Optimize your taxes Save on taxes with a well-organized pension plan
The pension system secures your livelihood in retirement. Pillar 2 and pillar 3 can also reduce your tax burden.
Pay into pillar 3a every year
Pay into pillar 3a every year
The amounts you pay into pillar 3a can be deducted from your net income as part of your personal income tax. As a result, you reduce your taxable income and thus the amount of tax you pay. Paying in the maximum legal amount for pillar 3a each year is the best way to save on taxes. For employees enrolled in a pension fund, this amount is 7,056 Swiss francs in 2024. Those not enrolled in a pension fund can pay up to 35,280 francs (or 20% of their net income) in 2024.
Your gross income and place of residence determine how much you can save on taxes by paying into pillar 3a.
Closing pillar 3a accounts in stages
Closing pillar 3a accounts in stages
A one-time tax is levied when paying out retirement savings from pillar 3, though at a reduced rate and separately from the rest of your income. This taxation does not operate the same way in all cantons. It is important to note that when calculating income tax, the higher the amount paid out, the higher the tax burden as a percentage. Since the tax office totals all payouts made in the one year when calculating taxation on a lump-sum withdrawal, any (complete or partial) withdrawal from a pension fund or a withdrawal from vested benefits is added to the pillar 3a payout.
Pillar 3a accounts can be closed up to five years before reaching official retirement age – women can do this from age 59 and men, age 60. This gives you plenty of time to plan ahead wisely and close your accounts in stages, avoiding progressive taxation.
Filling gaps in your pension fund
Filling gaps in your pension fund
Check your pension fund statement to see if it indicates a possible purchase limit. A limit means that you can voluntarily buy in to the pension fund up to the maximum stated amount. These contributions can be fully deducted from your taxable income. Ideally you should stagger your contributions over several years. This will allow you to save more on tax than if you had made a one-time contribution. Bear in mind that you may not withdraw funds from the pension fund in the three years following your purchase, for example, to buy a self-occupied residential property. Otherwise, the tax advantage you gained from your buy-in will be annulled.
Stagger withdrawals from your pension fund over time
Stagger withdrawals from your pension fund over time
Pension capital is normally blocked until official retirement age but can be withdrawn early under certain circumstances, for example, if you become self-employed or buy a home you intend to live in. Certain pension funds also allow this if you reduce your workload gradually before retiring, that is, if you opt for semi-retirement.
If you are planning to make an advance withdrawal for semi-retirement, note that, depending on your canton, you could save a great deal of money by having your pension fund paid out in stages. If both partners in a married couple are considering advance pension fund withdrawals, it is also a good idea to have these paid out in stages. Additionally, advance withdrawals should not be made in the same year as other potential withdrawals from pillar 3a.
