The withdrawal of the 3rd Swiss pillar, whether it is the Pillar 3a or 3b, may be complex for cross-border commuters due to specific fiscal and administrative rules. Here are the key points to consider:
- Pillar 3a : Tax deductible in Switzerland, but subject to strict withdrawal conditions (retirement age, real estate purchase, permanent departure from Switzerland, etc.). Since 2021, only virtual residents can still benefit from tax deductions.
- Pillar 3b : More flexible, with no contribution limit or withdrawal constraints. Ideal for those who do not meet the tax criteria for pillar 3a.
- Taxation : Pillar 3a withdrawals are taxed at source in Switzerland. To avoid double taxation, it is crucial to know the tax treaties between Switzerland and your country of residence.
- Strategies : Spread out withdrawals over several years makes it possible to reduce the fiscal impact. Currency management (CHF/EUR) is also essential to maximize your earnings.
Anticipating and planning the procedures is essential to optimize your retirement capital. Professional support can help you avoid mistakes and get the most out of your assets.
SVQ #44 - Is the 3rd pillar for cross-border commuters not always a good idea?
Eligibility rules and withdrawal conditions
The conditions linked to the 3rd pillar vary depending on the type of account chosen, and recent changes have particularly affected cross-border workers. Understanding these rules is essential to avoid complications during withdrawal.
Who can open a 3rd pillar account?
Cross-border workers can still open a pillar 3a account, provided they contribute to the 2nd pillar (LPP) or to be affiliated with it. However, since January 1, 2021, most of them can no longer benefit from tax deductions on their contributions, unless they have the status of semi-resident (at least 90% of income taxed in Switzerland, which mainly concerns Geneva and Fribourg). This development has led many insurers to reduce their pillar 3a offers for cross-border workers, except for quasi-residents.
On the other hand, pillar 3b remains accessible to all, without special conditions, which makes it particularly interesting. Pillar 3a is capped at CHF 7,258 per year (in 2025), while pillar 3b has no limits.
Now let's see when it's possible to withdraw these funds.
When can you withdraw your 3rd pillar?
Pillar 3a withdrawals are subject to strict rules. As a rule, withdrawal takes place at retirement age (65 for men and women). However, it is possible to anticipate this withdrawal up to 5 years before (from the age of 60) or to postpone it until 5 years later if you continue to work.
In certain specific cases, an early withdrawal is authorized: to buy or build a main residence (or to repay a mortgage), in the event of permanent departure from Switzerland, during a transition to self-employment, in the event of disability with an AI pension not covered by the 1st pillar, or even for the purchase of 2nd pillar contributions. If an early withdrawal is made within 5 years prior to retirement age, it must concern the entire capital.
Pillar 3b, on the other hand, offers total freedom: no limits or restrictions on the amounts or timing of withdrawals.
3a vs 3b accounts for cross-border commuters
After exploring the eligibility criteria, let's compare the two pillars.
Since 2021, pillar 3a has lost much of its fiscal attractiveness for cross-border commuters who do not have the status of virtual resident. Although it maintains some advantages, such as the tax deductibility of contributions and tax-free capital growth, its withdrawal constraints and limited access make it a less attractive solution for many cross-border workers. They must agree to freeze their funds until retirement, except in well-defined situations.
On the other hand, pillar 3b, although it does not offer immediate tax advantages, is distinguished by its flexibility. It allows unlimited amounts to be deposited and funds withdrawn at any time, making it ideal for managing unexpected events or taking advantage of investment opportunities.
The choice between these two options therefore depends primarily on tax status and personal goals. Quasi-residents can still benefit from the benefits of pillar 3a, while pillar 3b is an attractive alternative for others.
For an informed decision, it is advisable to seek the advice of experts, such as Best Third Pillar, which can help determine the best option based on the individual situation and optimize the withdrawal strategy.
Tax rules for withdrawing from the 3rd pillar
The taxation associated with the withdrawal of the 3rd pillar can be a headache for cross-border workers. Between withholding tax in Switzerland and taxation in the country of residence, it is essential to fully understand these mechanisms to avoid costly double taxation. Here is an overview of the key points to better understand and manage these samples.
Swiss withholding tax on withdrawals
When a withdrawal is made, Switzerland automatically applies withholding tax. This rate, which depends on the canton and the amount withdrawn, concerns all cross-border workers, regardless of their country of residence. For pillar 3a, this tax is calculated according to a progressive scale specific to capital withdrawals, which can represent a large sum, sometimes several thousand francs. On the other hand, for pillar 3b, the rules vary according to the type of product chosen.
