Pillar 3: private pension

In the short term: 
You can deduct pillar 3a contributions up to the maximum set amount from your taxable income – and your pillar 3a deposits are exempt from wealth tax. Pillar 3a therefore helps you to reduce your annual tax bill.
You can use our tax calculator to quickly work out how much you could save.

In the medium term:
Money from pillar 3a can be used to buy residential property.

Since preferential interest rates are applied to pillar 3a accounts, it is worth paying in early in the year. If you pay in at the beginning of the year, you will benefit from a whole year's interest. Compare current interest rates here.

Maximum contribution for employed and self-employed persons

Example
A single adult with no children, no assets and a taxable income of 80,000 francs can save up to 1,548 francs per year in the canton of Zurich.
Calculate your savings here: Tax calculator

It's a good idea to start thinking about investing in the third pillar as early as you can. Building up a solid savings cushion is crucial for determining how much financial freedom you will have in retirement.

The law permits you to access your pension account earlier in the following circumstances:

• To purchase additional second-pillar pension benefits
• If you leave Switzerland permanently
• To start a business – and afterwards, if you change industry or want to invest in your business
• To purchase or renovate your own home
• If you draw a disability pension under Swiss disability insurance (DI – IV/AI)
• To repay a mortgage

You can request a withdrawal from the pension account under the following conditions:

• The business constitutes your primary occupation so you are no longer obliged to pay into an occupational pension.
• The amount is withdrawn within one year of you starting your business.
• You have registered with the OASI (AHV/AVS) compensation office as self-employed.
• Your business is a sole proprietorship (partner in a limited or general partnership is also possible). You cannot withdraw from your pension account if the business is a public limited company (AG/SA) or a limited liability company (GmbH/SARL).

Set up multiple 3a accounts and withdraw them at staggered intervals when you start approaching retirement. Wherever you live in Switzerland, the tax rate is lower if you withdraw 30,000 francs on five separate occasions than if you withdraw 150,000 francs at once. You cannot withdraw money any earlier than five years before statutory retirement age. For this reason, it rarely makes sense to have more than five accounts. Remember that the you must withdraw the balance of each 3a account in full.

Compare pillar 3a account interest rates

It is possible to withdraw savings from your pillar 3a account five years before statutory retirement age. Equally, if you continue working beyond retirement age, you can defer withdrawal by up to five years.

Note for non-Swiss citizens paying withholding tax:
When paying into a pillar 3a account, the same conditions apply as for Swiss citizens. However, you need to contact the responsible withholding tax office directly if you want to make these contributions tax-deductible.

How do I find a suitable pillar 3a account?
A pillar 3a account will give you greater financial flexibility when you retire. There is wide range of pillar 3a accounts available from by both banks and insurance companies. However, traditional pillar 3a accounts that earn interest have become less and less attractive in recent years because of the continued negative interest rate strategy adopted by the Swiss National Bank. Investment accounts are therefore becoming more attractive than savings accounts. With this type of account, you have a better chance of achieving higher returns. However, the risk is also higher. Another option is to invest in index funds or exchange traded funds (ETF).

Pillar 3a accounts are also being affected by the trend towards digitalization. For example, some start-up companies, in partnership with a bank, now enable you to manage your pillar 3a account easily on your smartphone. Pillar 3a insurance policies are another option available on the market. With these products, you are bound by a contract to make regular payments. You therefore lose some flexibility. However, this type of policy can be a good solution for people who otherwise lack the discipline to save for retirement.

Whichever pillar 3a account you choose, it’s important to check the costs involved. The higher these costs, the more your possible returns or interest will be eroded by fees.