What is the new pillar 3a limit in 2025?
From 2025 onward, the annual pillar 3a contribution limits will be:
- CHF 7'258 for employees with a 2nd pillar
- CHF 36'288 or up to 20% of net income (whichever is met first) for self-employed individuals without a 2nd pillar
These higher thresholds address the rising cost of living in Switzerland. They allow for more substantial tax deductions and a greater long-term savings potential.
Can foreigners have a pillar 3a plan?
Yes. If you have Swiss-earned income subject to AHV/AVS, you can generally open a pillar 3a account, even as an expat. This is a crucial step to planning your long-term future in Switzerland.
How do retroactive pillar 3a contributions work for expats?
The private pillar 3a plan exists to close the income gap you experience in retirement and maintain your standard of living. Everything you pay into your private pillar 3a pension fund can be deducted from your income taxes.
Going forward, you will be allowed to “catch up” on missed pillar 3a contributions – doing so brings you increased financial security and lower tax burdens. However, there are certain conditions and limitations that apply. Here’s what you need to know:
- Only post-2025 gaps can be filled: Missed contributions before 2025 remain lost. The first year you could potentially make up for is 2025, and you can do so starting in 2026.
- Ten-year window: You have up to ten years to catch up on any missed year’s contribution. If you miss 2025, you can still pay it by 2035.
- Tax deduction in the year of payment: Retroactive payments reduce taxes in the year you make them – you don’t receive a retroactive tax return bonus from the government. An example: If you hadn’t contributed over the last 3 years and decided to catch up all at once, you’d reduce your taxable income by an additional CHF 21’774 for that one year you make the payments.
- AHV requirement: You must have had income subject to the Swiss AHV in both the year you want to catch up on and the year you make the retroactive payment itself. This is especially important for expats, because the income you had before moving to Switzerland was not subject to AHV, meaning you can’t do a retroactive payment for that period.
- Pay the current year first: Before making a retroactive payment, you must first pay your full ordinary contribution for the current year. Only then can you add on a past year’s missed amount.
- Before the plan: You are allowed to make retroactive payments for the years in which you did not have a pillar 3a plan yet. An example: if you open your pillar 3a plan for the first time ever in the year 2030 and max it out, you are allowed to do retroactive payments for the years when you didn’t even have the plan yet (2025-2029 in this case).
- No retroactive payments after withdrawals start: Once you begin withdrawing pillar 3a funds, you cannot make retroactive contributions anymore (see more information on withdrawals below).
If you’ve newly arrived in Switzerland and need assistance understanding and opening a pillar 3a fund, contact Simplecare today. Our seasoned consultants will be happy to support you in English, German, and Russian.
When can I withdraw my pillar 3a funds?
Generally, you’re allowed to withdraw your pillar 3a pension 5 years before reaching retirement age. There are also a few circumstances that allow for earlier withdrawal:
- If you’re looking to finance a house or apartment (this must be your main residence).
- If your goal is to become self-employed, you can request to draw the funds early to support your venture. Note that the formation of a corporation or limited liability company is not considered self-employment.
- If you have a gap in your occupational pension, you’re allowed to transfer funds from your pillar 3a to pillar 2.
- If you decide to permanently leave Switzerland. Note that you’ll be required to pay withholding tax. Early withdrawal is not applicable to cross-border workers.
- If you receive a full disability pension from the Swiss IV – but only if you don’t have any additional private disability insurance.
Additionally, you’re only allowed to make early withdrawals once every five years.
How to make the most of your pillar 3a going forward
- Check for missed opportunities: Starting in 2026, you can address gaps from 2025 onward. Identify if you missed contributions and consider using the retroactive option.
- Choose wisely: You need to carefully consider where and how you open your pillar 3a fund. Will your strategy focus on stable growth or riskier stock options? Bank or insurance company? What about the inclusion of a life insurance option? Simplecare is here to help guide expats through the process of opening a pillar 3a account with attractive returns – contact us today.
- Contribute early: If you’re able to, you should ideally make most of your pillar 3a contributions at the beginning of the year. This maximizes the over-time growth of each payment. Over the decades, this can mean several thousand francs more in your account compared to late-year contributions.
If you’re looking for a personal consultation for a tax-saving pillar 3a plan, contact Simplecare today.
