Retroactive payments into pillar 3a – possible strategies

Private retirement savings in pillar 3 are designed to top up your retirement assets and close any pension gaps you may have. This is because the income you can expect to receive from pillars 1 and 2 rarely covers the expenses incurred during retirement. There is a maximum amount that can be paid into pillar 3a restricted pension plans each year (2025: CHF 7,258), or for people without a pension fund, up to 20 percent of net income (2025: maximum of CHF 36,288).

Previously, anyone who failed to pay in the maximum amount for a particular year could not do anything about it. This is set to change following the decision made by the Federal Council in November 2024. In the future, retroactive payments will be permitted for years in which the maximum amount was not paid in entirely. But the decision comes with conditions.

Making retroactive payments allows you not only to prepare for retirement as effectively as possible, but also to deduct the payments in full from your taxable income. This is what makes retroactive purchases so attractive. Nevertheless, forward planning and an appropriate strategy are essential because the tax advantages depend on your personal situation, and retroactive payments are subject to various conditions.

As shown by a UBS study, purchases into pillar 3a should always go hand in hand with other savings measures so that you can build up retirement assets as effectively as possible whilst making better use of the tax benefits. It is important to remember that your financial situation is not always predictable. There are various factors that can prevent you from retroactively closing pension gaps via pillar 3a, such as pregnancy, loss of employment or urgently needed renovations to a property. During these periods, the amount you actually pay in may not reach the maximum amount permitted – creating a gap that can be closed retroactively for the first time from 2026.

However, if you are quite certain that you will have a higher income or fewer expenses in the coming year, your payment can be postponed until then – as long as the gap to be closed is no more than ten years old. In some cases, this can also maximize your income tax benefits.

You should always check carefully beforehand whether closing a gap in pillar 3a is really worthwhile from a tax perspective, or whether you can save a similar amount for retirement in another way. Depending on your situation in life, there are different strategies you can adopt for making retroactive payments into pillar 3a.

If you have a ten-year gap, we generally recommend closing it before the deadline. However, it does not always make sense to close the oldest gaps first, as you have to pay in the entire missing amount in one go. An example is given below.

To simplify matters, it is assumed that the maximum annual pillar 3a contributions remain the same. Realistically, however, the amount increases each year. Growth in the savings rate is also linear in the example. Moreover, most of the gaps in the example are not filled until ten years after they occur. This is simply because of the savings capacity that the person in the example is assumed to have, and does not mean that you should always wait for as long as ten years before making retroactive payments.

In this example, the gap that arose in the first year can no longer be closed, as the person can’t afford the amount required to close it until more than ten years later. The second gap can only be partially closed for the same reason – however, closing part of this gap instead of waiting until a later gap can be closed in full can maximize retirement savings because it will result in greater tax benefits (see strategy 2) – this also applies to the following years in the example.

It is not until the seventh year that the savings capacity ten years later (i.e. in the seventeenth year) exceeds the gap, but there are not enough savings available to completely close the gaps from years seven and eight combined. However, savings are sufficient if the eighth year is skipped. This means that payments for years seven and nine can maximize both the retroactive payments and the income tax benefits.

The chart therefore shows that skipping individual years can be a strategy for closing gaps completely at a later date, or is a good idea if you can be certain of your cash flow at a certain point in time, for instance due to an inheritance or capital from pillar 2.

Deferring the payment of contributions until subsequent years can be worthwhile from a tax perspective if your taxable income increases sufficiently. This is because additional income units are generally taxed at a higher rate than earlier units. If your income stagnates or even falls, it is generally not worth deferring payments because the tax benefits will also be lower.

Here an example

A single person resident in Zurich whose income increases from CHF 50,000 to CHF 80,000 would benefit from an 8-percent higher income tax benefit if they were to pay in both the regular and the retroactive maximum amount for 2025 in 2026.

This advantage would be lost if they were to pay in the relevant maximum contribution directly in 2025 and 2026 respectively. However, without an increase in income, deferring the contribution would minimize the income tax benefit by 9 percent.

However, the rule for deferring contributions is not universally valid since income tax progression flattens out. The point at which a change in income makes a shift in contributions worthwhile depends on several factors, including the contribution amounts, the taxable income and the income tax progression itself, which in turn is influenced by a number of factors. In general, however, it can be said that suspending the payment of contributions only offers greater tax benefits for low incomes if there is a particularly high increase in income – for example due to a promotion.

The decision to allow retroactive payments into pillar 3a will come into force on 1 January 2025. Retroactive purchases will be possible for the first time in the following year. The fact that purchases will be subject to so many regulations is primarily to ensure the legality of payments. What is more, the relevant tax authorities must be able to check at any time whether purchases have been made correctly.

The new regulation can be a good supplement to other pension-planning measures for all employed persons who are entitled to make purchases into pillar 3a. It completes the options available for accumulating retirement assets and can help ensure that your income will cover or even exceed your expected expenses. Before you decide to make retroactive payments, it’s worth defining a precise strategy with the necessary foresight. Then nothing will stand in the way of making retroactive payments into pillar 3a from 2026.