The three-pillar system: pension provision & tax savings

I couldn't help but wonder... what can one really rely on?  

Trust is not something that is granted to us – we have to earn it first. By being there for each other, we build reliable relationships with our loved ones: brick by brick, until a wall is built that we can lean on. This is exactly how the three-pillar system in Switzerland is structured: together, the three pillars ensure that you have something to lean on and rely on in old age or in the event of invalidity. And you also benefit from it in terms of tax savings.  

However, as with interpersonal relationships, you have to invest something in return. So let's take a closer look at the three-pillar system and find out how you can save on taxes.  

The three-pillar system explained simply  

Always being strong and never needing support? That gets really exhausting in the long run. Especially if you want to raise children, build your own home, have a partnership or pursue your own hobbies alongside your job. From the tax return not to mention the tax return.

Hopefully, you don't have to shoulder all this alone and have people by your side to support you. After all, that's what they're there for. Similar to the relationships in our lives, the Swiss pension system is also based on three pillars:   

1. Pillar 1 is like our family: we cannot choose our relatives, but we can stick together as a family.

2. Pillar 2 is like a partnership: It depends on the respective partner how much we can really rely on each other.

3. Pillar 3 is our friendships: Here we can actively build our own support system, but we have to do something about it.

The following chart provides an initial overview of what each pillar in the three-pillar system consists of – and who is responsible for it:  

We all know how important it is to invest time and effort in relationships. But when it comes to retirement provision, a financial investment is also worthwhile from a tax perspective: contributions to pillars 1, 2 and 3a can be deducted from your income tax. However, only with pillar 3a can you decide for yourself how much you invest, at least up to the maximum amount.  

We are happy to be the shoulder to lean on, when it comes to your taxes. We advise you on all three pillars and take care of your tax return. This allows you to make provisions and reduce your tax burden at the same time without feeling overwhelmed.

Pillar 1: The family of pension provision 

The first pillar is the state pension scheme AHV/IV, short for old age, survivors and disability insurance (Alters-, Hinterlassenen- und Invalidenversicherung). Contributions are mandatory for everyone and are deducted as a percentage of salary or self-employed income. These payments are also considered tax-deductible expenses.  

Pillar 1 is based on the idea of solidarity: people with high incomes make disproportionately high contributions, whether they want to or not. And in the end, pensions – whether for old age, widows and orphans, or disability – are merely a basic form of social security that is usually not sufficient to maintain the standard of living you are used to.  

So it's really like with your own family: you don't choose your relatives, you still look out for each other, but you also build your own social environment.  

Pillar 2: The partners we choose 

The second pillar is somewhat more complicated and, above all, more individual. After all, it concerns occupational pension provision, which is heavily dependent on the respective employer. There are often very large differences between pension fund regulations.  

It is worth taking a closer look at the company pension scheme and asking questions before starting a new job. Ideally, pillar 2 should enable you to maintain your accustomed standard of living in retirement. And who wouldn't want that?

Among other things, you should pay attention to the following: 

• A certain percentage of wages must be used for occupational pension provision. However, employers can invest much more than this – and, depending on the circumstances, can be very generous or rather stingy.  

• The company often pays more if the employee pays more. In that case, it may be worthwhile to pay higher contributions yourself.  

• As you get older, your pension fund contributions also increase. You should keep this in mind.  

• The occupational pension in pillar 2 covers old age, disability and survivors' benefits, and in some cases also includes additional death benefits.   

‘Be careful when choosing a partner’: this also applies when it comes to your employer and their pension fund solution. After all, your partner can be your biggest supporter and a rock in times of trouble. Or they can deceive you and let you down when it matters most.   

If you find a gap in your pension fund, there may also be the option of making voluntary contributions. We would be happy to discuss this with you personally. As a partner for your taxes we won't leave you out in the cold.

Pillar 2 for the self-employed - the singles of the working world 

Those who prefer to remain independent and single must make their own provisions. Whether in love or in self-employmentdo not forget to be your own reliable partner! Self-employed people can voluntarily join a pension fund and make their own ‘company’ provisions. This can also be worthwhile because it is tax-deductible. It is best to discuss this with us in advance.

Pillar 3: The BFFs of retirement provision 

Anyone who thinks that life with family and a partner is complete has probably never had real friendships. Because we also need our friends to feel truly complete and secure. And yes, the same applies to retirement provision. As a voluntary, private pension scheme, pillar 3 is just as important for providing for later life.  

Pillar 3 has two components:   

1. Pillar 3a are the real BFFs:there is a maximum amount that can be invested per year. In return, there are tax deductions and clear rules for payouts. Just like how you only have limited time and space for really close friendships.  

2. Pillar 3b are loose acquaintances: there are many more investment options here – and fewer regulations. However, pillar 3b is not tax-deductible. In principle, you meet up with your wider circle of friends when the opportunity arises, without any major obligations.

From a tax perspective, pillar 3a is therefore particularly relevant. Here, you can voluntarily invest in your future and benefit from tax advantages in the present.   

Using the three-pillar system to save on taxes  

There are so many tasks piling up on our mental desk that something inevitably ends up falling through the cracks. Far too often, it is retirement planning that ends up on the floor. The future seems so far away with everything that needs to be done today.  

When it comes to the first pillar, you don't need to worry about a thing. But with pillar 2 and, above all, pillar 3, it's worth thinking about tomorrow today.   

Tax tips for pillar 2 in the three-pillar system 

Pillar 2 offers the option of making voluntary contributions: for employees who may be able to pay higher contributions or wish to close a gap in their pension fund, and for self-employed individuals who wish to make voluntary contributions. This may be advisable, but is not mandatory.   

After all, it is not always worthwhile investing more time and effort in romantic relationships. Let's discuss in advance what the best solution is in your case and how you should proceed. Of course, this only applies to pillar 2 – not your relationship!   

However we are also happy to advise on issues relating to both love and tax: For example, whether a marriage is worthwhile despite marriage penalty is worthwhile for you from a tax perspective.

Tax advice for pillar 3a in the three-pillar system  

Pillar 3a offers the greatest tax flexibility. You can deduct your investment in pillar 3a assets from your taxes up to a maximum amount of CHF 7,258 for employees and CHF 36,288 for self-employed people without a pension fund (as of 2025). And you can do so according to your individual wishes.  

As a result, there are also a lot of decisions to be made:  

• Which 3a savings plan is right for you: bank accounts, funds or insurance policies?  

• How many 3a accounts should you have? 

• And how much should you invest in each? 

Because pillar 3a is particularly important and also particularly complex, we will talk about it in more detail soon. After all, friendships are such an essential part of our lives that they deserve their own article. Let's be honest: we talk about love enough anyway! 

Trusting the three-pillar system 

At the end of the day, who and what we rely on is our own choice. Who are the people we call in case of an emergency? Who gets our most important passwords or is allowed to babysit our children? And how well do we want to provide for later life today? Relying on pillar 1 or blindly trusting an employer with pillar 2 is not a good way to provide for your retirement. Instead, we take care of our own retirement planning with pillar 3. When it comes to reducing your tax burden with pillar 3a, you canrely on taxum AG. We will work with you to find the best solution.

And just like that, you can rely a little more on yourself – and your pension provision...