When should I pay into my pillar 3a fund to save on tax?
There are tax benefits to paying into a pillar 3a account. But you need to make sure the bank or insurance company receives your payment on time.
19.01.2023
iStock / svetikd
1. Save on tax with the third pillar
As an incentive, the government allows you to deduct pillar 3a contributions from your taxable income. What’s more, these retirement savings are exempt from wealth tax. You do not have to pay income or withholding tax on interest and capital gains.
The flip side of these tax advantages is that pillar 3a savings are tied up until five years before you reach statutory retirement age, and can only be withdrawn earlier under certain conditions (e.g. to buy a residential property).
Private pensions (third pillar) are becoming increasingly important. They can be used to bridge any gaps left by the first two pillars, as well as to finance any additional needs that may arise.
2. What is the maximum I can pay into pillar 3a?
There is a limit on how much you can pay into pillar 3a each year. As of 2023, there will be a maximum of 7,056 francs for people who are covered by an occupational pension. Those without an occupational pension may pay in a maximum of 35,280 francs (up to 20% of their net income) (as at 2023). Banks and insurance companies won’t accept any more than this.
While some just return the excess amount, others send back the entire contribution.
Note: if you do not notice the returned payment and then miss the deadline for the new payment, you will not be able to claim a tax deduction the following year.
3. What is the deadline for paying into pillar 3a?
You should pay into your pillar 3a fund before Christmas. This ensures that the amount paid in arrives at the bank or insurance company in time for it to be deducted for tax purposes. To be on the safe side, it’s a good idea to check that the bank has processed the payment correctly in the retirement savings account.
This article was first published on 14.11.2017
