Last update: 17.09.2024 08:33
Who can pay into pillar 3a?
What are the requirements for your payment to result in a tax deduction?
In this basic article, we take a close look at this with numerous case studies for Swiss citizens: Pillar 3a as an employee, Pillar 3a in part-time employment, Pillar 3a as a self-employed person, Pillar 3a without income, Pillar 3a without gainful employment and in the case of unemployment, Pillar 3a in the year of retirement, in the case of early retirement and after retirement, Pillar 3a with an IV pension, the amount of Pillar 3a payment per person for married couples.
A pillar 3a tax deduction requires an AHV earned income
The pillar 3a deduction is intended to help you build up your private pension provision. In order to be able to claim the small or perhaps even large pillar 3a deduction for tax purposes, you need – quite obviously – a taxable income. More specifically: you must be in paid employment, i.e. have earned income subject to AHV contributions. The decisive factor here is the income type “employment”. Other types of income (e.g. from rent, interest or dividends) do not entitle you to a pillar 3a deduction.
In principle, all Swiss residents must pay contributions to the AHV, but only employees (whether full-time or part-time) and the self-employed have earned income.
In principle, there are two different maximum amounts: the small pillar 3a deduction for employees with a pension fund connection and the large pillar 3a deduction for the self-employed and freelancers.
To be able to claim one of these two deductions, you must make a payment to a pillar 3a foundation. The foundation will certify the amount of your payment for the calendar year by letter or e-mail. For tax purposes, you then deduct the amount actually paid in according to the certificate. We have looked at what you need to consider for a valid tax deduction at the time of payment in another article.
Let’s take a look at various case studies and clarify the question: Who can pay into pillar 3a? And how much? We shed light on the situation for cross-border commuters and foreigners in a separate article.
Pillar 3a who can pay in as an employee, part-time employee and self-employed person
Pillar 3a as an employee: I am employed and pay into a pension fund
Katja works full-time as a clerk in an SME. Her employer deducts pension fund contributions from her salary. Her colleague Natascha is the managing director of her own company. Natascha owns the limited company alone and pays herself a monthly salary of CHF 5,000.
Because Katja pays AHV contributions on her income and is also insured in the occupational pension scheme through her employer, she can deduct the “small” Pillar 3a maximum contribution.
The same applies to Natascha. As a managing director, she is an employee of the legal entity and pays AHV contributions on her salary. As her salary also exceeds the BVG entry threshold, she has joined a pension fund. Accordingly, she is entitled to the small Pillar 3a contribution.
Pillar 3a part-time: I work part-time and pay contributions into a pension fund
Like Katja, Marina works in an SME, but part-time. AHV and pension fund contributions are deducted from her salary. Can she pay into pillar 3a and how much?
Yes, she can. And it doesn’t matter how high Marina’s part-time workload is. She can deduct the full “small” Pillar 3a amount and not – as some people think – just a proportion of it. The decisive factor is that Marina is insured in the occupational pension scheme.
Let’s illustrate this with an example: Marina works 40%, but she is still allowed to pay in and deduct the full pillar 3a contribution.
Pillar 3a as an apprentice / in training
Noe is training as a mediamatician. Can he pay in?
The apprentice’s salary is subject to AHV contributions. Depending on whether Noe is insured in a pension fund, he can pay in the small or large 3a deduction. But does that make sense? That depends on whether Noe has to pay taxes at all.
Apprentice wages are part of taxable income and must be declared in the tax return. However, in many cantons the lowest income brackets are not taxed. The federal government only levies direct federal tax from CHF 18,300. This is why many apprentices do not pay income tax. This also clarifies the issue of pillar 3a. As is so often the case, it depends on which canton you live in. If Noe doesn’t have to pay tax, why should he pay into the tax-privileged, tied 3a pension plan and accept withdrawal restrictions? In this case, we would advise Noe to save in unrestricted pension provision 3b, for example with findependent.
Pillar 3a as a student
Alina is studying medicine in Zurich. She has a scholarship and earns some extra money with a part-time job. She is not insured in the pension fund. Can she pay into pillar 3a?
With her part-time job, Alina earns an income subject to AHV contributions and is therefore entitled to a pillar 3a deduction. Because she does not have a pension fund connection, she can pay a maximum of 20% of her salary into Pillar 3a (large maximum contribution) and not the small maximum contribution. However, as with Noe, the question arises: does this make sense? Alina does have to complete a tax return and state her income from her part-time job and scholarship. The latter is not counted as income in tax practice, and the deductions bring her below the tax-free allowance of CHF 6,700 in the canton of Zurich. A pillar 3a deposit is therefore not worthwhile for Alina in tax terms. We would also advise her to save in pillar 3b.
