The truth about 3b pillar accounts
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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. Currently, it is 7258 CHF (in 2025). So, insurance companies also offer 3b life insurance products to increase their reach.
Also, these products are frequently 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 further complicates it and is generally not even worthwhile.
Only two cantons have tax deductions for the 3b: Fribourg and Geneva.
- In Fribourg, you can deduct 750 CHF for a single person and 1500 CHF for a married couple per year.
- 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). Moreover, 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 deduct the money invested in a brokerage 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 vast 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.
What if you need life insurance?
To be clear, I am not saying that life insurance is bad; I am saying the 3b life insurance scheme is bad.
There are some cases when life insurance is valuable. The primary purpose of life insurance is to protect your dependents. If a household has a single income earner, dependents may be in trouble if that earner dies. This situation is especially concerning if living an expensive life because other death benefits will not suffice.
Another example is to be able to cover debts in the absence of a high income. For instance, with a mortgage and a single earner, having a life insurance payout may significantly help the surving dependents.
If you require life insurance, pure risk life insurance is for me the best solution. These insurance policies are like other insurance, there is no capital accumulation, only premium. If you want a standard payout, you can get really decent premiums. You can get something below 500 CHF in most cases.
If you would like to learn more, you can read how to choose life insurance.
Conclusion
For me, the conclusion is clear: ignore the pillar 3b name 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 name 3b. Instead of meaning anything outside the three pillars, it has come to mean life insurance.
It is unfortunate that many people are sold 3b life insurance. This is the case for many expats coming to Switzerland that are recommended these bad products.
Two things are essential to mention, though. First, there is nothing wrong with investing your money outside 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 out 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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Hello Baptiste,
just learned from you that I have been taken some bad decisions so far, because I opened a 3a pillar with a fix yearly deposit of CHF 3900 and then at the year-end last year I fulfilled the GAP to the deductible limit with an extra deposit…
I can’t go back but I can improve my further decisions, so, here my two questions:
– is it better to complete this year deductible GAP (7258-3900) by opening a non-insurance 3a?
– I am in Geneve with family and I have up to 7000+ additional deductible if I open a 3b insurance for my wife. Is that definitely a bad idea even with the large tax reduction? Would it be better a purchase into the 2rd pillar instead?
Many thanks!
Alessandro
Hi Allessandro
Sorry to hear that :(
1) Yes, it’s better to fill up with a real 3a rather than a life insurance 3a.
2) I have never seen a case where the 3b was worth it. And are sure about the 7000? 3b has different maximum than 3a and it’s lower than that in Geneva (last time I checked). If your wife is working, she can have a real 3a (which is 7000+). 3b is next to 3a.
Hi,
this is what I received from my SwissLife account manager:
Q
Annual deductions for the 3rd pillar b in geneva according to tax guide.
Couple, 2 kids, Only one of the spouses is not affiliated with the 2nd pillar or the 3rd pillar
Total amount: 7761 CHF
UQ
It looks quite interesting, isn’t it?
Hi,
I forgot about the child deduction, this sounds about right.
But keep in mind that this is not a direct deduction, you will only save your marginal tax rate multiplied by this. But yes, it could be interesting.
But considering the fees and ridiculously low 3b returns, I am still not convinced this is worth it unless you are close to retirement.
Hello Baptiste, thank you for your clear explanation.
I’m in a situation where I need to amortize 12k per year. It was suggested by my consultant to do 100% indirect amortization, but I can only max at 7258. Then, he suggested to do a pillar 3B with insurance, and according to him it’s the best option to amortize.
Looking for alternatives, I talked to my bank, UBS, and they told me I can’t just create a new savings account and pledge as indirect amortization. According to them, is must be a either a 3a or a 3b life insurance. So do you think this is indeed correct?
Also I considered doing both direct and indirect amortization. I’d max out in 3a with indirect, and the rest would go as direct. But my consultant told me this is not possible because the loan was made under the condition of 100% indirect amortization. Do you know if they can really force that? Or is there a conflict of interest with my consultant, and he’s trying to push the life insurance at any cost? For me it’s quite strange you don’t have the option to pay back some of the loan with direct amortization.
Thanks for your time!
Hi Charles,
They are correct in that indirect amortization can only be done through 3a and 3b. In some cases, you can pledge assets for the mortgage, but this is to replace the down payment, not the amortization.
So, it’s definitely possible to do both (that’s what I am doing myself). However, I do not know whether the contract itself can force indirect amortization, it sounds strange to me.
I would recommend asking your bank directly because there is indeed a conflict of interest in this case. It’s possible, although unlikely that the contract forces this, but this puts you in a weird position where you are forced to do 3b and normally this should have been discussed with the bank.
If you have a legal protection insurance, I encourage you to reach to them to discuss.
Hello Baptiste,
I came to knowledge of your page thanks to a friend and suddenly my life came apart when I started reading that the 3a life insurance and “pension” plan I had was all a terrible scam.
