Can you Withdraw your 3rd Pillar in the Event of a Serious Illness?
In Switzerland, it is possible to withdraw your 3a pillar in certain well-defined cases. Indeed, to make an early withdrawal, the capital you wish to take from your pension must be used for one or more of the following reasons:
- You are leaving Switzerland permanently to settle in another country
- You wish to use this money for housing (purchase or construction; renting does not qualify)
- You wish to become self-employed
- You wish to use this money to fill gaps in your 2nd pillar
- You are recognized as disabled by the Disability Insurance (DI/IV).
In this article, we focus on this last case: withdrawing Pillar 3 in the context of a serious illness that leads to AD
What are the Conditions for Withdrawing your 3rd Pillar for Health Reasons?
Withdrawing your 3a Pillar
To withdraw your 3rd pillar in the case of an illness leading to disability and an inability to work, you must be receiving a full disability pension from DI (Disability Insurance). As soon as a person lives or works in Switzerland, they are automatically insured under DI.
To be considered disabled and entitled to AI benefits, you will need to submit an application via a form. It will then be reviewed, and the competent authorities will determine your entitlements.
It is therefore not the illness itself that allows the withdrawal, but rather the recognition of disability by the AI.
Withdrawing your 3b Pillar
What is Considered a Serious Illness According to the IV/AI?
For AI, disability is defined as a “reduction in the ability to earn or perform usual tasks, such as household chores, resulting from a physical, psychological, or mental health impairment.”
More often than not, it is mental health disorders that lead to an incapacity for work. Whether the incapacity is mental or physical (resulting from an accident or an illness), as long as it is long-term (at least one year), you may be considered disabled.
From that point on, the premiums waiver in the event of loss of earning capacity can step in to provide financial support.
Protection Provided by the 3rd Pillar in the Event of Disability
A 3rd pillar insurance contract allows you to cover risks such as death or disability. For example, it allows you to:
- Guarantee a pension in the event of disability
- Maintain pension benefits even in the event of an illness leading to disability
When you take out a 3rd Pillar policy, you commit to paying regular premiums. If a serious illness entitles you to IV/AI benefits and you are unable to work, paying these premiums can quickly become difficult.
The Essential Point Many People are Unaware of: Premiums Waiver
If you are recognized as disabled by Disability Insurance (DI), your premium payments are made on your behalf. You do not have to worry about this financial aspect, and your pension savings continue despite your incapacity for work.
To benefit from this option, you must pay a small additional premium each month. This amount is very low compared to the benefit you receive in the event of disability.
In other words: you pay a little more now to avoid having to continue paying your insurance premiums if one day you can no longer work and have a reduced income.
Prepare for Life's Uncertainties
Conclusion
No one is immune to a serious illness. Given the uncertainties of the future, it is always wise to be prepared. With a small additional monthly amount, add premium waiver coverage and stay protected in the event of DI (Disability Insurance) invalidity.
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