Retroactive Payments into the 3th pillar possible from 2026 on
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Switzerland’s pension system is based on three pillars: state, occupational, and private provision. The goal of this system is to ensure financial security and maintain the standard of living during retirement. Below is an overview of the three pillars:
The state pension forms the first pillar of the Swiss pension system. Its purpose is to guarantee financial subsistence. It is financed on a pay-as-you-go basis, meaning that contributions are not saved individually but are used immediately to finance current pension payments.
The occupational pension forms the second pillar. It consists of the pension fund and accident insurance. Its purpose is to maintain the accustomed standard of living. It is financed through the capital funding method, meaning contributions are saved and later paid out as a pension or capital.
The voluntary private pension forms the third pillar. It complements the state and occupational pensions with the goal of closing potential pension gaps and securing the individual’s desired standard of living. On average, the 1st and 2nd pillars cover only about 60% of a person’s pre-retirement income. The remaining 40% can be covered through the 3rd pillar.
Before retirement: Michael is approaching retirement and earns a net monthly salary of CHF 8,000. He has contributed to the mandatory pension system (1st and 2nd pillars) but does not have a 3rd pillar.
After retirement: The benefits from the 1st and 2nd pillars (AHV + BVG) cover approximately 60% of his pre-retirement income: CHF 8,000 × 60% = CHF 4,800.
Pension gap: Without a 3rd pillar, a shortfall of CHF 3,200 arises. With a 3rd pillar, Michael could build additional savings to maintain his lifestyle and close this gap.
The voluntary private pension allows individuals to save additionally for old age. This helps close potential pension gaps and build further assets. The 3rd pillar is divided into two types of accounts – 3a (restricted pension provision) and 3b (flexible pension provision).
Pillar 3a is a restricted pension plan that primarily serves as financial security for old age. It is tax-advantaged by the government.
Tax Treatment
The annual amount contributed can be deducted from taxable income. Furthermore, the assets in a 3a account are exempt from wealth tax during the saving period. Upon withdrawal, the balance is taxed separately from regular income at a reduced tax rate.
Maximum Contribution 2025
Advantages
Disadvantages
Pillar 3b refers to free pension savings and offers more flexibility than the restricted Pillar 3a. Unlike Pillar 3a, there are no maximum contribution limits, and the amounts paid in are usually not tax-deductible.
Advantages
Disadvantages
Previously, individuals who did not pay in the maximum amount in a given year could not make retroactive contributions. A parliamentary motion by Ettlin (June 19, 2019) instructed the Federal Council to create a legal basis to make this possible in the future.
The Federal Council approved amendments to the Ordinance on Tax-Deductible Contributions to Recognized Pension Schemes (BVV 3). These came into effect on 1 January 2025.
Starting in 2026, in addition to the regular annual contribution, it will be possible to make an additional contribution (a so-called “small contribution”) to fill previous gaps. This allows retroactive payments and tax advantages to be utilized. However, gaps from years prior to 2025 can no longer be filled. To ensure compliance, the legislator introduced several conditions.
Conditions
Advantages
Weaknesses
The tax benefits of Pillar 3a make it an attractive tool to both save for retirement and reduce annual tax liabilities. Thanks to tax-deductible contributions, tax-free interest earnings during the accumulation phase, and preferential taxation upon withdrawal, significant financial savings can be achieved.
The new option starting in 2026 to make retroactive contributions provides additional flexibility and expands the financial planning options for employed individuals. It is worthwhile to make use of this opportunity to close pension gaps and benefit from tax advantages at the same time.
Do not forget: The final payment must be received by the pension foundation by 31 December.
If you have any questions regarding potential retroactive contributions, our tax specialists will be happy to assist you.
