Pillar 3a: answers to the nine top questions

Pillar 3a is part of the private pension system in Switzerland. The Swiss pension system has three pillars:     

• 1st pillar: state benefits (AHV / IV)      
• 2nd pillar: occupational provisions (pension fund or BVG)     
• 3rd pillar: private provisions, made up of pillar 3a and pillar 3b

To ensure that you are able to maintain your accustomed standard of living after you retire it is recommended that you save using the 3rd pillar. The 3rd pillar is divided into pillar 3a (tax-qualified provisions) and pillar 3b (non tax-qualified provisions).

If you rely solely on post-employment benefits from AHV and your pension fund, you will only be able to count on around 60 percent of your last income.

With pillar 3a, you’ll be able to save for a self-determined life when you’re older: you’ll improve your retirement and close any income gaps.

Additional advantages of pillar 3a:    

• Taxes: you’ll save on taxes, as you can deduct your deposits from your taxable income.    
• Savings amount: you determine how much you want to contribute up to a defined maximum. Even small amounts are worth it.   
• Early withdrawal: in special cases – for example, to finance a home – you can withdraw money from pillar 3a.       
• Retirement: you can access the money in pillar 3a as early as five years before you reach AHV retirement age.

The maximum amount in 2023 for persons with a pension fund is CHF 7056. Persons without a pension fund can pay in a maximum of 20% of earned income, up to a maximum of CHF 35 280. As a rule, the maximum amount is redefined every year or every two years.

If you contribute to pillar 3a, you’ll benefit from tax advantages. Your deposits can be fully deducted from income tax up to the permissible maximum amount. Each year, you’ll receive a receipt showing the amount you have deposited, which you can submit with your tax return.

To ensure that you can benefit from the advantages for the current tax period, be sure to make deposits to pillar 3 by mid-December.

As a general rule: the earlier you start contributing to pillar 3a the better. The condition is that you must be employed in Switzerland and have income subject to AHV.

Both banks and insurance companies offer pillar 3a pension provision options.  

Interest-bearing 3a account

With an interest-bearing 3a account, the interest on your account balance is slightly higher than on a savings account.  

Unit-linked 3a account

Unit-linked savings in pillar 3a usually generate a more attractive return than with a traditional 3a savings account. At the same time, insured persons must be aware that they also bear the investment risk and that, depending on the investment and stock market performance, losses cannot be ruled out.

Fixed-interest 3a savings policy

While part of the premium is used for risk coverage, the savings component of the premium earns a fixed rate of interest and is thus used for retirement provisions. There are also insurers that offer savings policies under which only the premium exemption is insured. 

Unit-linked 3a policy

The savings component of the premium is invested in funds in anticipation of a more attractive return. As with the unit-linked 3a savings account, this entails an investment risk and may also result in losses. There are also policies that guarantee a minimum payout when they mature.    

3a risk insurance

This policy covers the risk of disability and/or death. It is not a savings policy so the premiums are correspondingly low.

The choice of the right 3a product depends on your objectives and your family situation.

If you are only seeking tax-exempt saving and do not wish to benefit from insurance cover, a bank solution is sufficient. You can adjust your deposits at the bank to your financial situation at any time, but with this solution you are solely responsible for your savings discipline.

The advantage of an insurance solution is that you can cover any income gaps in the event of disability and, if necessary, protect your family in the event of death. With a 3a policy you incur a long-term obligation, but because you are forced to save and are exempted from premiums you will definitely reach your saving target – even if you are unable to work.

• Becoming self-employed or changing your self-employment
• Financing residential property for own use    
• To repay a mortgage
• If you move abroad   
• Draw a full IV pension (if your pillar 3a does not provide for disability benefits) 
  

In the event of death, the savings amount or the insured death benefit goes to the spouse or registered partner. If this does not exist, the following persons are beneficiaries with equal rights:

1. Direct descendants
2. Persons who were largely dependent on the insured person
3. Life partners who either lived with the person without interruption for at least 5 years prior to the latter's death, or who are responsible for supporting one or more children from the relationship.

Subsequent beneficiaries include parents, siblings and other heirs of the deceased. 

The number of 3a accounts depends on your place of residence. Some cantonal tax authorities limit the number of 3a accounts.

In general, however, you are allowed – and it even makes sense – to have several accounts. If you divide your assets and have them paid out in different tax years, you’ll avoid progressive taxation: the more capital you draw in a single year, the higher the tax rate.

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