your (current) spouse is the first beneficiary. If you are no longer married after the divorce, your children will be the beneficiaries.
2. if there are no beneficiaries in the first tier, the credit balance goes to persons in the second tier
The persons in the second rank include:
- your children
- or the natural persons who have received significant support from you,
- or the person who has lived with you continuously for the past five years until your death or who is responsible for the maintenance of one or more joint children (i.e. “cohabiting partner”)
3. if there are no such persons, your parents, siblings or other heirs are beneficiaries in the third, fourth and fifth ranks.
Which beneficiaries can I adjust?
The order of the beneficiaries from the first and second rank cannot be changed. For the beneficiaries from rank 2 and rank 3-5, you can determine the entitlements and their shares. According to the Federal Social Insurance Office, however, the complete exclusion of a beneficiary is not permitted, so in practice a small proportion is chosen if, for example, a partner is to be placed in a better position than children.
- Example 1: Max is married and has two children. In the event of death, his better half receives the entire pillar 3a assets, as she is the first in line. His offspring will not receive any payout from pillar 3a. However, the value of the pillar 3a assets is taken into account when calculating their compulsory portion claims.
- Example 2: Moritz is divorced and also has two children. In the event of his death, his children receive his pillar 3a assets.
Our tip: Enter your life partner, otherwise there is nothing
Life partners in an unregistered partnership are not automatically included in this legal order. You must take action here if you want to name your partner as a beneficiary. In the second place, you can name your cohabiting partner as a beneficiary, even if you have children.
Are the order of beneficiaries of pillar 3a and occupational benefits insurance the same?
No. It is true that mandatory and non-mandatory occupational benefits insurance (see BVG) and the vested benefits regulation (see FZV13) also have a beneficiary order in the event of death. However, these are not identical to those of Pillar 3a. The reason for this is that the two pillars pursue different purposes.
The BVG provides for survivors’ benefits in the mandatory pension scheme. The group of eligible survivors is limited and all are at the same level; there is no cascading order. If the beneficiaries meet the requirements of Articles 19, 19a and 20 BVG, they receive benefits.
For the non-compulsory portion, the pension funds can provide for further beneficiaries in their regulations in a cascade order (Art. 20a para. 1a to c BVG), such as de facto cohabiting partners, parents, siblings or children who are “left empty-handed” in the compulsory pension scheme. Who receives your vested benefits assets? This depends on Article 15 FZV – we have examined this in another specialist article. In principle, a cascade order applies, but you have a lot of leeway and can determine the shares of all beneficiaries at your own discretion.
Find the best pillar 3a
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How are beneficiary order 3a and the will connected?
Inheritance law and pension law have developed independently of each other. Inheritance law does not take into account the pension needs of surviving dependants because inheritance law only regulates the transfer of assets. Nevertheless, the revised inheritance law, which came into force on January 1, 2023, brings relevant adjustments for pillar 3a. This is because it has been newly stipulated that pillar 3a assets explicitly do not form part of the estate, but flow directly to the beneficiaries instead of the estate. However, Pillar 3a entitlements are added to the compulsory portion, with 3a policies being valued at their surrender value.
However, the revision of inheritance law did not make any adjustments to the order of beneficiaries. As a result, the beneficiaries of pillar 3a do not necessarily have to be the same as the heirs. Therefore, an important note: If the 3a payment violates compulsory portions, you as the beneficiary must make compensation payments to the other beneficiaries entitled to a compulsory portion. This can happen if the deceased leaves few assets other than the 3a assets.
So you can write whatever you want in your will. The 3a beneficiary order regulates who receives the money from your 3a.
Our tip: Check beneficiary order 3a according to life events
After significant events (such as marriage, divorce or the birth of a child), check whether the beneficiary order is still right for you. This will ensure that the right people benefit from your 3a pension in the event of an emergency.
How can the beneficiary order 3a be adapted?
You have the option of adjusting the statutory beneficiary order 3a within certain rules. You must currently observe these points:
1. the first group of beneficiaries includes only your spouse or registered partner. These persons have absolute priority. You can therefore not make any changes here and you cannot include any cohabiting partners – not yet. More on this later.
