How much tax do you save with pillar 3a?

Every franc paid into pillar 3a is subtracted from your taxable income. You pay no tax on that money while it grows either: no income tax on investment returns, no wealth tax.

Tax only arrives at withdrawal, usually at retirement, at a separate reduced rate. The advantage is twofold: you pay less today and, in most cases, less tomorrow too.

If you're employed and covered by a pension fund, the maximum is CHF 7,258 per year. If you're self-employed without a pension fund, you can pay in up to 20% of net earned income, capped at CHF 36,288.

The contribution counts for the tax year in which it reaches the account: the last useful day is usually late December. Paying in January for the previous year means the opportunity is gone.

The saving depends on your marginal tax rate — the percentage of tax on the last franc you earn. With a taxable income of CHF 90,000, in many cantons this rate is around 25-30%.

Paying in the maximum CHF 7,258 therefore saves roughly CHF 1,800-2,200 per year. In low-tax cantons it's less; in heavier ones it can be more.

Over twenty years of maximum contributions, the accumulated tax saving alone can exceed CHF 40,000 — not counting the growth of the invested capital.

The money stays locked in until retirement, with exceptions: buying your own home, starting a self-employed business or leaving Switzerland for good.

At withdrawal the capital is taxed separately from other income. Holding several 3a accounts and withdrawing them in different years reduces the progression: federal law sets no limit on the number of accounts, but some cantons apply their own rules.

Finally: 3a pays off if the account or foundation has low costs. An insurance-based 3a policy, for example, often keeps a significant share of the first years' contributions as acquisition costs.