Many providers of 3a products recommend starting contributions as early as possible. This advice is based on a straightforward calculation: the earlier you contribute, the longer you save and benefit from compound interest. While the calculation is correct, we believe it oversimplifies the matter. Here, we explore when pillar 3a really makes sense.
Table of content
Who benefits from pillar 3a? |
At what age does pillar 3a make sense? |
Conclusion |
The difference between pillar 3a and pillar 3b |
Who benefits from pillar 3a?
The most well-known advantage of pillar 3a is the opportunity to save on taxes. Contributions to pillar 3a can be deducted from your taxable income. How much you benefit depends primarily on your income and place of residence.
Pillar 3a is especially worthwhile for high earners
Two key principles apply:
- The higher your income, the more worthwhile pillar 3a becomes.
- The greater the tax burden in your canton, the more advantageous pillar 3a is.
If your income is low, your tax bill is likely already small, so the potential tax savings are limited. The same principle applies to cantons with low tax rates or mild tax progression.
That said, contributing to pillar 3a can still make sense for lower earners. However, the benefit will not be as significant as for high earners. Additionally, individuals with low income and limited savings should carefully consider whether contributions might create liquidity issues. Once funds are deposited into pillar 3a, they are typically unavailable for other expenses.
Curious about how much you could save with pillar 3a? Our interactive map shows how advantageous it is in your canton. Plus, the tax savings from pillar 3a go beyond just the contributions, as explained in our linked article.
When is a retroactive contribution to pillar 3a worth it?
Starting in 2026, retroactive contributions to pillar 3a will be possible, changing how we evaluate the optimal timing for contributions. For young individuals with low incomes, it might make sense to postpone contributions. Missed contributions can be caught up later, during years with higher income. This strategy allows for managing income peaks and smoothing taxable income over several years.
An example: A 20-year-old student living in Frauenfeld works part-time at a marketing agency. In 2025, her gross income is CHF 17,000. At this income level, she owes no taxes, meaning contributions to pillar 3a would not generate any tax savings.
Eight years later, her gross income increases to CHF 100,000. According to the Federal Tax Administration’s calculator, she would owe CHF 13,988 in taxes. By contributing the maximum amount to pillar 3a, her tax bill drops to CHF 12,137. If she also makes a full retroactive contribution for 2025, her tax liability decreases further to CHF 10,504.
With the retroactive contribution, she saves CHF 1,633—savings she wouldn’t have achieved by contributing at the age of 20.
Don’t forget to factor in withdrawal taxes
It’s important to remember that you will pay a capital withdrawal tax when accessing funds from pillar 3a. This includes taxes on any investment gains. While this tax is typically lower than the amount saved through contributions, it’s a factor to keep in mind.
A third key principle emerges:
- Contributions to pillar 3a are worthwhile if the tax savings from contributions exceed the withdrawal taxes.
You can use our interactive map to determine whether this applies to you.
At what age does pillar 3a make sense?
As explained earlier, whether pillar 3a is worthwhile depends less on your age and more on your income, place of residence, assets, and future expenses. Contributions to pillar 3a are generally locked in until five years before retirement, with few exceptions.
This means the funds cannot be used for purposes such as education, travel, or purchasing your first car. Therefore, you should only begin contributing if you don’t need the funds for other immediate financial goals.
Conclusion
In summary, if you have the financial means and a high income, contributing to pillar 3a as early as possible is often beneficial. This is especially true for individuals investing their pillar 3a funds in securities, as the long investment horizon allows for greater risk-taking than shorter-term investments.
However, for those with low incomes and limited savings, it may not be the best choice. While there are good reasons to contribute even in these cases, it’s essential to understand that the funds will not be readily accessible.
The difference between pillar 3a and pillar 3b
Throughout this discussion, we’ve focused on pillar 3a. However, some providers also promote Pillar 3b, especially insurance companies leveraging the good reputation of the third pillar to attract customers. Be cautious: pillar 3b contributions are generally not tax-deductible, which is the primary advantage of pillar 3a.
We recommend against combining savings and insurance in a single 3a or 3b policy, such as a unit-linked life insurance plan. For young individuals without dependents, such coverage is usually unnecessary. Even for those with families, separating saving and insurance typically offers a more cost-effective solution.