Rocco Baldinger, Credit Suisse: Opening several Pillar 3a accounts can have tax benefits.

Open several Pillar 3a accounts and possibly save taxes as a result

People who pay their pension capital into multiple Pillar 3a accounts can save taxes in many cantons because the capital can then be withdrawn gradually over several years. We reveal how many accounts it's worth having and over what period you can withdraw your Pillar 3a capital.

3a accounts need to be withdrawn in full

When you approach retirement, it's only possible to take out all the assets accrued in a single Pillar 3a account in one go; it's not possible to withdraw partial amounts. People who pay all their Pillar 3a contributions into a single account therefore have to withdraw the full amount in one year. 

Breaking tax progression with multiple 3a accounts

Although the pension capital paid out is taxed at a reduced rate and separately from other income, this tax burden is progressive based on the amount paid out in many cantons. The more capital you withdraw, the higher this makes the tax rate and thus the taxes to be paid.

The solution: Several Pillar 3a accounts

Since withdrawing a large pension amount can lead to higher taxes, it's worth having several Pillar 3a accounts. People who pay their Pillar 3a capital into several accounts during the employment phase can benefit from the option of spreading withdrawals at the time of retirement. This means that the Pillar 3a capital is withdrawn and taxed over several years.

Before retirement, the number of Pillar 3a accounts does not have any tax implications, but whether someone pays into the third pillar does. Using 3a deposits allows you to save taxes on multiple fronts.

Be careful with simultaneous lump-sum withdrawal of pension fund capital

Lump-sum withdrawals from the pension fund are taxed at a reduced rate, just like Pillar 3a assets. If Pillar 3a assets and the capital from the second pillar are withdrawn in the same year, these pension benefits are taxed together, which can lead to a significantly higher tax progression. The same applies to pension capital from vested benefits accounts.

Tax savings: CHF 5,476

The person in our sample calculation would like to withdraw their money from Pillar 3a when they retire. They also want to withdraw their pension fund assets as a lump sum.

In the scenario shown on the left, they only have one Pillar 3a account. If they withdraw this together with the lump-sum payout from the pension fund in the same year, it results in a tax burden of CHF 47,382.

A better planned scenario is depicted on the right: The same person now has two 3a accounts and has this balance as well as the capital from the second pillar paid out gradually over three years. This allows the person to save CHF 5,476 in taxes.

The sample calculation is for a married person of reformed denomination who lives in the city of Zurich. The figures are calculated based on 2023 tax rates. For illustrative purposes only. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.
Source: Credit Suisse

How many Pillar 3a accounts are ideal?

It is not possible to generalize about the ideal number of Pillar 3a accounts. It depends on the value of the assets that someone saves over the course of their working life, but also on where they live and their civil status. Once you have accrued retirement savings of CHF 50,000, it can, however, be worth opening another Pension account – third pillar.

In most cases, two or three Pillar 3a accounts per person are a good solution. However, since tax practices vary from canton to canton, we recommend checking your personal situation early on. Schedule an appointment with a financial planner, or use our pension calculator to find out in just a few clicks how many Pillar 3a accounts is ideal for you and how much tax you can save by staggering your withdrawals. There are no restrictions on the maximum number of Pillar 3a accounts permitted.

When to open multiple Pillar 3a accounts

It's important to know that money that has already been paid into a Pillar 3a account cannot be transferred to a second Pillar 3a account, since Pillar 3a saving is a form of tied pension provision. With few exceptions (such as promotion of home ownership), the money can only be withdrawn shortly before retirement.

So those wishing to benefit from the tax savings of multiple Pillar 3a accounts will need to plan for this early on. That is the only way to build up several Pillar 3a accounts in parallel through contributions. It can be worth opening another Pension account – 3rd pillar once you have accrued retirement savings of CHF 50,000. The pension experts at the bank know exactly when an additional Pension account – 3rd pillar is recommended.

Pillar 3a withdrawals: earliest and latest cutoffs

Under normal retirement, Pillar 3a funds can be withdrawn once you are five years away from the statutory retirement age. This means no earlier than 59 for women and 60 for men.

The final cutoff is the year of normal retirement, unless the person works beyond that. Women who work past the age of 64 and men who are gainfully employed beyond the age of 65 can have their Pillar 3a funds paid out up to five years later, i.e. at the age of 69 for women and 70 for men.

It is important to note that the retirement age for women will be gradually raised from 64 to 65 starting in 2025. This increase means the cutoffs for women to withdraw Pillar 3a funds will also be shifted.