One is the loneliest number: Why having more than one 3a pillar account is a good thing

If you've been reading my blog for a while, you may have noticed that I am quite concerned about the Swiss pension gap. Since the 3a pillar makes up the majority of my investments (at the moment, at least), I am always trying to learn about how I can maximize my payments into this account. I have already opened another 3a account with Selma, however, there are further benefits of opening several 3a accounts (and I like to diversify). Hence, I am looking at other 3a account providers and stumbled across finpension. finpension is specialized in the management and investment of 2nd and 3rd pillar pension assets.

I asked Corina Friedli, Pension Advisor at finpension a few questions to clear up some things for me.

Why should I open more than one Pillar 3a account?

In general, there are two issues that should concern us.

• The tax progression

• The flexibility

In many cantons the tax burden is progressive. This means that the higher the income, the higher the tax rate and thus the higher the tax to be paid. In the Swiss Tax Calculator, you can have the tax situation simulated for you personally.

Here is an example for an unmarried woman without children who makes a lump-sum payment of CHF 100,000 at the age of 64. This is how the total tax burden looks in %:

Source: Federal Tax Administration

And this is how it looks for the same woman with a lump-sum payment of CHF 30,000:

Source: Federal Tax Administration

As can be seen, the total tax burden is lower in most cantons if a lower capital payment is made.

In addition, withdrawn 3a money is part of the assets. If you add this to an existing asset or to another capital withdrawal (for example from the 2nd pillar), it can lead to the fact that you also have to pay wealth taxes. This depends on the canton and the municipality. Certain cantons only levy wealth tax from CHF 75,000. This can also be checked individually in the FTA tool.

In addition to the tax aspects, flexibility is also an important topic that we would like to highlight. Flexibility is lost in two ways if you only have one pillar 3a account.

• One is dependent on the place of residence at the time of withdrawal. If you already know where you want to retire, you have a clear advantage. Because this person can prepare much better for retirement, since she knows what tax situation she will be confronted with. For all others, however, the smaller the amount to be paid out, the more flexible you become with the place of residence.

• The amount cannot be determined by yourself at the time of withdrawal. You must withdraw the entire amount and thus cannot influence the property tax rate.

Long story short. It is worthwhile to have more than one Pillar 3a account.

When should I open another account?

Some providers recommend opening a new account from CHF 40,000/50,000. We, on the other hand, recommend opening two accounts right from the start. Imagine that Heidi Müller has already accumulated assets of CHF 45,000 at the age of 35. She now decides to open a new account and from now on only deposit money into the new account. The money lies in the account for another 25 years, is invested and makes an annual return of 2% p.a. Thus, at the age of 60, Heidi would have assets of CHF 73,827.30 and would be CHF 23,827.30 above the recommendation of CHF 50,000.

For this reason, we recommend paying into different accounts from the beginning. This way you can better control the assets. In addition, it does not matter to the tax authorities how many accounts you pay into at the same time, as long as it is not more than the legal maximum per account.

How many Pillar 3a accounts can I open?

Once again, it depends on the combination of assets and tax burden. In theory, you can open as many accounts as you want. In practice, it makes sense to have between two and five accounts.

How can I transfer my existing 3rd pillar account? Can I transfer only partial amounts from one account to another? Can I break up the transfer into multiple accounts?

You can ask for a transfer document. At finpension you can download this document in the app. Start your app, choose deposit and follow the steps below:

You must transfer the whole amount. It is not possible to split the amount. This is only possible in the second pillar (read more).

At finpension you have the possibility to open more than 1 portfolio. Each portfolio is equal to one 3rd pillar account. In other words you can have several accounts/portfolios in one app.

Thank you, Corina, for these thorough answers to my questions!

How about you? Do you have burning questions about the 3a pillar accounts? Ask them below in the comments!

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