Private tied 3a retirement savings offer a twofold advantage: you can provide for your retirement and save taxes at the same time. Employees and self–employed persons who are already members of a 2nd pillar pension plan or pension institution can pay up to CHF 6,682 per year into their 3rd pillar and deduct it from their taxable income. For employees without compulsory BVG/LPP coverage, the limit is 20% of the AHV/AVS salary up to maximum CHF 33,408. Tax will first be assessed at retirement, when the retirement savings capital is paid out in the form of a pension or lump-sum capital.
Federal Council and Council of States oppose further tax advantages
The State has decided not to encourage private retirement savings with any further tax privileges. In March, the Council of States rejected the relevant motion from the National Council by 21 votes to 8. Those opposed to greater tax privileges argued that they would only benefit the wealthy. Many were also concerned about the shortfall in tax revenues. The Federal Council was also against the motion. Basically, only 10% of Swiss taxpayers would be able to take advantage of the full deduction. The Federal Council argued that the proposal only affected those earning over CHF 110,000 in gross income, and even then, only if they first exhausted the existing allowance.
Private retirement savings relieve the State
The demand for higher tax deductions came from the FDP. FDP representatives argued that personal responsibility for retirement provision should be strengthened. While conceding that the tax-deductible allowance for 3rd pillar savings was already quite high, the FDP maintained that it was not high enough in view of the ageing population. Further incentives were necessary to encourage personal responsibility.
Save taxes with pillar 3a savings – even in lower income brackets
It is true that those in the higher income brackets can save more taxes than those in the lower income brackets. But because of Switzerland's progressive tax system, where the tax rate increases progressively and not linearly with the taxpayer's income, pillar 3a contributions can also be worthwhile for persons in the lower income brackets.
By paying CHF 6,682 into his pillar 3a plan, even an employee who earns CHF 50,000 per year can save several hundred francs in taxes.