In Switzerland, making payments into the voluntary third retirement savings pillar has two primary advantages.
Firstly, the interest yield rates for 3a assets are notably higher than those of regular savings accounts. Secondly, contributions are tax deductible.
Because 3a contributions are tax deductible, legal limits define the amount of money which you can contribute to 3a retirement savings every year.
Maximum contributions for employees and self-employed people
Two separate annual contribution limits are used in Switzerland, and you employment status determines which of these limits applies to you.
An employed person who makes contributions into the second retirement savings pillar (an employee-sponsored pension fund) can contribute 6768 francs per year into the third pillar on a tax-privileged basis (2017/2018 limit). While this limit typically applies to employed people, for which second pillar contributions are obligatory, it can also apply to self-employed persons who contribute to second pillar retirement savings.
Employed people who do not contribute to a pillar 2 pension fund at the time of making pillar 3 contributions can contribute as much as 20% of their income to third pillar 3a retirement savings on a tax-deductible basis – up to a maximum annual contribution limit of 33,840 francs (2017/2018 limit). This arrangement normally applies to self-employed people.
When individuals are part of legal relationships, if both spouses or both legal partners are employed and contribute to second pillar retirement funds, the tax-deductible contribution limits apply to each individual separately.
When referring to pillar 3a contributions made by individuals who also contribute to a second pillar pension fund, the term “small pillar 3a” is sometimes used. Annual contributions, in this case, cannot exceed 6768 francs. The maximum 3a contribution limit for individuals without an employee-sponsored pension fund is much higher (33,840 francs), which is why this arrangement is sometimes referred to as the “large pillar 3a”.
However, the terms “small” and “large” can be misleading because the maximum contribution for individuals without a pension fund (the “large pillar 3a”) can, in practice, be lower than the maximum contribution for individuals with a pension fund.
Example: A self-employed person without a pension fund has a net income of 30,000 francs. The maximum tax-deductible contribution that person can make to their 3a retirement savings is 6000 francs per year (20% of 30,000 francs). An employed person with a second-pillar pension fund, on the other hand, may contribute up to 6768 francs to their 3a retirement savings on a tax-deductible basis.
Maximum annual contributions by year
Every year, the federal government defines the maximum tax-deductible contribution limit. On average, the limit has been changed every two years.
The following chart provides an overview of progressive changes to third-pillar contribution limits, both for people with and without second-pillar pension funds.