Over a Third of the Swiss Working Population Have No Pillar 3a
Who pays into Pillar 3a? And how much? In their new study, the economists at Credit Suisse have taken a closer look at the savings habits of the Swiss population in tied private pension provision. There are significant differences between the regions, for example: People from French-speaking Switzerland and Ticino use Pillar 3a less than German-speaking Swiss.
Private pension provision supplements AHV pensions and pension funds. It is therefore a key pillar of financial security in retirement. In contrast to the state pension provision and employee benefits insurance, saving in Pillar 3a is voluntary, but encouraged by the federal government and cantons through tax incentives. Consequently the contribution options are limited: Pillar 3a is available only to the working population, and the contributions that can be paid in are capped.
Maximum Pillar 3a Contributions per Year (in 2019)
Employed persons with a pension fund
up to 20 percent of net earned income, but capped at CHF 34,128
Employed persons without a pension fund (such as self-employed persons)
Pillar 3a Less Widespread among Women, French-speaking Swiss, and Ticino Residents
65 percent of the working population aged 25-65 years make use of the option of tax-advantaged private retirement saving1: Approximately 59 percent make regular payments into Pillar 3a, 6 percent on an ad-hoc basis. The proportion of regular 3a savers here is 55 percent for women, lower than the 62 percent for men (see figure).
The proportion of savers among 25 to 34-year-olds is also below average (47 percent), as well as for foreign gainfully employed persons (41 percent). The higher the level of education and income, the more likely regular contributions are made. There are also clear differences regionally: 61 percent of the workforce in German-speaking Switzerland regularly pay into Pillar 3a, compared with only 54 percent in French-speaking Switzerland and 44 percent in Ticino.
Of those surveyed who do not make contributions to Pillar 3a, around 44 percent cited financial reasons. Individuals with low educational levels and divorcees justify their non-payment more often than average with the lack of resources.
Lower Income Groups Save Less – But There Are Exceptions
How much do the Swiss pay into Pillar 3a? It does not come as a surprise that average contributions rise in proportion to the income level of the account holder2. In the lowest income bracket (annual gross income under CHF 60,252), 75 percent of households have no Pillar 3a – although 10 percent of households pay at least CHF 3,600 per annum and per person. In the income bracket from CHF 60,253 up to CHF 88,032, more than half of households still pay nothing; but a further quarter pay at least
CHF 3,100 and one-tenth the maximum amount.
Major Regional Differences in Deposit Amounts
People from German-speaking Switzerland pay on average more into Pillar 3a than their French and Italian-speaking compatriots (see figure). However, the contribution behavior also varies within language regions: Delémont, Geneva, Fribourg, and Bellinzona are among the cantonal capitals with the lowest contributions, with an average of between CHF 1,218 and CHF 1,315 for a gainfully employed single person. Sion at CHF 1,601 is already in the middle of the pack. Glarus and city of Basel pay on average considerably less than residents in the other German-speaking Swiss capitals.
Very Little Is Still Invested in Securities
Most of the Pillar 3a capital deposited with banks is in interest accounts. In 2016, just under 23 percent was invested in securities solutions3. Securities solutions, which include equities and other risk-bearing investments, are more suitable the longer the investment time horizon. Nevertheless, on average, older account holders tend to opt for them: In the case of 45- to 54-year-olds, the penetration of securities (the share of pension capital invested in securities solutions) stands at 28 percent, while for under 35-year-olds it is below 20 percent. Account holders can, however, increase their opportunities for returns with securities solutions, although risks are higher and there are fees.