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If you want to provide for your old age financially, you have two options: buying into an occupational pension fund or paying into a private pillar 3a pension plan. In both cases, you can benefit from tax advantages.

A voluntary purchase into the pension fund (pillar 2) involves contributing a voluntary additional amount on top of the already legally prescribed monthly payments being made by the employer and the employee.

A purchase into the pension fund at a glance 

Buying into the pension fund involves a voluntary payment into pillar 2. You can make a purchase if you are insured with a pension fund, have a gap in your savings and do not plan to withdraw capital in the next three years. You will find information on this on your pension fund statement and in the regulations of your pension fund. You can buy into the pension fund until you have accumulated the amount of capital that would otherwise have accrued if you had been insured from the earliest time possible at your current salary. The exact amount is usually shown on the pension fund statement and can otherwise be requested from the pension fund.

Purchase into the pension fund or payments into pillar 3a: what makes more sense?

Unfortunately, there is no one answer, as any recommendation always depends on your individual situation. The prerequisite for a voluntary purchase into the pension fund is a gap in your coverage, a shortfall that may have arisen due to longer stays abroad, studies, part-time employment, breaks for having children or pay increases. Such gaps quickly exceed the annual amount that can be paid into pillar 3a. In the case of the pension fund, you can pay the shortfall in a single year or spread payment over several years, i.e., exactly when it is most beneficial from a tax perspective.

You can pay into pillar 3a every year, but only a certain, limited amount per year. This maximum for employees for 2024 is CHF 7,056. Under the current law, if you do not contribute this amount in the calendar year, you cannot make it up retroactively, although the potential amount you are allowed to contribute to the pension fund – assuming the same salary and employer – basically remains the same. Therefore, in practice, the maximum 3a contribution is paid first and only then are purchases made into the pension fund.

Plan your retirement at an early stage

When you think about your retirement, you are faced with some important decisions. Let’s draw up a plan together based on your personal wishes, so that nothing stands in the way of a relaxed financial future.

Is there a difference under tax law when making a purchase?

Whether you buy into the pension fund or pillar 3a, the tax advantages are the same.

The amounts you contribute can be deducted from your taxable income in the year in which they are deposited. During the contribution period, the pension capital tied up in the pension fund and in pillar 3a is also exempt from wealth and income tax.

Which option is most suitable always depends on your personal circumstances. Here is an overview:

Pension fund purchase and pillar 3a purchase in comparison

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Pension fund purchase

Pension fund purchase

Pillar 3a payment

Pillar 3a payment

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Maximum amount

Pension fund purchase

  • Depending on the amount of the contribution gap

Pillar 3a payment

  • Maximum CHF 7,056 for employees or CHF 35,280 for self-employed without a pension fund

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Tax deduction upon deposit

Pension fund purchase

  • Deductible from taxable income in the year of deposit

Pillar 3a payment

  • Deductible from taxable income in the year of deposit

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Payout modalities

Pension fund purchase

  • Can be paid out as a lump sum or annuity
  • In the case of lump-sum withdrawal, staggering is only possible for phased partial retirement

Pillar 3a payment

  • The lump-sum withdrawal is made in full for each account
  • Staggered lump-sum withdrawals are possible for several accounts

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Taxes at payout

Pension fund purchase

  • Capital withdrawal tax, separate from other income at a reduced rate

Pillar 3a payment

  • Capital withdrawal tax, separate from other income at a reduced rate

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Early withdrawal to finance residential property

Pension fund purchase

  • Early withdrawal to finance residential property is possible with certain restrictions (e.g., the full capital can no longer be withdrawn after the age of 50)

Pillar 3a payment

  • Early withdrawal to finance residential property is possible

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Blocking periods for withdrawal

Pension fund purchase

  • Three-year blocking period for capital withdrawals after purchase

Pillar 3a payment

  • No blocking period

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Investment opportunities

Pension fund purchase

  • In principle, you have no say in the investment

Pillar 3a payment

  • Flexible investment options and fund solutions possible

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Restrictions on deposits

Pension fund purchase

  • Flexible closure of pension gaps only possible until retirement

Pillar 3a payment

  • Only if there is income subject to OASI
  • The maximum amount applies every year
  • Subsequent payments are not (yet) possible

Payment into the pension fund (pillar 2): when is it worthwhile?

