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The truth about 3b pillar accounts

Baptiste Wicht | Updated: |

(Disclosure: Some of the links below may be affiliate links)

In this blog, I talk a lot about the third pillar. The third pillar is a great part of the retirement system allowing you to invest money for your old age and benefit from tax benefits.

I have also talked about the 3a life insurance trap. But I have not yet discussed an obscure part of the retirement system: the so-called pillar 3b.

So, in this article, we discuss all there is to know about the 3b pillar and how you should mostly avoid it (in its advertised form).

Pillar 3b

Unlike the third pillar (3a), the 3b pillar is poorly defined and not well-understood. The reason is simple: pillar 3b is anything that does not belong to the other three pillars.

This means a savings account is part of the so-called pillar 3b. If you have a broker account, it is also part of the 3b pillar, and any other investments are part of the 3b.

So, when you have exhausted the limits of the first three pillars, your free investments are part of your pillar 3b. So, pillar 3b is not even linked to retirement!

Since it is a free investment, there are no limits or rules in the 3b pillar. You can invest as much or as little as you want and use the products you want.

The 3b pillar is as simple as that in theory. And again, in theory, there is nothing wrong with pillar 3b. And I wish we could finish this article there. But, unfortunately, we need to talk about 3b life insurance.

Life Insurance 3b

When people talk about the pillar 3b or 3b in short, they often talk about life insurance 3b. And, if you search for pillar 3b on the internet, you will find that insurance companies are the top results. This is unfortunate!

I have already talked about life insurance 3a and how bad they were. These products profit insurance companies only, not you. Your 3a money is always better with another product.

So, why do insurance companies advertise 3b life insurance? Simply because a yearly contribution limit limits the 3a life insurance. In 2023, it was 7056 CHF per year. So, insurance companies also offer 3b life insurance products to increase their reach.

Also, these products are often talked about because they are tax-deductible in some cases.

3b Tax Deductions

In most cases, you cannot deduct what you invest outside of the three pillars. But there is, unfortunately, an exception. I say, unfortunately, because this exception makes it more complicated and is generally not even worthwhile.

Only two cantons have tax deductions for the 3b: Fribourg and Geneva.

  1. In Fribourg, you can deduct 750 CHF for a single person and 1500 CHF for a married couple per year.
  2. In Geneva, a single person can deduct 2196 CHF (or 4434 if self-employed), and a married couple can deduct 3294 CHF (can vary if one or two are self-employed. On top of that, married couples can deduct 898 CHF per year per child (different deductions if self-employed).

In general, any tax deduction is interesting. And if you could deduce the money invested in a broker account, it would be a great tax deduction. However, this deduction is only possible for 3b life insurance.

If we take the example of Fribourg, the maximum deduction would be 1500 CHF. A marginal tax rate of 40% would give us 600 CHF savings per year. But this means locking money in a bad product. Your money is much better in any investment account than in 3b life insurance. Your money is even better in a bank account than in 3b life insurance.

And there is another thing that we should mention. Some financial advisors will tell you that there is another tax advantage with 3b life insurance. In some cases (hold for five years and withdraw after 60 years old), you will not get any taxes when you receive the life insurance payment.

But this is a dumb comparison. If you put this money in your broker account, you will not pay any taxes when you withdraw money since capital gains are not taxed in Switzerland. So, this is just a pointless marketing argument.

What is wrong with 3b life insurance?

Just like 3a life insurance, 3b life insurance comprises bad products. It is probably not impossible to make a good 3b life insurance product, but I have never encountered one.

The first thing that is wrong with these life insurance products is that they are sold to people who do not need life insurance. Financial advisors in Switzerland will try to sell life insurance for any reason. Having kids, a house, or a spouse is enough to justify life insurance. But the immense majority of people do not need life insurance.

Why are they sold so aggressively? Simply because financial advisors make large commissions on these products. This only is a good reason to be very careful with financial advisors.

