“Financial basics” learning path: Module 3 of 5

Q: How much can I save on taxes by contributing to the 2nd and 3rd pillars?

Pillar 3a: The maximum annual amount for employees who also pay into a pension fund is currently (as of 2024) CHF 7,056. For self-employed persons without an occupational pension plan, the maximum amount is currently 20 percent of the net annual salary, but no more than CHF 35,280. These contribution limits are regularly adjusted to account for inflation and wage developments. Pillar 2: In principle, you can deduct pension fund purchases in full from your taxable income. You can find out if and how much you can contribute in your pension fund statement. To identify and specifically close any pension gaps, it’s best to seek advice. Different solutions may make sense for you depending on your individual situation; for example, before reducing the number of hours you work, check whether you can still close any gaps in the second pillar.

Q: What does “restricted” mean? When can I access my money in pillar 3a and my pension fund?

As a rule, you can withdraw your pillar 3a savings no earlier than five years before regular retirement (as of 2024: reference age 65 years). In exceptional cases, the capital can be paid out earlier: if you buy residential property or repay a mortgage if you start your own business if you emigrate from Switzerland if you make purchases in pillar 2 if you draw a full disability pension Likewise, valid reasons for an early withdrawal from your pension fund include buying a home, becoming self-employed, emigrating or taking early retirement. For more detailed information, please refer to your pension fund regulations.

Save for retirement: secure your future and save on taxes

Financial security and independence well into old age

The topic of saving for retirement is not something people think about every day, especially if retirement is still a few decades away. But it pays to think about the future in plenty of time. Not least because you can already save on taxes by saving for retirement today.
Timely retirement provision is particularly crucial for women. The fact is that on average they receive 26 percent less pension from the pension system than men.
There are many reasons for this gender pension gap. One solution, however, is for women to start saving systematically and early for old age. This is the key to financial security and independence. And the sooner you start, the more you will benefit in the long term.

How can I save on taxes and save for later?

Antonia is off to a good start in her first job. Thanks to her careful budgeting, she also has her daily expenses under control. By making a conscious effort to set aside money each month, she was able to afford the sofa bed she wanted in no time. Soon she will also have saved up a small financial cushion.

But what about later? She recently heard on a podcast how important it is for women to start their retirement planning early. “The sooner, the better,” it was said, “to give the money invested plenty of time to grow. And this way you also save on taxes.”

“Sounds good,” Antonia thinks to herself, and decides to take a closer look at retirement planning.

The three pillars of the pension system

In Switzerland, the pension system is based on a system of three pillars. The goal is to enable someone to maintain their accustomed standard of living in old age.

Pillar 1: OASI

Old-age and survivor’s insurance (OASI) is the basic state insurance. It’s intended to secure a minimum subsistence income in old age (or for surviving dependents in the event of death).

Insurance is compulsory for everyone. The benefits are normally paid out as a monthly pension after retirement.

Pillar 2: BVG

As a rule, all employees whose annual gross salary is above the statutory pension fund threshold are required to pay into the occupational pension fund. As of 2024, this amounts to CHF 22,050. Contributions are paid in jointly by the employer and employee and deducted directly from the employee’s salary.

Benefits from the pension fund are normally disbursed after retirement, either as a monthly pension or a one-off lump-sum payment.

Pillar 3: private pension

Pillar 3a is a restricted pension plan, which means that, with a few exceptions, the money is blocked until a few years before regular retirement.

In return, the contributions are subsidized by the state: up to the specified maximum amount, the money is not taxed. The amount currently (as of 2024) stands at CHF 7,056 for employees with a pension fund.

There are various ways of making deposits: into a pillar 3a account (a special savings account), into a 3a retirement savings account (equivalent to a fund account, the money is invested) or via a 3a insurance policy.

The accumulated assets are normally paid out on retirement as a pension or lump sum, depending on the pension product.

Identifying and closing pension gaps

Benefits from the first two pillars should cover around 60 percent of your income before retirement. If you haven’t paid into the scheme continuously and in full – for example due to maternity, part-time work, career breaks, or education and training – the percentage will be lower. These breaks in contribution payments result in a gap after retirement, i.e., the difference between what you need to maintain your accustomed standard of living and what you receive from the first two pillars.

That’s why private retirement planning is so very important. The earlier you start, the longer you have to set aside money for your old age, and in this way you can specifically close gaps in your retirement savings – and focus on other goals.

Identifying gaps in your pension

Source: UBS; for illustrative purposes only

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FAQ

How much can I save on taxes by contributing to the 2nd and 3rd pillars?

Pillar 3a: The maximum annual amount for employees who also pay into a pension fund is currently (as of 2024) CHF 7,056. For self-employed persons without an occupational pension plan, the maximum amount is currently 20 percent of the net annual salary, but no more than CHF 35,280.

These contribution limits are regularly adjusted to account for inflation and wage developments.

Pillar 2: In principle, you can deduct pension fund purchases in full from your taxable income. You can find out if and how much you can contribute in your pension fund statement.

To identify and specifically close any pension gaps, it’s best to seek advice. Different solutions may make sense for you depending on your individual situation; for example, before reducing the number of hours you work, check whether you can still close any gaps in the second pillar.

How exactly does tax saving with retirement planning work?

Pension fund purchases and payments into pillar 3a (up to the annual maximum amount) are deducted from your taxable income in your tax return. This means that you earn less “on paper” and therefore pay less income tax.

Simply enter the relevant amounts in the appropriate fields on your tax return. The deduction from income is then automatic.

What’s more, you can also save taxes when withdrawing your balance in retirement. Find out everything you need to know about this topic in our article “Pension planning: tips on saving taxes.”

What does “restricted” mean? When can I access my money in pillar 3a and my pension fund?

As a rule, you can withdraw your pillar 3a savings no earlier than five years before regular retirement (as of 2024: reference age 65 years).

In exceptional cases, the capital can be paid out earlier:

if you buy residential property or repay a mortgage
if you start your own business
if you emigrate from Switzerland
if you make purchases in pillar 2
if you draw a full disability pension

Likewise, valid reasons for an early withdrawal from your pension fund include buying a home, becoming self-employed, emigrating or taking early retirement.

For more detailed information, please refer to your pension fund regulations.

You are here on your personal learning path:

Module 1
Initial goals: how to take your future into your own hands
Module 2
Save with a plan: to make both big and small wishes come true
Module 3
Save for retirement: secure your future and save on taxes
Module 4
Invest with foresight: how to achieve your long-term goals
Module 5
Looking to the future: how to lay the foundation for a fulfilled life
Women’s Wealth Academy
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Women’s Wealth Academy

Women who actively take care of their finances increase their chances of achieving financial security and are more optimistic about their future. Take your finances into your own hands.

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