What is pillar 3a? How private pension provision pays off.

I couldn't help but wonder... aren't our BFFs actually the best retirement plan?

Women know that girls' nights aren't (just) about shoes, make-up and hot dates. We make plans together, help each other out of difficult situations and get through breakups collectively. You could even say that friendships are the most reliable form of security for the future. This makes our BFFs the ‘pillar 3a’ of relationships: we can rely on each other – BECAUSE we voluntarily invest a lot.

Other than friendships, pillar 3a of the pension system also has tax advantages, which we will now look at together. But first, let's briefly recall the three-pillar principle of the Swiss pension system.

The three pillars of Swiss pensions and life

The three-pillar system in Switzerland is designed to provide for everyone. But those who invest a little extra can make their retirement even more enjoyable. This has many parallels with the closest relationships in life: we are born into our families, but we choose our partners and friends – and they enrich our lives.

The three pillars of Swiss pension provision and life are therefore as follows:

1. Pillar 1 is like our family: we don't choose them, but we are connected for life.

2. Pillar 2 is like a partnership: we choose who we get involved with and rely on.

3. Pillar 3 is our friendships: we are building our own support system of best friends.

   
   

While there is relatively little flexibility with pillars 1 and 2, pillar 3 is particularly customizable. Here, you can structure your retirement provision to suit you – just like your closest circle of friends. Pillar 3b is even more flexible, but not so relevant for tax purposes. However, pillar 3a is where things get really interesting: this is where provision for the future meets tax savings in the present.

This is how the three-pillar system is structured overall – and the role that pillar 3a plays:

We would love to be your BFF when it comes to taxes, as we can advise you on all three pillars. You can find out more about the three-pillar system here. This allows you to make provisions for the future while reducing your tax burden. So that your next evening with friends can be even more carefree.

How to invest wisely in pillar 3a

Every friendship is different because, above all, it has to fit into your life. The same applies to pillar 3a. While there are some guidelines, you also have room for decisions. It's a bit like not lying to your friends but deciding individually what you tell each of them.

So let's take a look at what you need to bear in mind with pillar 3a in order to get the most out of it (in terms of tax).

The maximum contribution to pillar 3a

Currently (2025), employees in Switzerland can invest up to CHF 7,258 per year in pillar 3a. For self-employed individuals without a pension fund, the maximum amount is CHF 36,288 per year.

The more you invest in pillar 3a, the more you can deduct from your taxes. It may be worthwhile to take full advantage of this opportunity. In other words: those who are completely open in a friendship are also given the greatest trust.

Investing in pillar 3a

So far, you had to make your pillar 3a contributions by 31 December of the year at the latest to get the tax deduction. That's changing in 2025: in the future, you'll be able to fill gaps in your pillar 3a later on. Starting from tax year 2025, you'll be able to make retrospective purchases going back up to ten years.

However, it is best to contact your best friends directly – and continue to pay into pillar 3a in the current year. Retrospective payments should remain a last resort, since strict guidelines apply: for example, you must first make full use of the current year before you can go back in time.We will be happy to advise you personallyon the other conditions.

Dividing up your 3a credit balance

Having more than just one close friendship has its advantages: if a friend is going through a difficult time, you can take care of them and still enjoy carefree social contacts. It's similar with pillar 3a, because it is often advisable to pay into several 3a accounts.

The balance can only ever be withdrawn in its entirety. With multiple accounts or portfolios, you have the option of withdrawing only a portion of your pillar 3a savings. This can also help to break the tax progression for capital gains tax: for example, it is more advantageous to have accounts with CHF 50,000 paid out in five different years than CHF 250,000 in one go.

The various options for pillar 3a

Being friends with different characters can also be enriching. Depending on whether you're in the mood for a glittering party atmosphere, a cosy evening of cooking or deep conversations. Fittingly, there are also three different ways to save your 3a credit:

• 3a bank accounts: Every Swiss bank offers 3a accounts, but these only pay very low interest rates, usually around 0.4% or a maximum of 0.8%. In the past, these accounts were worthwhile if you needed to act quickly at the end of the year. However, a short investment period may also be advantageous for a 3a account if you need the funds again very soon.

• 3a securities savings: Here, the 3a assets are invested in securities, usually funds. There are significant differences in terms of performance, risk and costs. Of course, there is no reward without risk. However, you should keep an eye on all three factors and find a good balance.

• 3a with insurance : A combination of death benefit insurance, disability pension and retirement savings can have advantages. This is particularly advisable as a form of protection, because most insurance companies continue to pay in if you become unable to work, for example. However, a mixed insurance policy combining risk and savings components is often more expensive, and it is usually better to take out a pure risk policy and keep your savings separate. This depends very much on the individual case.

Withdrawal of pillar 3a 

You can probably call your best friends with any concern – whether your house is on fire or you've simply run out of flour. With pillar 3a, however, things are a little different. You can withdraw your 3a assets for five reasons, each of which is subject to capital withdrawal tax:

1. When you reach retirement age or at the earliest five years before the official pensionable age.

2. To purchase residential property or, for example, to renovate existing property or repay a mortgage.

3. When you leave Switzerland. In this case, you should consider whether to withdraw your credit balance before or after deregistering. This can make a difference of thousands of Swiss franc!

4. In the event of incapacity to work, as pension provision is also intended as protection against disability.

5. When you become self-employed.

Prepare for the future and save on taxes with your tax BFF

With pillar 3a, you can make additional provisions to have fewer financial worries in the future. However, there are certain things to consider. Voluntary pension provision in Switzerland is one of the many topics where you might want to ask your best friend for advice. But she probably doesn't know exactly what is advantageous from a tax perspective either. At taxum AG as your BFF for taxes, we know this all too well. Let's talk personally about your private pension provision so that you can reduce your tax burden and live a more carefree life.

And just like that, private pension provision can become a reliable friend...