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The Swiss pension system

The third pillar forms part of the Swiss pension system.This optional private pension plan supplements the benefits offered by the first and second pillars. It was introduced in 1972 as a supplementary pension capital scheme to the first and second pillar pension plans.

On average the first and second pillars cover only 60% of the last salary received before retirement or even less if your earn a high income from paid employment.

Once you retire, your income is reduced. This decrease in income can be problematic depending on your expectations or retirement plans. By subscribing to an individual third pillar pension plan, you guarantee your normal standard of living.

With this in mind and in order to encourage citizens to build up third pillar capital, the government has put in place significant tax benefits, which are detailed below.

What are the benefits of the third pillar?

The third pillar offers many possibilities according to your objectives, expectations, savings capacity, current or future circumstances, as well as your tax situation.

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Build up capital

Build up capital and make dreams a reality, like buying a home, starting your own business and being self-employed, reducing your mortgage, financing the work on your main residence or even taking early retirement.

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Ensure financial security for your family

Ensure financial security for your family while building up capital for your retirement by taking out a third pillar life insurance policy. By taking this step, you protect your family from financial worries in the event of death or disability while making sure you have a pension in the event of disability. At the same time, you generate additional income upon retirement and fill the pension gap.

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Take advantage of tax deductions

Take advantage of tax deductions from the moment you make your first contribution, throughout the contribution period and also when withdrawing assets. Contributions are deductible from taxable income, capital and interest are exempt from withholding tax, on maturity; and early withdrawal tax is withheld at a reduced rate.

Concrete example

Tax benefits

Thirty-five-year-old Ms Dupont works in Geneva and has had an annual income of CHF 128,000 for the past two years. Aware that her retirement will also depend on her early years in employment, she wishes to anticipate any future ‘gaps’ in pension benefits and join a third pillar pension plan.

  • First, she decides to pay CHF 400 per month into a third pillar pension which will provide her with CHF 152,501 in capital by the age of 64.
  • Ms Dupont will benefit from the tax savings granted to her by the government, up to CHF 1,700 per year, or CHF 49,400 until her retirement.
  • She is right when she realises that: ‘Every time I pay CHF 100 into my future pension, the government pays me CHF 35 to encourage me.

Given these advantages, Ms Dupont is considering increasing her monthly contribution and, consequently, her tax savings.


Each year the Swiss government sets the maximum contribution entitling taxpayers to a tax incentive. For 2023 the maximum contribution to a 3a pension allowed was CHF 7'056 per employee.


Each year the Swiss government sets the maximum contribution entitling taxpayers to a tax incentive. For 2023 the maximum contribution to a 3a pension was 20% of a self-employed individual's annual income and up to CHF 35'280.

The different types of third pillar pensions

The third pillar pension is the wealth you build up during your lifetime or that you ensure in anticipation of your life goals or retirement. The third pillar pension plan are made available in the form of a bank account or life insurance. Naturally, each of these two solutions offer very different advantages, but you can take full advantage of both by combining them.

Third pillar bank account

Description: Operates like a bank account that you can put money into or not depending on the options available1. The capital built up is deducted if you make withdrawals2.

Third pillar insurance policy

Description: Operates as an insurance policy with a fixed term and premiums1. If you make withdrawals2 the contract is terminated and the capital withdrawn corresponds to the cash surrender value of the insurance policy.

Pillar 3a and 3b

There are two types of third pillar plans. With a ‘restricted’ 3a pension,you can only withdraw money under certain conditions, while with an ‘unrestricted’ 3b pension, you have more freedom in terms of the contractual period and the payment amount, but you are generally not entitled to a tax deduction.

Right to join
3a (restricted)Swiss and border residents working in the canton of Geneva
3b (unrestricted)Swiss residents only except for the 3b pillar held with a bank
3a (restricted)Capped
3b (unrestricted)No limit
Tax deduction
3a (restricted)Contributions may be deducted from taxable income throughout Switzerland
3b (unrestricted)Contributions may only be deducted from taxable income in the cantons of Geneva and Fribourg
3a (restricted)No tax on contributions or interest. Tax on capital at a reduced rate on withdrawals.
3b (unrestricted)Tax on capital over the life of the product. The capital withdrawn on maturity is not taxed.
Specific features
3a (restricted)Withdrawals under specific conditions defined by law.
3b (unrestricted)Capital can be withdrawn at any time without any reason.
Types of products
3a (restricted)

Bank account or insurance policy:

- 3a pillar savings account

- 3a pillar invested in pension plans

- 3a pillar insurance (restricted) – the insurance solution for guaranteed pension capital

3b (unrestricted)

Bank account or insurance policy:

- 3b pillar savings account

- 3b pillar mixed insurance schemes (unrestricted) – the supplementary insurance solution to guaranteed pension capital

- 3b pure risk insurance - the insurance solution for death benefits

3a (restricted)

The share may be divided among the following legal heirs:

- spouse,

- children,

- dependents

- partners with children or>five years living together

The order may be changed to:

- parents

- brothers and sisters

- other heirs

Tax: one-off and separate (approx. 10%)

3b (unrestricted)

Free choice of policyholder.

Note: Rightful heirs may try to claim an abatement if their right to the share of the estate is prejudiced (based on the cash value).

Tax: Scale of inheritance tax according to the degree of kinship.

Cases of withdrawal of 3a pillar assets provided for by law

  • normal withdrawal: at the normal retirement age (65 years old)
  • early retirement: maximum of five years before the normal retirement age
  • continuation of employment: maximum of five years after the normal retirement age
  • leaving Switzerland: departure and permanent move abroad
  • self-employed: transition to a self-employed activity
  • access to property: for a main residence only
  • mortgage reduction: for main residence only
  • other events: according to law

1 The annual contribution must respect the legal upper limit

2 Withdrawals are authorised according to the list of legal exceptions.

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