Save on taxes with pillar 3a

But how much will the tax savings actually be? What other advantages does pillar 3a offer? And which product suits my specific needs? We answer the most important questions about pillar 3a.

How much tax can I save with pillar 3a?

You can deduct your pillar 3a contributions in full from your taxable income. This will appreciably reduce your tax burden – depending on your canton of residence, income and contribution amount, you can save up to CHF 2000 in tax every year. Good to know: it is still worth contributing even if you do not pay in the maximum amount. Even smaller contributions can pay off from a tax perspective.

In aktuelles-jahr, the maximum amount for employed persons with an occupational pension is abzug-3a. If you are self-employed and not affiliated to a pension fund, you can pay up to 20% of your net income – up to a maximum of abzug-3a-selbststaendige – into pillar 3a.

However, paying into pillar 3a is not only worthwhile from a tax perspective: if you make regular contributions, you accumulate savings over the long term and build a nest egg for retirement.

What are the tax advantages of pillar 3a?

The tax advantages of pillar 3a at a glance

• You can deduct your pillar 3a contributions from your taxable income.
• The accumulated capital and income (through dividends and/or interest) within pillar 3a remain tax-free until payout.
• Upon payout, the pillar 3a capital is taxed separately from other income at a reduced rate, usually lower than your regular income.

Which pillar 3a product is right for me?

There are various ways of investing money in pillar 3a (tax-qualified provisions). You can choose the product that best fits your risk appetite, life situation and desired pension – whether you want to supplement your pension fund or build a specific amount of savings.

Here is an overview of the most common solutions:

Insurance solutions

• Unit-linked 3a policy (insurance solution with savings component): This pillar 3a product combines retirement savings with insurance cover and the opportunity to benefit from capital market investments with a certain level of risk. A portion of the premiums is invested in funds but death and disability benefits are also included. This unit-linked policy is suitable for investors wishing to benefit from potential returns without sacrificing security entirely.
• 3a risk insurance (insurance solution with no savings component): This solution offers insurance protection only – without a savings component. It provides financial protection in the event of disability or death. This option is ideal for people who only want to insure against risks such as illness or death.

Bank solutions

• 3a pension savings account (bank solution without securities): The traditional option with a variable interest rate – ideal for security-oriented investors who do not wish to deal with fluctuations. This solution is particularly suitable if the priority is to preserve the capital.
• 3a pension custody account (bank solution without securities): With this option, you benefit from potential returns on the capital markets, but bear the investment risk and are prepared to tolerate price fluctuations. This solution is suitable for people with a longer investment horizon who are prepared to accept a certain amount of risk.

How can my pillar 3a account be paid out?

Sooner or later, your pillar 3a will be paid out – when you reach the reference age at the latest. The government then takes a share of it – in the form of tax on the pillar 3a savings. The entire accumulated capital is paid out as a lump sum and taxed separately from other income at a progressive rate. The higher the payout amount, the greater the impact of progressive taxation.

Stagger withdrawals to save on tax

You are advised to stagger your payouts to optimise your tax situation. Pillar 3a can be withdrawn up to five years before you reach the reference age. If you have several 3a accounts or policies, you can spread the withdrawal of assets over different years – thus significantly lessening the impact of tax progression.

Tip: It is worth having several parallel 3a solutions while accumulating your pension savings. This allows you to stagger the withdrawal of funds flexibly and tax-efficiently – a simple but effective way to save when the money is paid out.

How else can I save on tax?

Claim deductions when you file your tax return

You can claim other deductions, in addition to your pillar 3a contributions, when you file your tax return. These include health insurance premiums, costs for your commute to work, training costs or even a flat-rate amount for lunchtime meals.

Here you can find out which costs can be deducted in your tax return: What costs can I deduct in my tax return? 

If you are a homeowner

As a homeowner, you can deduct the costs for value-preserving maintenance work:

Costs for maintaining your own home

Für werterhaltende Unterhaltsarbeiten an selbstbewohntem Wohneigentum kann jährlich eine Pauschale geltend gemacht werden – unabhängig davon, ob die effektiven Kosten darunter liegen. Übersteigen die tatsächlichen Ausgaben diese Pauschale, lohnt es sich, die effektiven Kosten in der Steuererklärung anzugeben, um den maximalen Abzug zu nutzen.

You can claim an annual flat-rate amount for value-preserving maintenance work on a home you own and live in – regardless of whether the actual costs are lower. If the actual expenses exceed this amount, it is worth stating the actual costs in your tax return so you can benefit from the maximum deduction.

High renovation costs 

If your renovation costs are high and exceed the taxable income, the deductions can be spread over two tax years. For example, if you have an annual income of CHF 80 000, you cannot deduct renovation costs of CHF 100 000 in a single year. In such cases, it is advisable to spread extensive renovations over two tax years. This allows you to reduce your taxable income in multiple years – and maximise your tax savings.