I’m an expat here in Switzerland , and I wanted to contribute to my pension since I have been moving around countries for the past 6 years and never really built a pension anywhere, and that is exactly how they got me into their trap.
I got my 3a life insurance 2023 with Zurich , and now I found myself where I will move one more time to Spain in exactly one year (March 2026).
I wanted to ask if you thing the fact that I’m moving countries will help with the stopping of the premiums or the cancellation of the contract, I have tried to ask my advisor in Zurich about it and he said I need to move it to a 3b and pay the min premiums that is about 200 euros a month.
What you would recommend would be the best option for me? Trying to get the premiums to min instead of trying to cancel the contract? or since the cancellation comes from moving abroad then the surrender value can be less?
As well , since my advisor could not tell me and I cannot find the information online, what would happen to that life insurance money that I leave here in Switzerland? When I retire will I have to pay taxes i both countries correct?
I appreciate so much your time and effort on this web site, It has save me from making a huge error !!!
I thank you so much!!
Hi Natali
You don’t need to move the funds to a 3b, that’s just dumb.
If you move to another country definitely, you can get back your 3a money, yes.
However, in your case, you should be able to break the contract right now and you shouldn’t have to wait. You will lose some money (unfortunately), but in theory, all 3a life insurance contracts can be stopped.
If you are convinced this is a bad investment, you should break the contract now. In theory, all it takes is to write a letter to the insurance company and tell them you want to cancel the policy. If you have any surrender value, you would then ask them to transfer that to a 3a (that you will have to open first). Since you have little time left, you should open a cash 3a anywhere and then use that to store the surrender value (if any).
Hello Baptiste ,
Thank you so much for such a fast answer.
I have two questions regarding it:
Would it be a better option to ask to not pay the premium of this year (paid at the end of the year) , and then cancel the contract in like Nov/Dec , like this I would not have to open another 3a account? Or it doesn’t make much sense?
If I transfer the money to a 3b and then asked to release the premiums , and leave the money there (around 10k) . Would I lose less than by cancelling my 3a contract?
One last, considering the amount of money I have and that it has been less than 2 years , do you have any percentage in mind on how much I could get back?
Sorry for so many questions but it’s really hard to find any information about this topics online.
Once again, I thank you for all the information shared, and I wished I would have find your site before.
Best regards,
Natali
Hi Natali
That’s a good point. If you are going to leave anyway, you might as well not bother with a second account unless you really want to contribute to your 3a for tax reason. Then you can release the premiums now and break the contract when you leave.
After less than years, you will get back less than 50%, unfortunately. It highly depends on each contract, but the first two years are where you lose most of the money.
I hope this helps a little. Unfortunately, there is not much you can do in your situation.
Thanks for the reply!
I’ll have to check when I get back to CH next week.
I remember however the surrender value was end 2023 was 37k
What’s your general perception when people want to cancel their 3b, e.g. will I expect a certain resistance from Zurich, I assume that a 3b cancellation is easier than a 3a (?)
In general, what matters is to stop paying into it (release the premiums), then you can take more time to decide whether you want to surrender or not.
I don’t think there will be much resistance. They will try to stop you of course and say you should not do that and that you really need and so on. In some cases, they will even say you can’t release the premiums (it’s wrong) and then suddenly tell you you can release the premiums when you talk about breaking the contract (real experience…).
Hello
Regarding ancelling 3b Life Insurance
I was sold a Zurich 3b life insurance with investment part (capitalfund) ca 3 years ago, the main motivation were:
1. My wife doesn’t work, so in case I’ll pass/die she will get a certain amount or if I’m disabled we would be covered
2. I took out 3a and 2a to finance our house back in 2007, so the Zurich advisor told me to compensate for this
I always had a good relationship with Zürich (have all other insurances with them), so I fully trusted them that this would be a good thing
I don’t have my papers/contract available at the moment but I just need some rough information what to expect when I cancel my 3b Life insurance capitalfund with Zurich
I have paid 50k paid in + 18k in a depot, how much would I loose since mid 2022?
I’m still debating whether just to cancel the “investment/fund” part and just go with the life insurance part, but I probably have cancel the package and get a new policy
I have ca 13 years until retirement
Would be grateful for feedback
Hi Evalo
It’s impossible to tell you how much you would lose, only Zurich can say that.
However, 68k in 2 years seem huge for a 3b life insurance. Usually, these contracts are small because the only point of them is to get the tiny tax deduction.
How much coverage do you get in case of death? With such a depot, I can imagine in the millions. Do you really need such a large policy?
Thanks for the great info. I find myself in an identical situation with a 3b life insurance , 5% life insurance and 95% investing. After investing 17k, the invested sum is apparently 15K and the surrender value is 10k… I took my concerns with my agent and he hinted that after 7 years I would break even.
I wanted to plan my exit strategy according to that but that would still lose me money.
Do you have any suggestions ? Another idea I had was to put the monthly investment at minimum (200CHF per month) and just forget about the fund until I’m old haha. At least I will have the crappy life insurance…
Thanks, Horatiu.
