Last update: 17.09.2024 08:33
What was that again? Pillar 3a top-up payments are not possible? Yes, that’s still the case. You have to pay in in the current year, otherwise you can no longer do so. But that will soon no longer be the case. Soon you will also be able to pay into pillar 3a retroactively. A purchase in pillar 3a! We show you the facts, how it works and the advantages for you.
Pillar 3a back payments – legal situation
As things stand today, you cannot make additional pillar 3a contributions. But this is set to change. In June 2019, the Ettlin motion1 was introduced. This aims to make it possible to make a pillar 3a purchase retrospectively. People with an AHV income who have not yet paid into pillar 3a, or have only paid partial amounts, should be able to do so later and deduct the full amount from their taxable income in the year of purchase.
Status of discussions in Parliament
The Federal Council didn’t think that was so cool and then scuttled the motion fairly quickly in August 2019. But the Council of States adopted the motion in September 2019 and the National Council on June 2, 2020. Yay! 💪 So the Federal Council had to come up with a proposal for implementation. That took a while. It then made a proposal that deviated significantly from the original idea. It is therefore not surprising that the National Council Committee for Social Security and Health, which is responsible for the matter, rebuked the Federal Council with a clear majority on August 16, 2024.2 and called for the original proposal to be implemented. It thus goes further than the Federal Council in its consultation draft.3 The Council of States Committee for Social Security and Health (SGK-S), on the other hand, supports the Federal Council’s proposal with a weak majority out of concern about the unquantifiable reduction in tax revenue.
According to the Commission, it should be possible to make unbureaucratic purchases into pillar 3a of up to CHF 35,280 every five years. It should be possible to close pension gaps retroactively from the age of 25 – even for years without income subject to AHV contributions!
However, in its proposal, the Federal Council only wants a 3a purchase for the last 10 years. The implementation draft also deviates from the usual definition of a pension gap as it generally applies in pension provision: gaps should only be able to be closed for years in which AHV contributions are due. A 3a purchase per year is also to be limited to the small 3a maximum amount of currently CHF 7,056 (as at 2024). The contribution gap for one year (around CHF 6,682 in 2012) should also always be closed completely through one purchase and not through several purchases. This is because the Federal Council expects its proposal to lead to tax losses of up to CHF 600 million. However, the Commission does not care; it acknowledges that its model leads to higher tax revenue losses than the Federal Council’s proposal.
That’s why we’re sticking to the key data in the Ettlin motion in this article. We tell you what opportunities it offers you and what you can do before it comes into force.
Pillar 3a top-up payments – these are the framework conditions
Somehow you have to determine how much you can pay in retroactively to close the gap. It works like this:
Step 1: Use the 3a table from the Federal Social Insurance Office. You can see your maximum purchase potential for your year of birth from the table.
Step 2: Subtract your existing 3a assets from this. If you have several pillar 3a accounts with different providers, add all the balances together.
Step 3: This results in your maximum subsequent pillar 3a purchase amount. But wait a minute: this purchase amount is still limited by three rules:
- you can only buy into pillar 3a every five years ;
- per purchase, you may only pay a maximum of the large Pillar 3a maximum contribution for self-employed persons; this is CHF 35,280 in 2024;
- and any advance withdrawals already made for home ownership are deducted from the maximum purchase amount.
And hooray, bonus! 🥳 In the purchase year, the usual annual contributions should also be tax deductible.
Example calculation for pillar 3a purchase
Claudia (*1987) works in an architectural office. After her apprenticeship as a structural draughtswoman, she didn’t earn that much at first and wasn’t able to pay much into pillar 3a. She then did further training and received a higher salary at her new company. After Noemi was born, she didn’t work for two years, but then found a well-paid job nearby. She and her partner live in rented accommodation and dream of having their own home. That’s why she has saved in her savings account.
According to the FSIO’s 3a table, Claudia could have paid a maximum of CHF 63,745 into pillar 3a by the end of 2020. But she hasn’t. 🙁 She currently has CHF 28,500 in her pillar 3a. She could therefore pay CHF 63,745 – 28,500 = CHF 35,245 into her pillar 3a. This is below the maximum Pillar 3a amount for self-employed persons (CHF 35,280). And because she is still renting, Claudia has not made an advance withdrawal for home ownership. She therefore meets all the conditions for a subsequent pillar 3a purchase.
