3rd Pillar 3A/3B — Save taxes and make provision

What is the 3rd Pillar and why is it important?

The 3rd Pillar is a voluntary old-age provision scheme in Switzerland that brings you two major advantages: you save taxes and at the same time build up assets for retirement. As a newcomer or foreigner in Switzerland, you may not be familiar with this system from your home country. But for you in particular, the 3rd Pillar 3A and 3B is a powerful tool to increase your financial security.

Swiss old-age provision consists of three pillars: the 1st Pillar is the AHV (old-age insurance), the 2nd Pillar is occupational provision (BVG). The 3rd Pillar is then your personal savings policy — and you decide for yourself how much you want to save.

The 3rd Pillar 3A — tied provision with tax advantage

The 3rd Pillar 3A is the tied form of private old-age provision. This means: the money is locked up until retirement, you cannot simply withdraw it. In return, you receive a substantial tax advantage. In 2024, you can pay up to CHF 7,056 per year into 3A and deduct this amount from your taxable income.

For self-employed persons without occupational provision, the limit is 20 per cent of net income, but a maximum of CHF 35,280 per year. This is particularly interesting if you are just setting up a business or are self-employed. According to the Federal Tax Administration (estv.admin.ch), with this tax deductibility you save between 15 and 45 per cent in taxes depending on the canton.

The 3rd Pillar 3B — flexible provision without tax advantage

The 3rd Pillar 3B is the free form of private provision. There is no limit on the savings amount here, and you can access your money at any time — without it being «penalised» for old-age provision. The disadvantage: there is no direct tax advantage when you pay in.

Nevertheless, 3B can be worthwhile. You can save flexibly, maintain your liquidity and at the same time build up assets. Many foreigners use 3B as additional security in case they want to return to their home country at some point.

How much can you save and when do you get the money?

In the 3rd Pillar 3A you must pay in no later than 31 December of the current year in order to claim the tax deductions. You can withdraw your 3A if you leave Switzerland (with a residence permit), if you become self-employed (under certain conditions) or at the latest five years before your normal retirement age.

With 3A you also receive returns from interest or investment gains in addition to your savings amount. These are tax-free as long as the money remains tied up in 3A. This is an important reason why many advisors recommend 3A — your assets grow through compound interest without taxes being charged in the meantime.

3rd Pillar 3A/3B for newcomers and foreigners — What is different?

As a newcomer you need to pay attention to some special features. If you are relocating to Switzerland, you should quickly clarify whether and how you must insure yourself and what provision gaps exist. Many newcomers bring pension benefits from their home country — you may be able to integrate these into Swiss provision.

Foreigners who leave Switzerland can withdraw their 3A benefits. Important: do this in coordination with your departure to avoid conflicts with tax authorities. According to the State Secretariat for Migration (sem.admin.ch), you should register your insurance and provision accounts when you leave to ensure there are no surprises.

Practical example: How you can save taxes with the 3rd Pillar

Imagine you earn CHF 80,000 per year and pay CHF 7,056 into 3A. Depending on the canton, you can expect a tax rate of around 20 per cent — that gives you a tax saving of around CHF 1,411 per year. Over 20 years, this adds up to CHF 28,220, which you could invest additionally.

Even better: if this CHF 28,220 itself generates interest again over 20 years, your assets grow exponentially. This is exactly why your advisor keeps emphasizing that saving early pays off — even if the amounts seem small.

How your advisor can support you

The choice between 3A and 3B is not always easy, especially if you come from abroad and are new to the Swiss system. An experienced advisor will look at your personal situation: your income, your marital status, your canton (because tax rates vary), your retirement plans and your risk tolerance.

Your advisor can also help you find a combination of 3A and 3B that is optimal for you. Some save aggressively in 3A to make the most of the tax advantage and use 3B for additional flexibility. Others focus on security and choose safe asset classes. Our services regarding provision and taxes help you find the right strategy.

Conclusion — Take action now

The 3rd Pillar 3A/3B is one of the best tools in Switzerland to save taxes and make provision for the future at the same time. As a newcomer in particular, you often have little time to identify your provision gaps — but with a structured plan you can quickly catch up.

The key is not to wait too long. Every year you do not pay in is a missed tax saving and a missing return. Book a free consultation appointment with Helpner and get individual advice on how you can reduce your tax burden with the 3rd Pillar 3A and 3B and secure your retirement.