Pillar 3a and taxes: smart ways to save money
Pillar 3a allows you to provide for retirement as well as save on taxes. Take advantage of the tax benefits with these tips from Comparis.
18.10.2024
iStock.com/BartekSzewczyk
1. What are the tax benefits of pillar 3a?
Private pension provision in pillar 3a has several tax advantages:
Payments into pillar 3a can be deducted from your taxable income.
You pay no wealth tax on the pension assets.
Interest and capital gains in pillar 3a are exempt from income and withholding tax.
The payout from your pension fund is taxed separately from your income and at a lower rate.
2. Pillar 3a and income tax: how much will I save?
Payments into pillar 3a can be deducted from your taxable income. For example: let’s assume you will earn 100,000 francs net in 2024. You pay 5,000 francs into pillar 3a this year. In that case, you only pay income tax on 95,000 francs in 2024. As a single, non-denominational person in the city of Zurich, this saves you around 1,300 francs.
The more you pay into pillar 3a, the greater the tax savings:
Pillar 3a calculator
You can easily calculate how much you will save by paying into pillar 3a. Simply compare the tax costs without deductions for pillar 3a with the tax costs with deductions in the amount appropriate for you.
3. What should I bear in mind when deducting deposits from tax?
There are two restrictions on pillar 3a deposits:
You must have an OASI income.
There is a maximum amount you can pay into pillar 3a. It is 7,056 francs for employees (as of 2024).
4. How can I deduct contributions to pillar 3a from my taxable income?
To claim the deduction, you need to fill in the appropriate field in your tax return and attach the deposit certificate from the bank or insurance company.
Good to know: you do not need to state pillar 3a assets on your tax return. The same applies to any interest and capital income from pension accounts or pension funds.
5. Pillar 3a payouts: what taxes apply?
Taxes are incurred when having your 3a balance paid out. This capital payment is considered income for tax purposes. However, the tax rate is lower than for regular income. For federal taxes, you only pay about one fifth of the usual income tax.
Please note: you must always withdraw the full amount of the capital from a pillar 3a account. The higher the payout in a year, the more you owe in tax, as the tax is progressive. That’s why splitting makes sense.
Splitting means you spread your 3a savings across several accounts. This allows you to spread the payout over several years and reduce the lump sum tax.
This article was first published on 11.11.2019
