Property finance: taking out a 3rd pillar insurance policy?

25 november 2020 - In the context of real estate financing, the indirect repayment of a mortgage loan can be made through parallel savings via a 3rd pillar. These savings can be accumulated with a bank or an insurance company. Focus on the second option.

Property finance: taking out a 3rd pillar insurance policy?

The 3rd pillar, known as "insurance", is a life insurance contract. Thanks to this, a guaranteed capital at maturity is calculated, unlike the banking version, which depends entirely on payments. This variant includes options such as a lump sum in the event of death (constant or decreasing), a waiver of premium payments in the event of disability as a result of illness or accident (the insurer takes over payment of the premium as soon as the initially fixed waiting period is exceeded) and optionally a disability pension. The owner and his family are thus fully covered.

Two types of 3rd pillar insurance, A and B

Pillar 3 A is tax deductible, while Pillar 3 B is non-deductible (except in the cantons of Fribourg and Geneva).

Pillar A has the same withdrawal conditions as its banking alter ego; the duration is fixed from subscription to AHV retirement age (possibility of withdrawing the capital five years earlier). It has an inheritance advantage: the capital in the event of death does not form part of the estate, but is paid directly to the beneficiary, unlike the banking 3rd pillar A.

In addition, the 3rd Pillar A also has security in terms of deposits, which are fully covered, whereas the banking version has a maximum covered amount of CHF 100,000 per client and bank. In addition to this guarantee, a further CHF 100,000 per client and bank is provided for (placed in 3A retirement savings accounts).

It should be noted, however, that the 3rd Pillar A can only be used to finance a principal residence and as long as you have income from a gainful activity, which is subject to AHV/AVS contributions.

Pillar B, on the other hand, is more flexible. The insured person defines the duration, the amount of the premium and the beneficiary. Moreover, since it is not tax-deductible (except for the cantons of Geneva and Fribourg), the capital is not taxed at maturity.

Ultimately, a thorough study of your pension situation must be carried out in all cases. In the event of disability or death due to illness, the first pillar (AVS, AI, APG) and the second pillar (LPP) only provide part of the final income. An insurance product is often desirable, especially if the pension fund, which has a defined contribution plan, has been withdrawn for the purchase of an asset.

by Arthur Petit, Head of Pensions at DL MoneyPark

Article published in the Magazine immobilier.ch of February 2020