Private pension provision: make comprehensive provisions now

Your concern is not unjustified, I replied: “The fact is that the pension gap is getting bigger and bigger – especially for high earners.”
Private pension provision is crucial to meeting this challenge. Pillar 3 offers significant opportunities to improve your financial situation in retirement.

Private pension provision: an overview of pillars 3a and 3b

Pillar 3a is one of the main options for retirement provision in Switzerland and offers tax advantages. “Pillar 3a contributions are tax-deductible and grow tax-free until they are withdrawn,” I explained to him. “That means considerable savings.” In addition, the funds are earmarked for a specific purpose and can be withdrawn no earlier than five years before the normal retirement age, which encourages disciplined retirement planning.
“But what about pillar 3b?” Thomas asked curiously. “Pillar 3b is the flexible part of pension provision,” I replied. It allows you to incorporate individual forms of saving and investment. There are no upper contribution limits, which makes it particularly attractive for people who want to invest more than the maximum taxable amounts. “The funds can be used flexibly at any time,” I added, “be it for a property, major purchases or supplementary pension provision.”

The growing income gap in old age: why private pension provision is essential

If you earn well today, you have to be prepared to live on considerably less when you retire. “Thomas, you currently earn around CHF 250,000 a year and have become accustomed to this standard of living. If you don’t take care of a private pension in good time, you could end up with just CHF 100,000 a year when you retire. Are you prepared to accept such a cut? Imagine what that would mean for your life: less travel, no more luxuries, possibly savings in everyday life that you can’t yet imagine. The gap between your last income and your pension benefit is widening,” I told Thomas. Whereas in the past a larger proportion of the final annual salary could be covered by state and occupational pensions, today the benefits are significantly lower for many – especially for people with higher incomes. For someone like Thomas with an annual income of CHF 250′000, this means a huge financial cut.
And I know from experience that pensioners need almost the same amount of money in retirement as they did before they retired. Life doesn’t simply get cheaper in retirement. That’s why private pension provision is an essential part of any financial plan for the future.

Options for retirement provision: why early action is crucial

Pillars 3a and 3b offer important opportunities for private pension provision. However, a lot of money from these 3rd pillars is still simply lying around in bank accounts, yielding little more than 1%. Yet a good investment could achieve an average return of 7% per year in the long term and significantly increase your wealth in retirement.The compelling argument for timely pension planning is the enormous effect of compound interest. Let’s look at an example of how early retirement planning pays off in the long term:

• If someone starts at the age of 35 and pays a total of CHF 30,000 per year into pillars 3a and 3b, they will have saved a sum of CHF 900,000 by the age of 65.
  By comparison, with an investment and an average interest rate of 7% per year, their assets could amount to CHF 3,050,000 in retirement, which is more than three times as much – a huge difference!

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• However, if you only start at the age of 50, you will miss out on the full effect of compound interest. With an annual payment of CHF 30,000, you will have accumulated assets of CHF 792,000 by the time you retire, with an annual return of 7%. This is not even a doubling of the total paid-in capital of CHF 450,000.

Why pillars 3a and 3b are the key to financial security

At the end of the discussion, it became clear how important it is to consider private pension provision at an early stage. Pillar 3a and 3b options play a crucial role in closing the income gap in old age and maintaining the standard of living.It is particularly important for high earners to develop a solid plan, as many need the majority of their final income in retirement in order to maintain the lifestyle they are accustomed to. In collaboration with Point Capital’s professional asset management team, individual and flexible pension solutions can be designed to ensure long-term financial security.The compound interest effect should not be underestimated; the earlier you start saving for retirement, the more you can benefit from this advantage. A well-thought-out pension plan makes a considerable difference in retirement.
There’s another way of putting it: “If you save for your retirement, you won’t be sitting on the sun terrace when you retire, but rather in the shade.”
So it’s better to rely on timely planning and professional support from Point Capital to find the best investment strategies and pension models. By being proactive and informed, you can set the course for a carefree financial future. Ultimately, private pension provision is not only a necessity, but also an important opportunity to actively shape your retirement according to your own ideas.

Yours, Mark Stock©

Mark Stock is a member of the Point Capital editorial team. “I am a stock market enthusiast and am passionate about economic history. I have been following the ups and downs of the markets for years and, of course, invest myself – preferably in shares. So my name says it all. Every month, I take up what I consider to be an exciting topic. And since the focus is on the content and not on me personally, I write under a pseudonym.”