Amortisation / Life insurance

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Author : Kristen

Private 3rd pillar B

The possibility of taking out a private 3rd pillar B (or unrestricted) pension insurance is o offered to everyone who lives in Switzerland or abroad, whether employed or not. Such insurance is ideal for a housewife or an employee who intends to terminate his or her gainful activity in the near future.

The premium amounts are unrestricted with no maximum limit.

The contract's starting and maturity dates are up to you. This means that a contract can mature with the birth of a child or at the time of retirement provided that the insurance company's age limits for contract entry and exit are respected. These age limits can vary from one company to another. Therefore, when making a donation in favour of children or even infants (just as in the case of an elderly person wishing to manage inheritance during his or her lifetime), it is recommended that you take out a "whole life" insurance.

The advantage is that you can schedule capital payments for any moment in your life, even before starting your gainful activity or after the age of retirement. For example, you can plan for contract maturity at 20 years for financing education, at 25 years for buying a car, at 35 years for purchasing a home, or even at 55 years for travelling around the world! In the same vein, you can be paid in advance at any time, without having to specify the reason or the destination of the amound. Therefore, the benefits can be used as equity to purchase a house, or even to say, buy a boat.

Only the policyholder signs the request; no spousal consent is required.

One little known fact is that the private 3rd pillar B pension also offers the possibility of taking out a loan against the policy. Such loans are granted by the insurance company that has issued the contract. The interest rate is well below that of small conventional loans, and it is possible to avoid paying interest without risk by having it deducted from the final benefit! This is the ideal solution in case of temporary financial problems or an urgent need for cash, such loans are obtained quickly without further examination.

Finally, the private 3rd pillar B pension insurance contract can be used as collateral with a bank, not only to obtain a mortgage loan for your own home, but also for a secondary residence or rental property. It could also be used to secure a commercial loan.

It is also possible to assign the contract to a third party, either legal or natural, who will thus become the new policyholder and be entitled to a maturity benefit. This may turn out to be very useful, for example, in the case of personal bankruptcy.

Contrary to the linked pension fund , the policyholder can be someone other than the insured. The same applies to the premium payer. Apart from an individual, it can also be a company,association, etc. To make a good choice, you should examine the tax consequences.

It should also be noted that private 3rd pillar B pension insurance can cover two persons. This particular feature is especially interesting for married couples. When the first spouse passes away, the surviving one will receive the benefits. This premium is also less expensive than those of two separate contracts.

Moving on to the beneficiary clause, here too you have the freedom to choose. Within the family, it is possible to favour the spouse or even one child over another in the distribution of the estate. It is also possible to exclude certain relatives (to name a nephew as a beneficiary rather than a child, for example). Furthermore, the beneficiary does not need to belong to the family circle: it can be a friend or business associate.

In terms of taxation, most cantons make it possible to deduct private 3rd pillar B pension premiums with certain restrictions regarding maximum amounts depending on the family situation. In the canton of Vaud, the same premium lump-sum can be deducted as in the case of health insurance premiums! The allowed amount is usually reached by the latter, leaving little or no place for the private 3rd pillar B. This fact often leads people to the conclusion that the private 3rd pillar B pension plan is not deductible, which is not exactly true.

The greatest differences in taxation between the linked 3rd pillar A and the private 3rd pillar B are the reporting of the tax redemption value of the assets over the contract term and no taxation on the final capital.

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