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How many Pillar 3a portfolios make sense for you?
If you withdraw your Pillar 3a assets later in a staggered way, meaning step by step over several years, you will save a lot on taxes. In this article, we’ll look at why people often talk about five Pillar 3a portfolios and which factors play a role in choosing the right number of 3a portfolios.
THE MOST IMPORTANT POINTS AT A GLANCE:
Whoever withdraws their 3a assets in a staggered manner over several years pays significantly less tax due to the progressive capital payout tax.
An existing portfolio cannot be split retroactively. Therefore, open multiple portfolios early on. Rule of thumb: five roughly equal-sized portfolios.
Canton of residence, marital status, and potential continued employment after the reference age influence the sensibel number of 3a portfolios.
Index
Save taxes when withdrawing Pillar 3a assets
When you withdraw your Pillar 3a, the reduced «tax on capital payouts from pension schemes» applies. This is independent of income tax, but equally progressive: the higher the capital to be withdrawn, the higher the tax rate. We’ll show why having multiple 3a portfolios pays off regarding capital payout taxes using a simple example:
The direct comparison: 1 portfolio vs. 5 portfolios
Option A:
Nora lives in Aarau and has her 3a balance of 200'000 francs paid out in one lump-sum shortly before her 65th birthday. The capital payout tax comes to 12'733 francs. After paying the tax bill, Nora is left with net assets of 187'267 francs .
Option B:
Jana also lives in Aarau. Over the years, she split her 200'000 francs across five different Pillar 3a investment solutions at 40'000 francs each. She starts in the year of her 61st birthday and withdraws 40'000 francs every year over five years. Tax per year: 995 francs. Total tax: 4'975 francs. Remaining net assets for Jana: 195'025 francs.
The result:
Jana splits her 3a assets across five portfolios and thereby saves 7’758 francs in taxes.
For the sake of simplicity, we assume that Nora and Jana are single and have no religious affiliation.
Determining the sensible number of 3a portfolios
You can withdraw your Pillar 3a at the earliest 5 years before your regular retirement age. If you retire in 2040, for example, you have a total of six tax years from 2035 to 2040 for the withdrawal. Instinctively, you might say that six Pillar 3a portfolios make sense because of this. However, the sensible number of 3a portfolios also depends on other factors. Here is an overview:
Situation | Sensible number of 3a portfolios |
|---|---|
No other capital withdrawals. The six years from your 60th to your 65th birthday are completely available to withdraw six 3a portfolios. | 6 |
You plan to withdraw your pension fund money as capital rather than a pension. Capital payout tax also applies to pension fund assets. To prevent the tax burden from getting too high, two large amounts (i.e. a Pillar 3a pot + the pension fund assets) should not be withdrawn at the same time, which means one year and thus one pot is eliminated. You can read the details in your pension fund regulations. | 5 |
A part of your pension money is in a vested benefits account or custody account. You should also reserve a tax year for withdrawing these assets so that the tax burden does not become unnecessarily large. | 4 |
You are married (or in a registered partnership) and taxed jointly as a couple. Planning together while taking into account the factors mentioned above will allow you to make optimal use of the six years. If you are roughly the same age, your withdrawal years will overlap. | 2-3 |
If you continue working in paid employment with AHV-liable income from age 65 to 70, you can theoretically dissolve one additional 3a pot per additional year of work. So, if you know early on that you’d like to work longer, you can organize yourself accordingly. | +1 pot per additional working year |
(The order of the reasons can also look different) | |
If your retirement is still far in the future and you can't quite gauge how many portfolios make sense for you, stick to the rule of thumb:
Try to reach five roughly equal-sized 3a portfolios before you retire.
But that is easier said than done. It’s often said that you should open a second Pillar 3a portfolio starting at 50'000 francs. The problem is that balances develop unevenly due to compound interest, and the desired equalization rarely works out.
We therefore recommend paying into 5 separate portfolios equally right from the start. That way, you get the maximum tax savings when making staggered withdrawals.
Also very important: An existing portfolio cannot be split retroactively! So it's better to open multiple portfolios sooner rather than later.
What else you should know:
Combining portfolios retroactively is generally allowed
However, it usually makes little sense because it unnecessarily increases capital payout taxes.
The tax burden depends on your canton of residence
Depending on where you live at the time of your capital payouts, tax progression kicks in earlier or later. In some cantons, splitting into multiple portfolios isn't as tax-beneficial as in others. To run your own scenario, you can give this tax calculator a try.
3a withdrawal or 3a pledging for home ownership
By law, you can easily withdraw a partial amount from a single investment solution for home ownership. This is usually possible every 5 years with the same foundation.
Pledging your 3a balance for home ownership does not count as a payout. Having multiple portfolios can be an advantage specifically for pledging: if the financing bank requires you to switch to their own 3a foundation for the pledge, you only need to transfer the required portfolio. Your remaining 3a portfolios stay with your previous provider.
Fees when closing 3a portfolios
Closing a portfolio shouldn't cost you anything, but some providers charge closing fees. Therefore, keep an eye out for these «hidden» fees when choosing your 3a provider.
Why findependent is your ideal companion for Pillar 3a
You can hold up to five 3a portfolios simultaneously to cleverly stagger your later withdrawal and save taxes on purpose.
You start investing completely flexibly and without high barriers starting from just 1 franc.
You choose as usual from five predefined investment solutions or customize your own portfolio according to your wishes.
You invest efficiently in tax-optimized index funds so your pension assets aren't needlessly burdened by costs and taxes.
You benefit from our unbeatable, low all-inclusive fee of 0.29%, meaning more of your returns stay with you.
You set up your Pillar 3a conveniently via the app and are completely ready to go in under 10 minutes.
You can reach our team directly and easily for questions at service@findependent.ch.
Keep investing even after retirement? Easy.
Even if your 3a balance is officially taxed upon withdrawal: You rarely need all your savings on day 1 of retirement. Simply let your money keep working for you as free assets! To do this, set up your new invest investment solution directly in the app and contact us for the next steps. This way you stay seamlessly invested, make optimal use of the compound interest effect, and shape your future exactly the way you want.
