How do I withdraw my 3rd Pillar A?
The 3rd pillar A is one of the fundamental pillars of individual pension provision in Switzerland. Designed for supplement pensions AVS (1st pillar) and LPP (2nd pillar), it not only allows you to build up savings for retirement, but also to benefit fromtax benefits interesting.
However, these savings are tied and cannot be freely withdrawn at any time. Certain conditions govern its withdrawal, whether early or at legal retirement age. In this article, we explain in detail in which cases it is possible to withdraw funds from the 3rd Pillar A, and what you need to know before doing so.
Situations giving right to a withdrawal
Withdrawal from your 3rd Pillar A is possible in the following 5 cases:
- Purchase of a home for own use
- Starting or changing a self-employed business
- Permanent departure from Switzerland (non-EU/EFTA)
- Full disability under IV
- Buying back years of pension fund contributions
1. Purchase of a home for own use
You can withdraw Pillar 3a funds to purchase, construction or renovation financing of your principal residence. This also includes the repayment of a mortgage.
A withdrawal is also possible for the acquisition of shares in a home in which you will live (e.g. shares in cooperatives).
2. Starting or changing a self-employed activity
It is possible to withdraw your assets from the 3rd pillar A if you definitively leave the status of salaried employee to become a independent. This withdrawal is only permitted when you set up or take over your self-employed activity, and must coincide with your official registration with theAVS as a freelancer.
This entitlement applies only once, and only if you are no longer contributing to a pension fund linked to salaried employment. It is not not possible withdraw these funds if you are self-employed in parallel salaried employment.
3. Final departure from Switzerland
If you are leaving Switzerland, you can make a last payment to pillar 3a as long as you are still affiliated to the AHV and taxable in Switzerland. Once your income is no longer subject to AHV, you can no longer make contributions.
If you're moving abroad (inside or outside the EU/EFTA) before retirementyou have the choice of:
- Closing your Pillar 3a and have the funds paid into an account in your name, regardless of the country of destination or the institution where your assets are held (bank or insurance company).
- Keep your 3rd pillar A and defer withdrawal until retirement age.
4. Full disability under IV
If you are recognized as being in a situation oftotal disability by the Swiss Disability Insurance (IV), you can request an early withdrawal from your 3rd Pillar A if it does not cover the disability risk.
This entitlement only applies if the disability prevents you from engaging in any gainful activity on a long-term basis. The disability must be officially recognized by an AI decision, generally with a disability rate of at least 70 % (giving entitlement to a maximum pension).
5. Buying back years of pension fund contributions
It is possible to transfer funds from Pillar 3a to your pension fund for fill a gap 2nd pillar pension plan, right up to legal retirement age (and even up to 5 years afterwards, if you're still working). However, there are a number of conditions and precautions to take:
- The transfer is only possible if the pension fund has a redemption potential.
- If your 3a account balance is lower to the redemption amount, you must transfer thein full of having it.
- If the balance is superioronly the amount equivalent is transferred; the remainder can remain in the 3a account.
It should also be noted that:
- This transfer is tax-neutral no tax deduction, as your pension assets do not change, but are simply moved from one pillar to another.
- You cannot repay a withdrawal EPL (encouragement of home ownership) with money from the 3rd pillar A.
- A transfer to a vested benefits account is not possible, as these accounts do not allow redemptions.
What happens to the capital sum in the event of death?
When the holder of a 3rd Pillar A plan dies, his assets are paid to the designated beneficiariesaccording to a legal order defined by Swiss law. Since 2023, 3a assets no longer form part of the traditional estate, but are subject to a separate right for beneficiaries, applicable to both bank accounts and insurance policies.
Unmarried couples are less well protected if there is no clear beneficiary clause. We recommend that you explicitly designate your partner, even if you've been living together for less than 5 years, to avoid any disputes.
How is 3rd Pillar A capital taxed?
3rd Pillar A capital (whether withdrawn at retirement or early) is taxed separately of the usual income, according to a more advantageous reduced scale, at 1/5 of the tax.
If you withdraw more than one 3a account in the same year, they will be added for tax purposes. It is therefore advisable to make staggered withdrawals to optimize.
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