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Understanding the Third Pillar: Voluntary Private Savings and Insurance Plans

The third pillar of the Swiss social system includes voluntary private savings and insurance plans. These plans are not mandatory, but offer a way to save and invest individually for your future. These plans include life insurance, disability insurance and savings plans. To prepare for the future, younger people should consider the benefits of these plans and decide if they fit their personal financial goals.

Private savings and insurance plans offer several benefits. They allow you to build additional capital to be prepared for unforeseen expenses or to meet long-term financial goals. They also provide financial protection in the event of illness, disability or death. Taking out a life insurance policy, for example, can provide financial protection for surviving dependents in the event of death.

3. Säule
3. Säule

Tax advantages

If you opt for a pillar 3a, you will enjoy certain tax benefits: You can deduct the amounts paid in on your annual tax return. Employees can deduct the maximum amount for the current tax year (amount in 2023: CHF 7056). Self-employed persons without a 2nd pillar can deduct up to twenty percent of their income and a maximum of 35,280 francs (amount 2023). It should be noted, however, that a one-time lump-sum tax is due when the credit balance is paid out, but with a lower tax rate. It is important to note that, as a rule, there are no tax benefits for pillar 3b. Therefore, in contrast to pillar 3a, you do not have to pay taxes if you withdraw the entire saved balance.

It is important to explore the different third pillar options and choose the one that best fits your needs and goals. When choosing a private savings and insurance plan, factors such as rate of return, cost, flexibility and coverage should be considered.

Younger people, in particular, have the advantage of starting to build their private retirement savings early. The earlier you start saving and investing, the longer your money has time to grow and earn compound interest (compound interest effect). It is never too early to start with the third pillar and lay a financial foundation for the future.

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