Another thing is that these products are expensive. People put money into these products thinking that all their money will work for them. However, a significant part of what people pay into life insurance will pay the risk part of the life insurance and will not go to their savings. You can expect between 10% and 20% of the contributions will go to this part and be lost.

On top of that, the money is also not fee-free. This can highly vary, but you can expect anything from 0.50% to 2.00% fee on the invested part.

The advisors will often talk about the great returns of life insurance 3b. And they will make great projections with high returns and try to show how much money you can get. However, these are only projections. In practice, 3b life insurance (or 3a life insurance) returns are generally significantly lower than other investment products.

And when you consider the fees, the low returns, and the risk, part, life insurance products are abysmal investment products.


For me, the conclusion is clear: ignore the pillar 3b term and avoid 3b life insurance like poison. Most people discussing the 3b pillar are insurance companies and financial advisors. And these people very rarely have your best interest at heart.

These people have made it so that most people misuse the term 3b. Instead of meaning anything outside the three pillars, it has come to mean life insurance.

Two things are essential to mention, though. First, there is nothing wrong with investing your money outside of the 3a. I recommend people start investing early. Then, there is nothing wrong with life insurance itself. If you need life insurance (most people do not), you can take a life insurance policy. But avoid 3a and 3b life insurance. Instead, take a simple term life insurance.

What about you? What do you think about the 3b pillar?

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Baptiste Wicht started in 2017. He realized that he was falling into the trap of lifestyle inflation. He decided to cut his expenses and increase his income. This blog is relating his story and findings. In 2019, he is saving more than 50% of his income. He made it a goal to reach Financial Independence. You can send Mr. The Poor Swiss a message here.

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14 thoughts on “The truth about 3b pillar accounts”

  1. Good article. As mentioned here already: if you want life insurance, get life insurance. Do not get life insurance tied up with investments, usually with high TER. And yeah paramount is asking if you even need it (e.g. family with kids, riskiness of your job).

    I have a “Todesfall- and Erwerbsfähigkeitsversicherung” with Mobiliar. Costs me about 900.- a year. It’s ok but probably could live without. Like most insurance stuff, it all feels like a scam.

  2. Hi there, this is my first ever question/comment after reading and following for so long.

    What do you think of the 3B pillar which can be used as a mortgage deposit and substitute the need for Eigenmittel?

  3. Helvetia has 3b / life insurance (“performance plan” or something similar) that can be invested in Pictet LPP funds (with possible allocation in stocks). As you said, for GE it’s possible to deduct from taxes… but at the end of the day, as someone told, it depends if you really need a life insurance I guess.
    Or, if the gain with the deductions, is still worth compared to just adding more money to the classical ETF.
    I guess the TER of these funds might be pretty high…

    1. Hi Lorenzo,

      Even if you need a life insurance, you would very likely be better off with a single life insurance, not tied to a 3a/3b.
      And as you said, I would not be confident that picted, a private bank, provides cheap funds.

  4. In case you need to repay your mortgage annually above the max permitted 3a in the household, then it could make sense to open a 3b. Can help you detax your annual contributions if you live in the cantons which allow it.

  5. I do have a 3b life insurance and I do think it’s giving me some decent returns, but only because my employer (insurance company) is contributing significantly to the yearly premium.
    Yes, I did check the surrender values and they’re not great. But only taking into account the amount I pay on premiums, it’s reasonable.
    So I think your article hits the nail on the head…

  6. Great article as always. I got stuck in one of these for 2 years. When I saw the poor returns I got out, losing a significant amount of my capital. It never looked back, since I follow the poor Swiss way of investing now!

    1. Same here. After meeting a financial advisor from the Swiss insurance, he sold us 6 financial products as life insurance mixed investments in pillar 3a and 3b.

      Slowly my husband and I got out of them, but I quit the last one only 3.5 years later :( losing a lot of money.

      Those products should be banned in Switzerland!

      1. Thanks for sharing, Yasi! That’s impressive and very sad! These products are often targeting expats because they do not know the details of the system, so it is easy to sell them things and the financial advisors are often recommeded by companies :(
        This is a major issue.

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