Saving Taxes with Pillar 3a: How Does It Work?

Private retirement savings are a central topic in Switzerland – not only for financial security in old age but also for tax optimization. With Pillar 3a, employees can benefit in two ways: they save for retirement and reduce their annual tax burden.

This article explains how Pillar 3a works, the annual contribution limits, available investment forms, and the resulting tax advantages.

The Three-Pillar System in Switzerland

Overview

Swiss retirement savings are based on three pillars:

1. Pillar 1 (AHV/IV/EO): State pension, mandatory for everyone.
2. Pillar 2 (Occupational Pension): Mandatory for employees.
3. Pillar 3 (Private Pension): Voluntary supplement, divided into 3a (restricted) and 3b (flexible).

Focus on Pillar 3a

Pillar 3a is restricted, meaning the funds can only be withdrawn early under specific conditions (e.g., home ownership, self-employment, emigration, or retirement).

Tax Benefits of Pillar 3a

Deduction from Taxable Income

Contributions to Pillar 3a can be deducted from taxable income every year.

Maximum Contribution (2025)

• With occupational pension: CHF 7,056 per year
• Without occupational pension (self-employed): 20% of net income, max CHF 35,280 per year

Tax-Free Growth

Interest and investment gains within Pillar 3a are tax-free during the accumulation phase.

Taxation on Withdrawal

Withdrawals are taxed separately at a reduced rate, which is significantly lower than the regular income tax rate.

Investment Options for Pillar 3a

3a Bank Account

• Classic form with interest credit
• Very secure but low returns

Securities Solution (Funds, ETFs)

• Investment in stocks, bonds, or mixed funds
• Higher potential returns but also market risks
• Especially suitable for long-term investments (15+ years until retirement)

Early Withdrawal Possibilities

Withdrawal before retirement is only possible in exceptional cases:

• Home ownership: Financing self-used property
• Self-employment: Starting or financing a self-employed activity
• Emigration: Permanent departure from Switzerland
• Disability: Permanent incapacity to work

Practical Examples

Example 1: Employee with Occupational Pension

An employee earns CHF 90,000 per year. She contributes the maximum CHF 7,056 to Pillar 3a and saves between CHF 1,500 and 2,500 in taxes, depending on the canton.

Example 2: Self-Employed without Occupational Pension

A self-employed graphic designer earns CHF 120,000. He can contribute 20% of his income (CHF 24,000) to Pillar 3a and saves several thousand francs in taxes.

Common Mistakes and Tips

Common Mistakes

• No or late contribution (tax deduction only applies to contributions made by December 31)
• Assuming Pillar 3a is completely tax-free (tax applies at withdrawal)
• Depositing all funds in a single 3a account (makes staggered withdrawals difficult)

Tips

• Contribute the maximum amount annually to maximize tax benefits
• Open multiple 3a accounts to stagger future withdrawals
• Use securities solutions for long-term investments, bank accounts for short-term
• Plan tax implications before retirement (consider cantonal differences)

Conclusion

Pillar 3a is one of the most important instruments for tax optimization in Switzerland. Regular contributions allow employees to significantly reduce their tax burden while saving for retirement.

It is particularly effective when used over many years and combined with a well-planned withdrawal strategy.