Reduce your taxes with the 3rd pillar (and yes, it's legal!) 

The 3rd pillar is actually a legal and smart way to reduce your taxes in Switzerland while building up a nest egg for your retirement. This pillar is a voluntary savings scheme that differs from the first (AHV) and second pillars (pension fund) and offers numerous tax advantages, as the amounts paid in can be deducted in full from your taxable income. It is generally estimated that you will receive a third of the amount saved on top of this in tax savings. So it's definitely worth it! 

How does it work? 

Each year, you can pay up to a certain amount into your pillar 3a. This contribution amount is deducted from your taxable income. Contributions to a third pillar (whether in the form of the most common pillar 3a or the unrestricted pillar 3b) can be deducted from taxable income. This reduces the amount of tax you have to pay. As a general rule, the more you pay in, the less tax you pay that year. The savings accumulated from year to year are not taxed.  

How does this work in figures? 

With a pillar 3a, the deduction is limited to a certain amount each year: 

In 2025, you can pay in up to the following amounts: 

· CHF 7,258 if you are affiliated with a second pillar. 

· CHF 36,288 if you are not affiliated with a second pillar (e.g. self-employed) 

This can mean tax savings of several hundred or even thousands of pounds. 

A simple example: 

You earn CHF 80,000 and pay CHF 7,000 into your pillar 3a account. Your taxable income drops to CHF 73,000. The result: you pay less tax this year! And with several 3a accounts, you can optimise even more later on.  

Tax exemption on interest 

You can win on several fronts. We explain how. In addition to the contribution deduction, the money saved in the pillar 3a benefits from tax-privileged returns, as it is tax-free during the savings phase. Only when the amounts are paid out are they taxed at a reduced rate. 

This is where the tax authorities come into play. The progressive tax is relatively low and varies from canton to canton. It amounts to between 5 and 10% of the capital saved, depending on where you live (and not where the bank is based). 

Incidentally, it is advisable to open at least two 3a accounts with the same bank. This allows you to withdraw your savings in stages when the time comes, thereby counteracting progressive taxation. We're nice, so we're sharing our tips with you! 

Conclusion: With the third pillar, you can not only save on taxes today, but also provide for your retirement. Proof of its advantages. If you haven't set up a third pillar yet, this is a great way to maximise your tax savings and your financial future.