Because the case is clear, we don’t waste time: Yes, pillar 3a is worthwhile. The reason is simple: Payments into Pillar 3a can be deducted from taxable income in your tax return. In this way, part of the Pillar 3a payment is practically self-financed by the tax savings (risk-free return).

In addition, pension assets do not have to be declared in the tax return. You save wealth tax year after year and income tax on income such as interest or dividends.

In another article we explain how you can get the most out of pillar 3a.

Reduced tax at the time of withdrawal

Although a tax is payable on the withdrawal, it is a reduced tax. It is less than the standard income tax. Therefore, you save more tax with the deposit than you pay at the time of withdrawal. A few examples of calculations:

Tax advantage after 10 years

Income Tax
Deposit 2021-2030 each CHF 6’883Tax saved: CHF 18’780
Withdrawal 2031 (CHF 68’830)Tax paid: CHF 3’348
Total tax savingsCHF 15’432

Tax advantage after 20 years

Income Tax
Deposit 2021-2040 each CHF 6’883Tax saved: CHF 37’560
Withdrawal 2041 (CHF 137’660)Tax paid: CHF 7’536
Total tax savingsCHF 30’024

Tax advantage after 30 years

Income Tax
Deposit 2021-2050 each CHF 6’883Tax saved: CHF 56’340
Withdrawal 2051 (CHF 206’490)Tax paid: CHF 12’403
Total tax savingsCHF 43’937

Tax advantage after 40 years

Income Tax
Deposit 2021-2060 each CHF 6’883Tax saved: CHF 75’120
Withdrawal 2061 (CHF 275’320)Tax paid: CHF 21’413
Total tax savingsCHF 53’707

Single, reformed, no children, City of Zurich, CHF 100,000 income, withdrawal not in the same year as the withdrawal of the pension fund assets

Several 3a accounts for a staggered withdrawal

Since the tax is progressive when it comes to payout, it is worthwhile to accumulate several 3a accounts and withdraw them in stages. This will further reduce the tax on withdrawals of 3a assets.

Withdrawal before retirement only possible in exceptional cases

Money that is paid into the pillar 3a scheme is generally tied up until retirement. In the following situations, 3a assets can still be withdrawn if you:

  • build of purchase a property,
  • become self-employed (as a sole proprietorshop without GmbH or AG) or
  • emigrate.

Long investment horizon must be exploited

Since pillar 3a assets can generally only be withdrawn upon retirement, most 3a savers have an exceptionally long investment horizon. A long investment horizon allows a security solutions with equities. A crisis can be passed up and temporary losses do not have to be realized.

Pillar 3b is not tax deductible

Here and there one also encounters the concept of pillar 3b. However, pillar 3b is nothing other than free saving with free assets. Pillar 3b insurance policies are also ordinary insurance policies. They have neither tax advantages nor a statutory pension character. Accordingly, such assets and the income from them must be declared in the tax return.