Avoid double taxation
One of the main challenges is to avoid double taxation: on the one hand, withholding tax in Switzerland, and on the other hand, taxation in your country of residence on the same amount. Tax treaties, such as the one between Switzerland and France, offer solutions to limit this problem. For example, although the withdrawn amount is taxed in Switzerland, it must also be reported on your tax return in your country of residence. This procedure then allows you to request a refund of Swiss withholding tax, taking into account the tax already paid in your country of residence. A good knowledge of these tax treaties is essential to properly manage this process.
How to recover Swiss withholding tax
To obtain a refund of withholding tax, you must follow a well-defined procedure and respect strict deadlines. You have three years to complete this process, otherwise the tax becomes final.
“It is possible to request a refund of the tax collected in Switzerland by providing the French tax notice attesting to the payment of tax in France.”
To create your file, several documents are required. In particular, you will have to provide your French tax notice, which proves that the tax was paid in France. A tax residence certificate issued by your country of residence is also required, confirming that you are taxable there and that you have received the capital benefit. In some cases, it may be necessary to demonstrate that taxation actually took place in your country of residence, under the so-called “subject-to-tax” clause.
Given the complexity of these procedures and the significant financial challenges, it is often a good idea to call on experts. Specialists, such as Best Third Pillar, can help you optimize your tax strategy and guide you through these procedures, in order to maximize your retirement capital.
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How to maximize your 3rd pillar withdrawal
In addition to understanding eligibility rules and tax consequences, some strategies can help you get the most out of your 3rd pillar. These include choosing the most suitable withdrawal method, planning the right time to minimize taxes, and managing currencies effectively.
Single capital or monthly pension: what to choose?
One of the most important decisions concerns the choice between a one-time lump-sum withdrawal or a monthly pension. Both options have pros and cons depending on your individual circumstances.
For cross-border workers, a single capital withdrawal is often more advantageous, in particular thanks to the possibility of recovering part of the tax at source. This option also offers greater freedom to plan your assets or reinvest according to your needs. However, regardless of the option chosen, the right fiscal timing plays a key role.
Plan your withdrawals to reduce taxes
An effective strategy is to spread your withdrawals over several years in order to minimize withholding tax.
It is possible to start withdrawing your pillar 3a funds up to five years before the legal retirement age. This makes it possible to spread the amounts over several fiscal years, thus reducing the overall tax rate. For example, if you have multiple 3a accounts, it makes sense to wind them up gradually rather than all at once.
Why is this important? The tax rate increases with the amount withdrawn. For example, a single withdrawal of CHF 200,000 will be taxed at a higher rate than four annual withdrawals of CHF 50,000.
For a personalized approach, specialists like Best Third Pillar can assist you with free analyses and simulations adapted to your tax situation. Besides the fiscal aspect, currency management is another factor that should not be overlooked.
Manage currency exchange to maximize your earnings
Since the 3rd pillar is denominated in CHF, converting your funds into another currency requires particular attention. Fluctuations in exchange rates can significantly affect the final amount you receive.
One solution is to opt for products that allow you to save directly in euros. This reduces exposure to changes in CHF/EUR exchange rates. If your savings are in CHF, choosing when to convert is crucial, especially for large amounts. A variation of 1% can represent thousands of CHF.
“Calling a currency trader allows the immediate purchase or sale of CHF at a rate defined by market conditions, the transaction being confirmed in real time by telephone, with the funds being paid into the customer's account within two working days.”
For amounts over CHF 50,000, it is recommended to monitor the market and work with currency exchange professionals. Before liquidating large amounts of capital, take the time to assess your financial needs, your projects and the current economic situation. Consulting with an expert can help you make informed decisions.
Step-by-Step Withdrawal Process
Once your withdrawal strategy is well planned, it's time to take action. Here are the concrete steps for withdrawing your 3rd pillar, taking into account the strategies mentioned above.
How to withdraw your 3rd pillar
Here are the steps required to withdraw your 3rd pillar while complying with legal requirements:
- Submit a formal request : Send a written request to your financial institution.
- Provide the required documents according to the reason for the withdrawal :
- If you leave Switzerland permanently, a departure notification issued by your municipality is essential.
- In case of transition to self-employed status, a certificate AVS confirming this change is required.
- To transfer your pillar 3a to another institution, you will need to provide a certificate issued by that institution.
