Private provision with pillar 3a

Retirement planning while saving taxes

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Why is private provision with 3rd pillar important?

Retirement today is a long time in the future, but in order to maintain the lifestyle you are currently accustomed to also in retirement, you need to care about it now.

The sooner you address it, the better results you’ll get.
Those who rely on the AHV pension and, if gainfully employed, on the BVG can expect a total of only 60% of their previous salary. The need to cover these possible pension gaps is great and should not be underestimated.

However, with private provision in a pillar 3a, you have various advantages right from the start.

With your annual payments (maximum amount in pillar 3a for employed persons for the year 2023 is CHF 7056 – for persons not insured under the BVG it is 20% of the net earned income, but maximum CHF 35,280), or monthly premiums, you build up year after year a retirement assets which you will receive at retirement, in addition to the statutory pensions AHV (first pillar – statal pension) and BVG (occupational pension).

You can deduct the amount paid in pillar 3a from your taxable income and thus save up to CHF 2,000 in taxes year after year.

Perfectly accurate

In addition, you may use your 3a pillar policy as guarantee when purchasing a home (or 10% of the 20% own capital may come from the pension policy). The saved capital serves as a guarantee of the amount from the equity.

In addition, with a pillar 3a policy, as well as in a pillar 3b, you can cover some moral situations through the insurance and, for example, protect your family in case something should happen to you, or you can protect yourself against financial losses due to disability.

Your advantages with pillar 3a

At a glance

Save taxes:

Benefit from lower taxes from now on. This can also amount up to CHF 2,000 per person.

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Financing your own home:

Save the necessary equity capital for your own home and amortize the mortgage with pillar 3a. Most of the time, there are even more favorable mortgage rates to go with it.

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Retirement plan:

Receive a guarantee for the final capital and additionally benefit annually from the interest achieved.

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Protect your family:

Create fexibly your own modular insurance coverage and adapt it during the contract duration to your current life situations. We want it to be smart and flexible.

How is the Swiss pension system structured?

The swiss pension system – explained.

The Swiss pension system is based on the so-called three-pillar principle:
The first pillar is the mandatory, state-owned one, which every person residing in Switzerland has. It serves to cover the minimum subsistence level.
The second pillar is the occupational pension plan, which every *employed *(minimum entry threshold for a BVG: annual salary 22,050 CHF) person in Switzerland has. This is paid in addition to the AHV pension.
Together, these two pensions cover about 60% of the usual salary. So only a little more than half of what you are used to.
For this reason, there is the private pension in the third pillar, so you can accordingly cover these gaps.

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Tips and tricks

The maximum amount you can pay into a pillar 3a account or policy is adjusted annually. In addition, there are differences for employees who are compulsorily insured in the 2nd pillar through their employer and persons who are self-employed and are not subject to the occupational pension scheme.

For the year 2023, employees can pay in a maximum of CHF 7056 per year, whereas self-employed persons who are not insured in the second pillar can pay in up to 20% of their salary, but a maximum of CHF 35280 per year.

In principle, you can pay into your 3a account or policy at any time. However, if you have made a contract with monthly premium payment, the corresponding installment must be paid before the end of each month for the next month. If you have chosen annual payment, the amount must be credited to the account by the last day of the year.

Both types of third pillar serve as financial security or achievement of certain financial goals. Pillar 3a is a bound pension plan with more restrictions but more tax advantages, pillar 3b is a free pension plan that is more flexible but also has fewer tax advantages. These are the points where the two columns differ:


The bound pension plan 3a serves mainly as a safeguard for the financial future, or for retirement age. Pillar 3b can be used for any savings goals.


Pillar 3a runs until retirement age. Pillar 3b has an individual duration and is defined when the contract is signed, depending on the person’s goal.

Withdrawal before expiration of contract :

The bound pension can only be paid out for home ownership, self-employment or in the event of definitive departure from Switzerland before expiry. The capital from pillar 3b can be withdrawn at any time.

Maximum amount:

For employed persons, the maximum amount for 2023 in pillar 3a is CHF 7056 per year. There is no maximum amount to consider for Pillar 3b.

Tax Savings:

As the state has greater certainty that you will be able to assure yourself a good and autosufficient continuation of your current lifestyle after retirement thanks to your bound pillar 3a and you will not need any supplementary benefits from the state, it rewards you with a tax reduction. You can deduct the amount you are paying into 3a from your taxable income each year.

Who can take it out:

A bound pillar 3a can only be taken out by persons residing and working in Switzerland. Any person can take out a Pillar 3b.

Basically, there is no definitive answer to this question. It always depends on the individual situation of the person. However, there are some features that in most situations brings to the decision to make the pillar 3a or 3b with an insurance company:

Insurance policies feature a guaranteed lump sum at maturity on the policy. In most cases, the administrative costs at the end of the maturity are also lower with an insurance than with a fund of the bank. In addition, the insurance companies show a higher stability.

The best solutions are those where the saved capital is secured every year, thus increasing the guarantee year by year.

Depending on the investment strategy, certain companies also offer protection against negative performance, so that no loss is offset.

It is even more tragic when the losses are fully borne by the investor at the end of the term and time does not allow to recover these losses (big risk with bank funds).

Additionally, with life insurance, you have inheritance privilege. This means: benefits are paid to the beneficiaries even if an inheritance is disclaimed. Since the capital is not included in the estate, it is paid out directly to the beneficiaries.

This is how 3rd pillar works in Switzerland (German)

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