Save taxes with Pillar 3a: How does it work?

Private pension provision is a central topic in Switzerland – not only for financial security in old age, but also for tax optimisation. With Pillar 3a, employed individuals benefit twice: they save long-term for retirement while simultaneously reducing their annual tax burden.

In this article, you will learn how Pillar 3a works, how high the annual deductions are, what investment options are available, and what tax advantages result from it.

Switzerland’s Three-Pillar System

Overview

Old-age provision in Switzerland is based on three pillars:

1. 1st Pillar (AHV/IV/EO): State pension, mandatory for everyone.
2. 2nd Pillar (Pension Fund): Occupational pension, mandatory for employees.
3. 3rd Pillar (Private Provision): Voluntary supplement, divided into 3a (tied pension) and 3b (flexible pension).

Focus on Pillar 3a

Pillar 3a is tied, meaning the money can only be withdrawn early under certain conditions (e.g. for home ownership, self-employment, emigration, or retirement).

Tax Advantages of Pillar 3a

Deduction from Taxable Income

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

Maximum amounts (as of 2025/2026):

• With a pension fund: CHF 7,258 per year
• Without a pension fund (self-employed): 20% of net income, max. CHF 36,288 per year

Tax-Free Returns and Wealth Tax Exemption

Interest and capital gains within Pillar 3a are tax-free throughout the entire savings period. Additionally, the accumulated assets in Pillar 3a are exempt from wealth tax.

Taxation upon Withdrawal

Upon withdrawal, the capital is taxed at a reduced, separate tax rate that is significantly lower than the regular income tax rate. By staggering withdrawals over several years – for example by using multiple 3a accounts – the tax burden upon payout can be further reduced.

New from 2026: Retroactive Contributions to Pillar 3a

Since 1 January 2026, employed individuals can retroactively make up for missed or incomplete contributions to Pillar 3a. The key rules:

• Retroactive payments are only possible for contribution gaps that arose from 2025 onwards. Earlier gaps cannot be closed.
• Gaps can be made up retroactively for up to ten years.
• The prerequisite is AHV-liable earned income both in the year of the gap and in the year of the retroactive payment.
• The regular maximum amount for the current year must first be fully paid in before a retroactive payment is permitted.
• The maximum retroactive payment per year is limited to the “small” maximum amount (2026: CHF 7,258), including for self-employed individuals.
• Each gap may only be closed with a single one-time payment.
• Once retirement benefits from Pillar 3a have been withdrawn, no further retroactive payments are possible.

Investment Options for Pillar 3a

3a Bank Account

• Classic form with interest credit
• Very safe, but low returns

Securities Solution (Funds, ETFs)

• Investment in shares, bonds, or mixed funds
• Higher return potential, but also market risks
• Particularly suitable for long-term investments (15+ years until retirement)
• The legally permitted equity share is up to 50%, though some providers offer ETF solutions with up to 97%

Early Withdrawal Options

Withdrawal before retirement is only possible in exceptional cases:

• Home ownership: Financing owner-occupied property
• Self-employment: Starting or financing self-employment
• Emigration: Permanently leaving Switzerland
• Disability: Permanent incapacity to work

The earliest possible withdrawal for age-related reasons is from age 60 for men and 59 for women. A deferral of withdrawal is permitted for up to five years after reaching the statutory retirement age, provided gainful employment continues.

Practical Examples

Example 1: Employee with Pension Fund

A female employee earns CHF 90,000 per year. She pays the maximum amount of CHF 7,258 into Pillar 3a and saves between CHF 1,500 and 2,500 in taxes depending on the canton.

Example 2: Self-Employed without Pension Fund

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

Common Mistakes and Tips

Common Mistakes

• Not making contributions or contributing too late (tax deduction only possible for payments made by 31 December)
• Assuming that Pillar 3a is completely tax-free (taxation applies upon withdrawal)
• Paying all funds into a single 3a account (makes staggered withdrawals more difficult)
• Not using the retroactive payment option: Anyone who does not pay the full amount from 2025 onwards should make up the gap within ten years

Tips

• Pay in the maximum amount annually to optimise tax benefits
• Open multiple 3a accounts (rule of thumb: open a new one from CHF 50,000) to stagger later withdrawals
• For long investment horizons, choose securities solutions; for short horizons, prefer bank accounts
• Plan the tax consequences of withdrawal before retirement (consider cantonal differences)
• Use the new retroactive payment option from 2026 to close contribution gaps with tax advantages

Conclusion

Pillar 3a is one of the most important instruments for tax optimisation in Switzerland. With regular contributions, employed individuals can significantly reduce their tax burden while simultaneously saving for retirement.

Pillar 3a is particularly effective when used over many years and combined with a well-planned withdrawal strategy. Since 2026, the new retroactive payment rules offer additional flexibility to make up for missed contributions and maximise tax benefits.