Are you a cross-border worker between France and Switzerland, an executive or self-employed person, concerned about optimizing your taxation while calmly preparing for your retirement? The question of subscribing to a 3rd pillar in Switzerland deserves your full attention. This article sheds light on the possibilities, advantages, and alternatives suited to your situation.

What is the 3rd pillar in Switzerland?

The Swiss pension system is based on three pillars:

• 1st pillar: Old-age and survivors' insurance (AVS), mandatory, guaranteeing the minimum essential for retirement.

  
  

• 2nd pillar: Occupational pension (LPP), also mandatory, aimed at maintaining the usual standard of living.

  
  

• 3rd pillar: Optional individual pension scheme, allowing you to supplement the first two pillars to ensure additional financial comfort in retirement.

The 3rd pillar is divided into two categories:

• Pillar 3a (linked pension): Savings locked until retirement, with significant tax advantages.

  
  

• Pillar 3b (flexible pension): More flexible, without federal tax advantages, but it may offer deductions depending on the cantons.

Can cross-border workers subscribe to a 3rd pillar in Switzerland?

This depends on your situation and particularly recent regulatory changes. Dive in with us to understand if you can benefit from a 3rd pillar.

Regulatory developments 

Since 2017, FINMA, the Swiss Financial Market Supervisory Authority, has restricted the marketing of the 3rd pillar to cross-border workers. Thus, many Swiss insurance companies and banks no longer offer this product to non-residents. Nevertheless, some institutions continue to offer this possibility, although options are now limited. 

Eligibility conditions

For cross-border workers wishing to subscribe to a pillar 3a, it is essential to meet certain conditions:

• Affiliation to AVS: Be subject to the Swiss old-age and survivors' insurance.

• Income subject to AVS: Earn an income in Switzerland subject to AVS contributions.

However, even fulfilling these conditions, access to the 3rd pillar may be restricted based on the policies of financial institutions.

Tax advantages and quasi-resident status

One of the main attractions of pillar 3a lies in its tax advantages. However, for cross-border workers, these advantages are conditional on obtaining quasi-resident status.

What is quasi-resident status?

A cross-border worker can be considered quasi-resident if at least 90% of their worldwide income is taxable in Switzerland. This status allows access to ordinary subsequent taxation (TOU), providing the opportunity to deduct contributions to the 3rd pillar from taxable income. It is important to note that this status is primarily recognized in the cantons of Geneva and Fribourg. 

Procedure to obtain the status

To benefit from quasi-resident status, the cross-border worker must:

1. Check eligibility: Ensure that 90% of their income is taxable in Switzerland.

2. Apply for TOU: Submit an application for Ordinary Subsequent Taxation to the relevant tax authorities.

This process must be renewed each year, with the status being reassessed annually. 

Alternatives to the 3rd pillar for cross-border workers

Given the restrictions and access conditions to the 3rd pillar for cross-border workers, it is wise to explore alternatives in France.

French life insurance 

Life insurance in France offers flexibility and attractive tax advantages for cross-border workers:

• Favorable taxation: After 8 years, gains benefit from an annual allowance of €4,600 for a single person and €9,200 for a couple.

  
  

• Diversity of investment options: Access to a wide range of investments suited to different investor profiles.

  
  

• Facilitated transmission: Possibility to freely designate beneficiaries in the event of death, with reduced taxation.

This solution is particularly suited for cross-border workers considering spending their retirement in France. 

Luxembourg life insurance

Luxembourg life insurance provides access to investment products usually reserved for Swiss residents, as well as other advantages:

• Maximum fund security: Your assets are protected by the Luxembourg super-privilege — in the event of the insurer's bankruptcy, you are reimbursed before everyone else, even before the state.

  
  

• Tax optimization: You benefit from the same favorable tax framework as in France (allowances after 8 years, exemptions in case of death), with more flexibility to adapt the contract to your financial situation.

  
  

• Access to high-end investment options: You can invest in customized funds, in foreign currencies, in private equity or in discretionary management, often inaccessible through a French life insurance policy.

Luxembourg life insurance contracts are generally accessible from €250,000. However, some insurers offer contracts with a reduced entry ticket, around €125,000. It is important to note that access to certain management options, such as Dedicated Internal Funds (FID), may require a higher initial investment.

In summary… 

Subscribing to a 3rd pillar in Switzerland as a cross-border worker is possible, but opportunities have reduced due to regulatory developments. Obtaining quasi-resident status is essential to benefit from the associated tax advantages. However, alternatives such as French life insurance deserve consideration to optimize your pension provisions and taxation.