Pillar 3a: bank or insurance – where should I save for retirement?

First of all: Banks and insurance companies have to comply with the same legal rules for their pillar 3a products. This means that with both, you can pay in up to the maximum amount and deduct what you have invested from your tax bill. And after retirement, you can draw the savings you have accrued plus interest. You can also withdraw the money early, i.e. before retirement, for residential property, upon taking up self-employment or when you leave Switzerland. So far, so similar.

Banks basically offer two different kinds of retirement-planning products. You can open a classic pillar 3a account, which is a bit like a savings account with slightly better interest rates. If you are strapped for cash or would like to spend your money on something else, no problem: you decide for yourself every year how much you want to pay in. The maximum amount is CHF 6,833 (as of 2022) if you are enrolled in a pension fund.

However, you could also open an additional pillar 3a custody account to invest your savings in equities, funds and bonds. These investment instruments offer you interesting return opportunities. Good to know: you can also decide for yourself with pillar 3a custody accounts how much you would like to invest per year.

Here, too, savers can take out an insurance solution with or without securities investments. The insurance solution always includes risk protection in the event of disability or death, regardless of whether you need it or not. However, this protection comes at a price: When you pay your premium for your 3a pension solution, the cost share for the insurance is deducted from the savings deposit. This means that, unlike with a 3a product from a bank, some of the amount you pay in is not saved for your retirement. The amount and duration of the premium and the payment method are defined in the contract at the beginning and have to be adhered to. If your income is irregular, or you stop earning temporarily while spending time abroad, the lack of flexibility can become a financial burden.

Is it important to you that your retirement savings are invested sustainably? Then be sure to examine the products banks and insurance companies offer closely. Ask your future provider how your money will be invested and whether these companies and industries prioritize the sustainable use of resources. Sustainable investing is also worthwhile for you and your retirement solution. Companies that value the environment, social matters and good corporate governance generally have better opportunities to achieve solid investment returns in the long run. Does everything make sense so far?

Your head is bursting with information and you still don’t know whether to use a bank or an insurance company for your retirement planning? Then ask yourself the following question: do you want your retirement planning solution to remain financially flexible or would you rather take on a clear contractual obligation? If you prefer deciding for yourself how much money to invest in pillar 3a each year, then a bank is the better option for you. With insurance companies, you undertake to pay in regularly and are bound by this obligation.