Pillar 3a – why it pays to pay in early

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Pillar 3a accounts often pay a higher rate of interest than regular savings accounts. Paying in early on means you benefit from higher yields for longer. 

One outcome of the negative interest rate policy pursued by the Swiss National Bank is record-low interest rates for savers. Rates on savings accounts currently lie between 0% and 0.1% – some five times less than the rates on pillar 3a accounts. If you want to enjoy higher interest for as long as possible, you should start paying into your pillar 3a account as soon as you can in the new year. 

Tax savings with the third pillar

As well as better interest rates, this pillar also offers tax advantages:

  • Contributions can be deducted from your taxable income.
  • These retirement savings are exempt from wealth tax.
  • You do not have to pay income or withholding tax on interest and capital gains.

However, there is a limit on how much you can pay into your pillar 3a account each year – currently 6,883 francs for employed persons. For self-employed persons without an occupational pension, the amount is limited to 34,416 francs or 20% of their net income. The flip side of the tax advantages is that the pillar 3a savings are tied up until five years before you reach statutory retirement age. It can only be withdrawn earlier under certain conditions.

Free, no-obligation pension review

The retirement specialists at our partner service Optimatis will analyze your personal retirement needs with you. They can identify ways to close any pension gaps while also reducing your tax burden.