Paying into the Third Pillar

Tax benefits for paying into the 3rd pillar

Unlike pillar 3bcolumn 3a grants tax privileges. A pension fund can only add capital to pillar 3a up to an annual ceiling and is, therefore, deductible from taxable income. Anyone who pays the tied pension (3a) receives a certificate from the institution with which they have set up the account at the beginning of each calendar year on the amount paid. This must be attached to the tax return.

For the 3rd pillar, the legislature annually re-establishes the amount which can be paid into the maximum pension fund. Two upper limits are drawn in the pillar 3a: the large and the small pillar. The maximum amount of the large pillar is valid for those who do not pay into a pension fund. As a rule, these are self-employed persons. However, the much lower cost of the small pillar is applicable to all who belong to a pension fund.

• The maximum amount of the large pillar (2020): CHF 34'128, or a maximum of 20 percent of net earned income.
• The maximum value of the small pillar (2020): CHF 6826.

It is largely free to the extent that the beneficiary arranges the payment into the 3rd pillar within the upper limit. Multiple accounts can be opened for different forms of protection at different banks and insurers. Such a division is even advisable, as this allows the phased payment of various 3a accounts. So account holders can save significant amounts of money in taxation.

Functional commitment in linked pension provision

Anyone who starts with the payment in the 3rd pillar (3a) should be aware that the capital is generally not available permanently. For the tax advantages, the amounts paid and possible net interest income remain earmarked in Pillar 3a. Thus, with the exception of a few exceptional cases, such as the financing of real estate (only for self-employment), the commencement of self-employment or permanent emigration from Switzerland, the capital can be used solely for old-age provision or insured claims.

As a result, assets held by the pension fund may not be disbursed until five years before the statutory retirement age. In addition, a beneficiary may continue to pay contributions to the 3rd pillar up to five years after the statutory retirement age if he or she is engaged in gainful employment.