2 In the second group, you have more design options. Here you can define the exact entitlements. In other words, who should get how much. Please note that you cannot set anyone to “zero”.
3. in the third group (i.e. for parents, siblings, other heirs) you can change the order of beneficiaries and the quotas (who should receive how much) as you wish.
To make these changes, you must submit a written declaration to your pension fund. It goes without saying that your change must comply with the legal requirements. Unfortunately, there is a widespread misconception that you can freely determine who receives Pillar 3a in your will. The pension foundation only pays out according to the order of beneficiaries.
Our tip: Register your life partner even before the 5-year deadline expires
Even if the 5-year period of uninterrupted cohabitation has not yet expired, you can already register your partner as a beneficiary with your pension foundation. The done thing is done.
What tax aspects need to be considered for pillar 3a in the event of death?
There’s a saying that only two things in life are certain: death and tax. And in the case of our Pillar 3a death benefit, unfortunately, both are certain – although you are probably less interested in the tax.
When your pillar 3a is paid out in the event of death, capital payment tax applies. This means that in the event of death, Pillar 3a is taxed separately from the beneficiaries’ other income at the reduced rate of lump-sum payment tax. The exact amount of the tax rate varies depending on the canton. The calculation is made irrespective of the degree of relationship between the account holder and the beneficiary.
Depending on the canton, an inheritance tax of 4% to 40% is payable on the inheritance. Some cantons (Graubünden, Nidwalden, Obwalden, Schwyz, Uri and Zug) do not levy inheritance tax.
What does the Federal Council propose for the adjustment of beneficiary regulation 3a?
The revision is intended to make the 3a beneficiary regulations more flexible and better align them with today’s lifestyles. As a result of postulate 22.3220 Nantermod, the Federal Council has recognized that the current regulation of pillar 3a in the event of death does not always correspond to the realities of life today. Finally, the order of beneficiaries has remained unchanged since BVV 3 came into force on January 1, 1987.
However, the problem regularly arises in patchwork families that the surviving spouse or registered partner has an advantage over the children of the deceased person. This is because there is currently no way of avoiding the preferential treatment of the spouse or registered partner. This is to the detriment of their own children.
The proposals in the June 2024 report on “Flexibilization of the beneficiary order in Pillar 3a” therefore include the following points
- The right to choose your benefits: You have the choice of whether you want to change anything. If you do nothing, the spouse or registered partner remains the sole beneficiary.
- Flexibility in the order of precedence: You can now move one or more beneficiaries from the 2nd rank to 1st rank. For example, your own children would no longer be at a disadvantage compared to the surviving spouse. You could also raise your cohabiting partner to the first rank. You can also change the order of precedence for people in the third group.
- Determination of shares in the 1st rank: You can now also divide the claims of the beneficiaries for the 1st rank. If no other arrangement is made, the allocation is made according to heads.
Our tip: Monitor developments
Keep an eye on developments in this area. As soon as the proposed changes come into force, you should review your order of beneficiaries 3a and adjust it if necessary. The best way to do this is to sign up for our newsletter, in which we occasionally provide information on relevant pension changes.
Summary: Pillar 3a in the event of death – who inherits?
Today, your dependants benefit from your pillar 3a assets in the event of your death according to a well-defined order of priority. This gives preference to spouses or registered partners:
- Rank 1: Spouse or registered partner. You get everything. If you are married or living in a registered partnership, you don’t need to do anything at the moment. Because – at the moment – you can’t change anything.
- Rank 2: Children, supported persons or long-term partners. They benefit if there is no one in the first rank. The plan is that in future you will also be able to place people from this group in the first rank and determine their share.
- Ranks 3, 4 and 5: Parents, siblings or other heirs. They receive something if there are no persons in rank 1 or rank 2.
Under current law, you can adjust the ranking in the second and third groups. The payout is taxed as income at a reduced rate for the recipient. You should review your order of beneficiaries regularly, especially after significant life events. You should inform your 3a pension foundation directly of any adjustments. It will provide you with a corresponding form. The Federal Council is planning changes to make the regulations more flexible and up-to-date. Keep up to date with these developments in order to optimize your pension planning.
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