Together with pillar 1 (OASI/DI), the retirement pension from the pension fund (pillar 2) should guarantee the accustomed standard of living and provide a total pension income of around 60% of the previous salary. If there is a pension gap, a voluntary purchase may be worthwhile.

It makes sense, for example, if

  • you only join the pension fund after the age of 25.
  • your salary has increased over the course of your career.
  • you have switched to a pension fund with higher benefits.
  • you have already paid the maximum annual amount into pillar 3a.
  • your pension plan has improved because of an increase in savings amounts.
  • you need to compensate for missing years of insurance (e.g., due to childcare, unemployment, stays abroad).
  • you need to close a pension gap due to a divorce.
  • you are considering early retirement.
  • (early) retirement is still at least three years away.

Pension fund purchase: when is the right time?

You are free to choose when to make a contribution. Unlike with private pension provision, the following applies when buying into a pension fund: the later, the better – but not too late.
From a tax perspective, it is worth making additional payments during the years in which you earn a high taxable income. These are often the last ten years of employment before retirement.

It is thus advisable to start thinking about buying into a pension fund from around the age of 50 and to plan for possible purchases.

Before buying into the pension fund, consider whether you can claim high costs elsewhere for tax purposes this year or whether you would like to withdraw the capital within three years of making the payment.

First and foremost, it is the tax savings on the purchase that make up the return on a pension fund purchase. The less time you have the pension assets tied up, the higher their average annual return. In addition, taxable income is generally highest in the years before retirement, so tax deductions are particularly worthwhile at this time due to the higher progressive taxation. Risks such as reallocations, any restructuring measures or changes to the law can be better evaluated over a shorter period of time – and you stay flexible in the event that you need the financial resources elsewhere.

In a year in which you earn little or can otherwise claim high costs against tax, for example for the renovation of a property, it makes little sense to make a large purchase into the pension fund. If you withdraw capital within three years of making the deposit instead of drawing an annuity on retirement, you will have gained nothing: for one thing, the taxes you originally saved must be paid back, and for another, the purchase amount may not be paid out as a lump sum during these three years.

Can I save on taxes when withdrawing from the pension fund?

The main factor in minimizing your tax burden is whether you withdraw the pension fund assets as a lump sum or as an annuity.

The one-time lump-sum withdrawal with subsequent annual withdrawals from free assets is generally more advantageous from a tax perspective, as it is only taxed once – regardless of the remaining assets – and at a lower tax rate. However, after the withdrawal you must pay tax on the capital as assets and, depending on the investment, on the returns as income. The annuity from the pension fund, on the other hand, must be taxed in full as earned income.

Worth knowing

As a rule, the higher the lump-sum withdrawal in the calendar year, the higher the percentage of the tax levied. The tax office adds up all pension withdrawals in a given year from the pension fund and pillar 3, for both people in the case of married couples. In order to break the progression in tax rates, it is advisable to spread pension fund withdrawals, vested benefits and pillar 3a assets over several years if possible.

Another option to save on taxes could be to move, as the taxation of lump-sum payments varies greatly between Swiss cantons and municipalities.

Does buying into the pension fund involve any risk?

Caution is advised when buying into the pension fund if the financial situation of the pension fund is uncertain, i.e., if its assets do not fully cover the pension entitlements of the insured persons. If there is such a shortfall, interest may not be paid on the capital. In the event of a partial liquidation of the pension fund, there is even a risk that part of the accumulated capital will be lost.

If you want to have the pension assets paid out in full as a lump sum at a later date, you should clarify in advance whether this is possible. Last but not least, you should also check the pension fund’s contractual benefits in the event of death before making a purchase, especially if you are an unmarried couple. Different death benefits may apply to cohabiting partners and all pension assets, including payments into the pension fund, may even be forfeited. In such cases, you should carefully consider whether a purchase makes sense and meets your own needs.

Tips for voluntary pension fund purchases

Are you familiar with our digital pension solution?

Open your pillar 3a conveniently in the Mobile Banking App and decide for yourself how much to deposit. You’ll also save on taxes and can invest your retirement savings the smart way. It’s simple.

Conclusion

Buying into the pension fund is not as simple as it seems at first glance. You need to take many factors into account and weigh the advantages and disadvantages. It makes sense to address the issue in good time – around 10 to 15 years before retirement – particularly if you are contemplating early retirement.

You will find important and helpful information in the pension fund regulations, or you can contact the experts at your pension fund directly for personal advice.

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