Pillar 3a top-up payments – who benefits?
Many women and other groups of people benefit from paying additional contributions into pillar 3a. Are you one of them, like Claudia?
- Didn’t pay into 3a when you were young because you didn’t have enough money? ✅
- Are you self-employed and just didn’t have enough money for the full pillar 3a contribution in the first few years? ✅
- You didn’t always work and therefore didn’t have an AHV income every year (e.g. as a mother) – so you were excluded from Pillar 3a savings? ✅
- You worked part-time and didn’t have enough money to pay the full pillar 3a contribution? ✅
- Have you moved to Switzerland from abroad and have missed years of AHV contributions? ✅
Pillar 3a purchase – these are the advantages
Let’s stick with Claudia’s example. She and her partner dream of buying their own home. By making a subsequent pillar 3a purchase, she can now get a nice tax boost for buying a house in a few years’ time. How does that work?
She pays CHF 35,245 of her gross salary into pillar 3a this year. In return, she receives the full tax deduction and benefits from further tax advantages in pillar 3a. This is also financially viable for her, as she can take the money from her savings account with zero interest. A nice side effect is that the balance in the 3a savings account also earns a tiny bit more interest than the savings account. And: according to the motion, she can also deduct the regular pillar 3a contribution of CHF 7,056 from her taxes in the current year.
Not bad, is it?
Pillar 3a purchase or purchase into the pension fund? Why paying into pillar 3a is better
For Claudia, buying into pillar 3a, as opposed to buying into her pension fund, is exciting for other reasons too.
- no redistribution: she saves for herself in pillar 3a. Only for herself. In the pension fund, there are various redistributions that are not intended by the legislator, but are in fact unfavorable for her: from young to old, from people with higher incomes to people with lower incomes.
- no blocking period for purchases: she can pay into pillar 3a every year and, once she has found her home, can also withdraw the money paid in during the current year to support home ownership. This is not possible with the pension fund: what you pay in is blocked there for 3 years.
- No repayment obligation for WEF withdrawalsWhen Claudia buys her apartment, she can take money out of pillar 3a to finance it. And she can pay back into pillar 3a the following year and claim this contribution against her taxes. The situation is different with the pension fund: if she withdraws money to finance her apartment, she can only deduct purchases into the pension fund from her taxes once she has repaid the amount of her pension fund withdrawal in full.
- No minimum withdrawal for WEF: if Claudia needs money for her home later on, she must choose at least CHF 20,000 as the minimum withdrawal from the pension fund. The situation is different with pillar 3a: here she can withdraw less than CHF 20,000 later on, for example to pay for minor renovations, as there is no minimum withdrawal in pillar 3a.
Pillar 3a top-up payments – what you can do now
The motion is not yet law. But this or something similar is likely to come soon. Until then, you can use steps 1, 2 and 3 to determine your maximum purchase amount and consider how much of any shortfall you can save now. For example with an ETF solution. Set yourself a goal!
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Until the new regulation comes into force, you can also use up the annual pillar 3a contribution. Pillar 3a with securities is a sensible solution if you have a longer investment period.
Find the best pillar 3a
Unbelievable – most people pay too much for their pillar 3a and get too little return. Are you one of them? Find out which pillar 3a is best suited to you with just a few clicks in our free comparison.
Summary of pillar 3a additional payments
The purchase of pillar 3a will come. It is not yet clear exactly how the Federal Council will structure this. However, the key points for pillar 3a top-up payments are outlined in the Ettlin motion: The maximum purchase potential minus existing assets minus advance withdrawals for home ownership equals the permissible purchase amount, which is also capped at the large pillar 3a deduction and may only be used every five years.
We know very few people who cannot benefit from this.
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Disclaimer
We have taken great care with the content of this article. Nevertheless, we cannot rule out errors and cannot guarantee that it is correct and complete. This article is not a substitute for advice. We do not offer investment or tax advice and recommend that tax issues are always clarified with an expert and/or the relevant cantonal authority. We accept no liability whatsoever.
