What are the differences between 3rd pillar banking and 3rd pillar insurance?


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To plan for the future and ensure a comfortable retirement, there's no better way than with a personal pension plan, also known as a third pillar. This contract offers many advantages and can be taken out with an insurance company or a banking institution. However, these two providers do not offer exactly the same services. This article aims to help you understand the differences between the 3rd pillar insurance and the 3rd pillar bank.

Choosing a 3rd pillar bank or insurance depending on the project

Depending on your savings objectives and the project you wish to carry out with your pension capital, the choice of 3rd pillar will not be the same. Indeed, if you want to put money aside for the short or medium term - i.e. for 10 years or less - a 3rd pillar bank may be more appropriate. For example, you may need to make an early withdrawal to finance a real estate project. Payments into your account can be made whenever you like, and there is no limit on the amount, as long as the legal maximums are not exceeded. When you decide to withdraw your capital, you receive the amount you have saved for.
This is not the case with a 3rd pillar insurance policy, since you can only receive the purchase value of the contract. This may be lower than the total amount already paid in. On the other hand, if you need to save for the long term, the 3rd pillar insurance appears much more advantageous than the 3rd pillar bank, given that the rate that applies is guaranteed from the moment the contract is signed.

3rd pillar : The bank and insurance comparison

Bank Insurance
Contract duration Until retirement Free duration
Amount of payments Deductible annual ceiling Free payments
Incapacity to earn No exemption Exemption possible depending on contract
Return Low rate Guaranteed rate at subscription
Imposition at exit Capital taxed at reduced rate No taxation
In the event of death Payment of capital to beneficiaries Payment of capital provided for at subscription to beneficiaries
Tax deduction Yes, depending on annual deductible amount Yes, depending on annual deductible amount and canton of residence
Early termination Possible under legal conditions Possible

The security of 3rd pillar insurance

One of the differences between 3rd pillar insurance and banking concerns the security guarantees offered by the contract.
In the event of disability, insurance policies exempt you from paying premiums.
In the event of the death of the insured person, the beneficiaries can recover the full capital provided for in the contract.
In the event of bankruptcy or economic crisis, 3rd pillar insurance guarantees 100% of your assets. So there's no risk of losing your money.
If you're a homeowner, you can indirectly amortize your mortgage and benefit from all the advantages offered by third-pillar insurance.
On the other hand, the guarantee in the event of disability does not apply to third-pillar policies taken out with a bank.
With regard to the death of the insured, saving with a bank entitles heirs to receive only what has already been paid in.
If the bank were to go bankrupt or experience an economic crisis, the guarantee would amount to CHF 100,000 of the 3rd pillar assets.

The flexibility of the bank 3rd pillar

Taking out a third pillar with a bank gives you flexibility with regard to your payments. There are no constraints in terms of the pace or amount you can save each month, other than respecting the maximum annual limit. This makes it a particularly attractive savings solution if you're just starting out in your professional life. What's more, with a 3rd pillar bank account, it's perfectly possible to take a break from saving if you don't receive any income for a while, without this having any impact on your contract.
Conversely, insurance companies don't offer you the same flexibility, since your retirement account may be deactivated with some companies after a long period without any payments. In addition, you need to define the amount you are going to contribute on a regular basis in advance, and you may be able to modify it once you have reached at least three years of contributions.

The profitability of 3rd pillar insurance

As you may have guessed, flexibility does not necessarily rhyme with profitability. That's why there's a difference between the two types of 3rd pillar.
The bank can offer you a so-called classic solution, where security is the order of the day, albeit with a low interest rate. The other solution is an investment fund, which exposes you to greater risk in the event of a financial crisis or markets failing to perform as expected. It therefore seems necessary to have some knowledge of the stock market before turning to this option.
As far as insurance is concerned, it also offers you a third possibility for obtaining more interesting returns without completely putting security to one side. This is the mixed investment. If you're planning to save for 20 years or more, this is undoubtedly the option for you, as it's ideal for medium- and long-term profitability.

The common features of bank and insurance 3rd pillars

Although there are several differences between a 3rd pillar taken out with a bank and one taken out with an insurance company, certain elements are identical in both cases. So, whether you choose one or the other, you can benefit from a tax reduction by taking out an individual pension contract. What's more, third-pillar 3A products - also known as tied pension provision - are subject by law to regulations that the bank or insurance company must comply with. In addition, early withdrawal of your capital can be made under the same conditions: a property purchase, moving abroad or becoming self-employed. Finally, throughout the term of the contract, you will have the option of receiving interest on your capital or investing your 3rd pillar bank or insurance in securities, according to your preferences.
Thanks to this overview of the differences between the 3rd pillar bank and the 3rd pillar insurance, you can undoubtedly see more clearly. Nevertheless, it seems pertinent to add that free pension provision (or 3rd pillar 3B) can only be marketed by insurance companies.
If you feel the need to obtain further information before making your pension provision choice, don't hesitate to talk to an advisor on this subject.
Joffrey Maitre
Updated on: 31.01.2024Written by Joffrey MaitreHead of private provision department at Comparea
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