How are benefits from tied (private) pension (pillar 3a) treated under Swiss inheritance law in the event of death?
Statutory share, action in abatement
Insurance law solutions can be used to try to circumvent the right to a compulsory portion. Violations of the compulsory portion are subject to reduction. An action in abatement can be brought.
In the case of pillar 3a and 3b life insurance policies, the policyholder may designate a specific person as beneficiary and thus change the designated order by written declaration. The order may differ from an order of succession provided for in the second pillar as well as in the Swiss Civil Code (CC).
The beneficiary (e.g. cohabiting partner) will receive an amount in the event of the testator’s death, while surviving dependents (e.g. descendants) may receive nothing. Such gratuitous gifts inter vivos are relevant under inheritance law.
Under current law, it is disputed whether claims arising from tied private pension plans (pillar 3a) are included in the estate in the event of death. The pension agreement (pillar 3a as bank savings) and the pension insurance (pillar 3a as pension insurance) are treated differently:
According to prevailing doctrine, benefits from pillar 3a life insurance are not included in the estate. Bank savings 3a, on the other hand, are regarded as free assets, which is why the entire amount is included in the estate and must therefore be considered under inheritance law. – This unequal treatment has been criticized.
Revision of inheritance law
From January 1, 2023, all beneficiaries – irrespective of the form of pension plan – will have a direct claim of their own against the insurance institution or bank (foundation) for the benefit allocated to them. This pension benefit will be paid out to them directly.
According to the revised inheritance law, all benefits from tied (private) pension plans (pillar 3a), whether bank or insurance products, will be treated as dispositions inter vivos. Such benefits to a beneficiary third party upon the death of the pension beneficiary will not be included in the estate. Consequently, the benefits will not be divided. However, they are subject to addition and reduction.
In other words, such benefits are to be considered in the calculation of the compulsory portion: In the case of pension insurance, the surrender value is decisive, whereas in the case of the pension agreement, the full savings balance is crucial.
If no compulsory portion is violated, no reduction takes place.
Heirs entitled to a compulsory portion who do not receive their compulsory portion can file an action in abatement against the beneficiaries of Pillar 3a and request a reduction until their compulsory portion is established. The beneficiary third party benefits from the difference between the insurance amount and the surrender value.