Pillar 3a as a self-employed person or freelancer: I am not affiliated to a pension fund
Anna is a self-employed graphic artist and designer with her own digital agency.
She has a sole proprietorship.
So that self-employed people without a pension fund can provide for their old age, they can claim a higher deduction, the so-called large Pillar 3a maximum contribution.
Anna is allowed to pay up to 20 % of her net income into pillar 3a.
This is 20% of her annual income after deduction of social benefits (AHV, IV, EO and ALV contributions).
Anna’s deduction is limited to the large pillar 3a deduction.
She can recognize the payments as an expense in her income statement.
Pillar 3a part-time, but does not pay into the pension fund.
Maxim is a student who works part-time in a bar in the evenings and at weekends.
He pays AHV contributions on his salary.
Because his annual salary is below the BVG entry threshold, his employer has not insured him in a pension fund.
Yes, Maxim is also allowed to pay into Pillar 3a.
This is because the regulations for self-employed persons or freelancers without a pension fund connection apply to him in the same way.
Maxim may pay up to 20 % of his net income into pillar 3a.
The amount he pays in is limited to the large pillar 3a deduction.
Let’s take an example. Maxim is paid a net income of CHF 18,500. He can pay 20% of this, i.e. a maximum of CHF 3,700, into pillar 3a and claim it as a tax deduction.
Our tip: Pillar 3a for married couples or in a registered partnership
Are you married or in a registered partnership?
And you and your partner both work?
Bingo!
For married couples and couples in a registered partnership, both you and your partner may each pay the maximum contribution.
Many people don’t know this.
Otherwise, only the working partner is allowed to pay in.
Make sure that the deduction is granted per person.
Each of you must therefore pay into your own pension account.
It is not possible to freely divide the double maximum contribution between the two partners.
Pillar 3a when changing from employed to self-employed: I am employed subject to AHV contributions for a few months and then become self-employed.
Debbie worked as an employee until the end of June and paid into a pension fund. In July she became self-employed with her photography hobby. However, she does not have a pension fund. What applies to her?
Debbie can pay in the “small” pillar 3a amount in full by the end of June. In addition, she can pay in further contributions of up to 20% of her net income from self-employment from July. However, she must ensure that she does not exceed the large Pillar 3a deduction in the calendar year as a whole.
Pillar 3a when changing from self-employed to employed: I am self-employed for a few months and employed for the rest of the year.
After a good two years, Debbie realizes that her self-employment is not as profitable as it seemed at the beginning.
She therefore switches back to employment on 1 October and joins a pension fund.
During the period of self-employment (January-September), she may pay in a maximum of up to 20 % of her net income as a pillar 3a contribution.
During the period of employment (October-December), she may pay in a maximum of the small pillar 3a contribution.
However, if she changes her BVG status during the calendar year, she must ensure that she pays in a maximum of the large Pillar 3a contribution, as she cannot deduct more than this from her taxes.
Pillar 3a Who may pay in in special cases: non-employed, unemployed, early retired, retired, as a cross-border commuter, as a foreigner
Now let’s take a look at various special cases for pillar 3a payments. This is because there are special rules for early retirees, the retired, the unemployed, the disabled, cross-border commuters from Germany or Austria and foreigners subject to withholding tax when paying into pillar 3a.
Pillar 3a in the simplified settlement procedure
Carlos works as an all-rounder in several private households and receives his salary using the simplified payroll procedure. This is a form of withholding tax in which his employer pays tax on his salary at the same time as deducting his social insurance contributions. Can he pay into pillar 3a?
Carlos receives income subject to AHV contributions. Despite withholding tax, he declares this in his tax return so that the other deductions can be calculated correctly. However, this is no longer taxable income and does not increase his tax progression. For this reason, tax deductions are no longer granted on income according to the simplified settlement procedure because they have already benefited from a preferential tax rate. This is why Carlos cannot deduct any 3a payments from it.
If Carlos earns other income subject to AHV contributions, he can claim the applicable deductions described in the previous sections depending on his pension fund affiliation.
Pillar 3a without gainful employment. I am not gainfully employed
Joseph is not currently working.
He looks after their children as a househusband, and Maria earns a sufficient household income.
As her income is high enough, he does not have to pay a minimum AHV contribution.
Can Joseph pay into pillar 3a and reduce the household’s tax burden?
No. Since he has no paid work, he does not earn any income subject to AHV contributions. In this case, you cannot pay into pillar 3a. Tip: “not gainfully employed” is not the same as “unemployed” (see below).
By the way: Even if you pay the minimum AHV contribution to avoid missing years of AHV contributions, you cannot claim any pillar 3a deductions. OASI minimum contributions do not count as earned income.
Pillar 3a in the event of unemployment: I am unemployed
Diego is looking for a new job. He was previously employed for several years and then lost his job. Can he pay in even though he has no income from work in the current year?
