Rocco Baldinger, Credit Suisse: Opening several Pillar 3a accounts can have tax benefits.
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Open several Pillar 3a accounts and possibly save taxes as a result

People who pay their pension capital into different Pillar 3a accounts can save taxes in many cantons, because the capital can then be withdrawn gradually over several years. We reveal how many accounts it's worth having and over what period you can withdraw your capital. 

Assets in Pillar 3a accounts have to be withdrawn in full

When you approach retirement, it's only possible to take out all the assets accrued in a Pension account – 3rd pillar in one go; it's not possible to withdraw partial amounts. People who pay all their Pillar 3a contributions into a single account therefore have to withdraw the full amount in one year.

Breaking tax progression

Although the pension capital paid out is taxed separately from other income at a reduced rate, in many cantons this tax burden is progressive, measured on the amount paid out. The greater the capital withdrawn, the higher the tax rate and therefore the taxes to be paid.

The solution: Several Pillar 3a accounts

Since withdrawing a large pension amount can lead to higher taxes, it's worth having several Pillar 3a accounts. People who pay their Pillar 3a capital into several accounts during the employment phase can benefit from the option of spreading withdrawals at the time of retirement. This means that the Pillar 3a capital is withdrawn and taxed over several years.

Before retirement, the number of Pillar 3a accounts does not have any tax implications, but whether someone pays into the third pillar does. Taxes can be saved several times through Pillar 3a contributions.

Take care with simultaneous lump-sum withdrawal of pension fund capital

Lump-sum withdrawals from the pension fund are taxed at a reduced rate, just like Pillar 3a assets. If Pillar 3a assets and the capital from the second pillar are withdrawn in the same year, these pension benefits are taxed together, which can lead to a significantly higher tax progression. The same applies to pension capital from vested benefits accounts.

Tax savings: CHF 33,151 

The person in our sample calculation would like to withdraw their money from Pillar 3a when they retire. They also want to withdraw their pension fund assets as a lump sum. In the scenario shown on the left, they only have one Pillar 3a account. If they withdraw this together with the lump-sum payout from the pension fund in the same year, it leads to a tax burden of CHF 77,500. The better-planned scenario is the one on the right: The same person now has two Pillar 3a accounts and withdraws this capital, as well as the second pillar assets, gradually over three years. So the person saves taxes in the amount of CHF 33,151. 

The sample calculation is for a married person of reformed denomination who lives in the city of Zurich. The figures are derived on the basis of 2018 tax rates. For illustrative purposes only. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.

Source: Credit Suisse. 

The ideal number of Pillar 3a accounts

It is not possible to generalize about the ideal number of Pillar 3a accounts. It depends on the value of the assets that someone saves over the course of their working life, but also on where they live and their civil status. Once you have accrued retirement savings of CHF 40,000, it can, however, be worth opening another Pension account – third pillar.

In most cases, two or three Pillar 3a accounts per person are a good solution. However, since tax practices vary from canton to canton, we recommend checking your personal situation early on. Arrange to talk to an expert or find out with a few clicks using our pension calculator which number of Pillar 3a accounts is ideal for you and how much tax you can save by spreading the withdrawal of your accrued assets. There are no restrictions on the maximum number of Pillar 3a accounts permitted.

Several Pillar 3a accounts: When to open them?

It's important to know that money that has already been paid into a Pillar 3a account cannot be transferred to a second Pillar 3a account, since Pillar 3a saving is a form of tied pension provision. With few exceptions (such as promotion of home ownership), the money can only be withdrawn shortly before retirement. So those wishing to benefit from the tax savings of multiple Pillar 3a accounts will need to plan for this early on. That is the only way to build up several Pillar 3a accounts in parallel through contributions. It can be worth opening another Pension account – 3rd pillar once you have accrued retirement savings of CHF 40,000. The pension experts at the bank know exactly when an additional Pension account – 3rd pillar is recommended.

Pillar 3a withdrawals: Earliest and latest time

In the context of normal retirement, Pillar 3a capital can be withdrawn starting five years before reaching the statutory retirement age, in other words, for women from age 59, and for men, from age 60. The latest time is the year of normal retirement, unless a person works beyond that point. Women who work past the age of 64 and men who are in paid employment past the age of 65 can withdraw their Pillar 3a capital up to five years later – i.e. for women at 69, and for men at 70.

Save taxes with several Pillar 3a accounts 

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Planning early doesn't take much time time but, under certain circumstances, you can save a great deal on taxes. 

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