- Get your spouse's consent : If you make an early withdrawal before the legal age, written authorization from your spouse is mandatory.
Mistakes to avoid
Before finalizing your request, pay attention to these common pitfalls to avoid unnecessary complications:
- Ignore possible fees or penalties : Consult the cash value table for a pillar 3b account to understand the possible capital costs or losses in the event of an early withdrawal.
- Forget tax procedures : When withdrawing from pillar 3a, make sure you comply with the formalities to request a refund of withholding tax, according to the tax agreements in force.
Get professional help
The procedures for withdrawing from a 3rd pillar can be complex and have significant financial repercussions. To avoid costly mistakes and optimize your process, it may be a good idea to ask experts. For example, Best Third Pillar offers personalized support to guide you at each stage.
Conclusion
Withdrawing your 3rd pillar as a cross-border worker requires careful preparation and a thorough understanding of tax rules, whether Swiss or foreign. Each decision can have an important influence on the final amount of your retirement capital.
Tax aspects and currency management play a key role: withholding taxes, double taxation agreements, and the timing of converting your assets can significantly affect your net return. An error in this approach could lead to thousands of francs in additional taxes.
To avoid costly mistakes and optimize each step, it is a good idea to benefit from tailor-made support with Best Third Pillar.
In summary, plan your withdrawal strategy today. As mentioned earlier, optimal foresight will allow you to maximize the value of your 3rd pillar while reducing the fiscal impact. A prior consultation will give you the peace of mind you need to calmly manage this essential stage of your financial journey.
FAQs
What are the advantages and disadvantages of pillars 3a and 3b for cross-border workers in Switzerland?
Pillars 3a (linked) and 3b (free) offer distinct savings solutions for cross-border workers in Switzerland, each with its own advantages and limitations:
- Pillar 3a : This system makes it possible to build up pension savings in Swiss francs, a currency recognized for its stability. It offers attractive tax advantages, such as the possibility of reducing income tax, but this only applies to quasi-residents. However, the capital is subject to taxation upon withdrawal. Since 2021, a significant change has taken place: cross-border commuters who are not quasi-residents can no longer deduct their contributions.
- Pillar 3b : This pillar is characterized by its great flexibility. You are free to choose how much to save, the duration of the contract and the beneficiaries. In addition, it allows withdrawal after only three years, with no special conditions. On the other hand, contributions paid under pillar 3b do not entitle you to any tax deduction.
These two options adapt to different needs and can be combined according to your financial goals and your tax situation in Switzerland.
How can I avoid double taxation when withdrawing from my 3rd pillar as a cross-border worker?
To avoid double taxation when you withdraw your 3rd pillar as a cross-border worker, it is crucial to fully understand the tax specificities in Switzerland and France.
In Switzerland, withdrawing from pillar 3a is subject to a single tax, directly deducted at source. On the other hand, in France, your tax situation depends on your status. If you are recognized as Quasi-resident For tax purposes, you can request a refund of the tax collected in Switzerland, provided you provide proof of taxation in France. If this status does not apply to you, only the interests generated by your contract will be taxable in France.
To better understand your situation and optimize the management of your 3rd pillar, it is strongly recommended to consult a tax expert. This will allow you to ensure that everything is managed in a compliant and beneficial manner.
How can I reduce the tax impact when withdrawing from my 3rd pillar as a cross-border worker?
When you remove your 3rd pillar, there are several ways to minimize the fiscal impact. Here are some approaches that can help you optimize your situation:
- Staggering withdrawals : Since the tax on capital withdrawals is progressive, withdrawing your funds over several years can reduce the overall tax burden. This method makes it possible to spread the taxable amount over different tax brackets.
- Multiply 3a accounts : If you have multiple 3a accounts, you can withdraw them at different times. Each account must be settled all at once, but this distribution offers great flexibility to plan your withdrawals according to your tax situation.
- Withdraw before retirement age : You can withdraw your 3rd pillar up to five years before the legal retirement age. This can be an effective strategy to reduce the tax burden, especially if your income is lower at the time.
Specific points for cross-border commuters
If you are a cross-border worker, it is crucial to take into account the tax rules specific to your status. For example, if you are not considered to be a quasi-resident, the interest generated by your contract could be subject to different taxation. These particularities make a thorough assessment of your situation essential.
For optimal planning that is adapted to your financial goals, it is strongly recommended that you consult an expert. A professional can guide you in your choices and help you maximize the tax benefits of your 3rd pillar.
