Pillar 3b (Free Pension Provision)
Pillar 3b is the untied form of private pension provision in Switzerland, whose capital is available at any time and is subject to few tax restrictions.
Concept
Pillar 3b (free pension provision) encompasses all forms of private saving and provision that are not subject to the restrictions of the tied pillar 3a. These include voluntary life insurance, securities savings, bank deposits, real estate ownership, and other assets. Unlike pillar 3a, pillar 3b capital is generally freely available at any time and is not tied to a specific purpose.
Tax Treatment
Contributions to pillar 3b are, with the exception of limited deductions for insurance premiums, not deductible from taxable income. Lump-sum payouts from surrenderable life insurance policies within pillar 3b are exempt from income tax provided certain legal conditions are met (minimum term, age at inception), which makes this form of provision attractive for wealthy private individuals.
Relevance for Advisory Practice
Compared to pillar 3a, pillar 3b offers the advantage of unrestricted availability and flexibility in structuring, which is why it is used in particular to supplement tied pension provision for higher pension needs or for provision goals with a shorter time horizon.