Hi Horatiu
Normally, you should be able to reduce the monthly investment to 0. You have to insist because agents often say (wrongfully) that it is not possible.
You will never break even when you compare to putting this money into a good 3a. Any money to a bad 3b life insurance is already losing.
The most important is to stop paying into it. Then, it’s up to you whether you want to break the contract or not.
Thank you for the clear, detailed summary and the fair warning against 3b life insurance. I fell into the 3b trap a few years ago and just cancelled my plan. I plan to put the money I managed to recover into a broker account, but I wanted to find out if there are any tax implications from withdrawing the money (Geneva-based). I have not been able to find clear information about that anywhere, so any insight will be appreciated.
Sorry to hear your fell into this trap but well done for getting out. There is no tax implications that I am aware, the withdrawal should be tax-free.
A financial advisor is trying to see me a 3b pillar. The two argument he has, are:
1. it is protected by the government in terms that government is controlling the companies that are providing 3b pillars and how securely they invest those assets
2. safety of the top of the market insurance companies
He also mentioned that 3b is only provided by insurance companies, not banks and other platforms.
What do u think about that?
Hi Polina
3b is indeed provided only by insurance companies. As for his arguments:
1) It is true, but all financial entities in Switzerland are regulated.
2) It is not wrong, but it not safer than any other financial entity.
And he forgot to mention:
1) He is going to get a big fat commission on selling your this policy
2) The returns are going to be much lower than if you were to invest that money
3) There are only two cantons with some tax benefits
4) The fees are much higher than any decent broker
Dear Babptiste: I am so thankful for your website, posts and for the comments here. It was a awakening bell for me.
I came to realize that in 9 years, my 3b product with Axa hasn’t balanced out. I calculated that I have contributed CHF 64K and the value today is CHF 48K. Say that over this period, I saved over 5 k in total in taxes in GENEVA, and the cost of the life insurance for 200k for a healthy woman in her late 30s would have been about 300 per year. I have still lost over 8k in contributions, 0 gain.
The answer from the advisor “transfer towards our new product. The product you currently have is our old product; we stopped selling it in 2019, and it has been replaced by the current new product. Unfortunately, there is no other option within our establishment to evolve your current third pillar.” He wants me to sign to two products: smartfelx (buying my 48k) and subscribe -and pay again- acquisition costs for the new 3b product..basically they want to screw me twice!!!!
Your posts also made me realize that I moved to Vaud Canton, so I am basically putting money in the bin over the last year because 3b contributions are not deductible from income here.
Never again. I am signing into a life insurance, required for mortgage. In terms of 3A, I will follow the advice and keep it as exclusive investment (no insurance linked to it)
One question is how to cover for disability? This seems the only thing that I would not be able to replace from 3b?
I am sorry to hear that, Cristina. I agree with your conclusion, they are trying to screw you over again with another product. If you can get out, I would do that and invest the money instead of letting AXA not grow it.
Do you really need extra coverage for disability? We got disability insurance in Switzerland. If you think you do, some life insurance will continue paying the premiums if you become disabled (this is an option). Otherwise, there some disability insurance which will pay you an annuity if you become disabled.
Hi, thanks for this article, which confirmed what I suspected regarding a lot of the Pillar 3B products out there. How does one go about defining or establishing a 3B account? I’m looking to invest mainly in the market.
Hi Rebecca
It depends on what you mean by 3b in your case. If you mean a 3b life insurance and want to invest, then don’t! If you mean anything outside the third pillars (the general definition of 3b), then you can either use a Robo-advisor or a broker to invest yourself. The 4 Investing Levels: Control vs Fees
Very useful article, Baptist.
I’m being “advised” to invest in a Pillar 3b life insurance by an “independent financial” advisor and this article helped be more thoughtful in my decision making.
He presented me with a couple of options (AXA, SwissLife, etc) and while the management fee doesn’t seem to be significant (0.45% pa) the performance of the index the fund are tied to are roughly 5% and 10% for moderate and optimistic scenarios respectively.
By now it’s clear to me that besides locking myself for the next 20y, putting that money in a broker in a low cost ETF would yield me the same or even more. But there is one argument this “advisor” is pushing that I still do not have a elements to decide whether is sensible or just again, another scam.
He is saying that those Pillar 3b is the best (only?) way if I want to buy a property (pledging).
I might not have 100% understood it but the point is that he is pushing his Pillar 3b advise due to the fact that I wish to buy a property.
How do they relate? Even in the case of buying a property, all your advises remain the same?
Many thanks!
Hi bapt
Thanks for sharing the “advice” you receive.
The advice is basically bullshit. A 3b is not the best way to buy a property and you can pledge a 3a without issues. A 3b life insurance is basically making your entire financial situation worse. The only one that is going to profit from the 3b is the advisor because he will get a nice commission.
It is true that in some cases, banks will ask for a life insurance to increase the security of the loan. But in these cases, they will generally use a 3a life insurance and that is only in some corner cases where people are properly overleveraged already.