Yes. Unemployed means that you were employed and receive unemployment benefit. This is different from “not gainfully employed”. If you are unemployed, you can pay into pillar 3a like Diego, because the daily allowances from unemployment benefit count as replacement income. You can also deduct the maximum amount in the year in which your entitlement to unemployment benefits ends – even if you only received benefits for a few months (Art. 7 para. 4 BVV 3). If you have left the job market, i.e. your entitlement to unemployment benefit ended before you re-entered the job market, you may no longer pay in.
How much can you pay in? If your daily allowance is above the entry threshold for BVG insurance of CHF 84.70 (as at 2023), you are compulsorily insured through the BVG Substitute Occupational Benefit Institution and can pay in the small Pillar 3a maximum contribution. If it is less than CHF 84,70, you can pay in up to 20 % of your net income. Make sure that your 3a payment does not exceed your earned income (including unemployment benefit) and that you pay in the contributions before the compensation payments end.
Pillar 3a in the year of retirement: I am retiring this year
Claude is retiring as an employee on January 31 after a long working life. He asks himself: can I still pay into pillar 3a for the current year and how much?
“Yes, full” is the short answer. This is a tax-saving trick that many people don’t know.
Our tip: Pillar 3a in the year of retirement
Pay the small 3a contribution in full in the year you retire as an employee. You may deduct the maximum contribution, even if you only work for a few months (or less). Make sure that your payment to the foundation is booked BEFORE you retire so that it is irrevocably included in the pension cycle. Some cantons limit the deduction to the net income earned minus professional expenses. If you want to be on the safe side, check with your tax administration beforehand whether you are still allowed to pay in the maximum contribution, otherwise take your chances. As already mentioned, most tax authorities accept the maximum deduction; in the worst case, they will reduce your deduction.
Pillar 3a in retirement: I am retired and have earned income
Ruedi is 66 and although he is already retired, he still wants to get out and about and earns some extra money at the library. He even exceeds the AHV pensioner’s allowance.
Ruedi may deduct payments up to the amount of the small pillar 3a amount. He may continue to make deductions for as long as he is gainfully employed, up to the age of 69 (women) or 70 (men). This would also apply if they earn less than the AHV pensioner’s allowance, as a special rule then applies. This is an exception to the principle “no pillar 3a payment without income subject to AHV contributions”.
Pillar 3a in early retirement: I have taken early retirement
Martin has taken early retirement. He is still paying the minimum AHV contribution until he receives his AHV pension. He is already drawing his BVG pension. Can he still pay into pillar 3a?
It depends. As an early retiree, Martin no longer receives a main income. If he earns an income subject to AHV contributions from a second job, he can continue to pay into pillar 3a. How much? This depends on whether he is affiliated to a pension fund as a secondary occupation (-> small maximum contribution) or not (large maximum contribution, maximum 20% of net income).
Pillar 3a with IV pension: I receive a disability pension
Lara receives an IV pension.
With a view to later, she asks herself: can I also pay into pillar 3a?
No. IV pensions do not entitle you to a pillar 3a deduction.
There is one exception: if Lara earns an income subject to AHV contributions in addition to her IV pension (i.e. she is still able to work), she can pay into Pillar 3a.
As in the other cases, the amount of the possible deduction depends on whether or not she is a member of a pension fund.
Pillar 3a payment in the year of withdrawal: I withdraw money from pillar 3a
Manuel withdraws money from pillar 3a to buy a property. The permissible early withdrawal reason is “promotion of home ownership” (WEF). He would like to pay into the 3a at the end of the year. Is that possible?
Yes, if he earns an income subject to AHV contributions in the same year, he meets the requirements for the tax deduction and can therefore pay into pillar 3a.
Summary: Pillar 3a – who can pay in?
We remember principle 1: “No pillar 3a payment without earned income subject to AHV contributions”. Then there is principle 2: “No 3a deduction without a proper tax return in Switzerland”. A pillar 3a deposit and its recognition as a tax deduction therefore require that you have paid employment on which AHV contributions are paid and that you are taxable in Switzerland.
Depending on whether you earn your income as an employee or as a self-employed person and whether you belong to a pension fund, you can deduct different maximum amounts. Employees with pension fund affiliation may deduct the small Pillar 3a maximum contribution, regardless of how high their salary is in the year, how high their level of employment is or how long they work during the year. If you are employed or self-employed without a pension fund connection, you may deduct the large 3a maximum contribution, which is variable and amounts to up to 20 % of your net income. If you change your BVG status (from gainful employment with a pension fund connection to employment without a pension fund connection or vice versa), you may deduct no more than the large Pillar 3a maximum contribution in a calendar year. For groups of people in special situations (such as unemployed, cross-border commuters, pensioners), special rules apply depending on the situation.
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