Maximum Pillar 3a amount in 2019
Articles

Maximum Pillar 3a amount in 2020

Old Age and Survivors' Insurance (AHV) and employee benefits insurance (BVG) only cover 60 to 70 percent of the previous household income after retirement. If you want to maintain your accustomed standard of living even in your old age, you should therefore contribute the maximum Pillar 3a amount every year. But what are the maximum Pillar 3a amounts for 2020?

Optimize your pension provision by contributing the maximum Pillar 3a amount

The first pillar (state pension/Old Age and Survivors' Insurance) and the second pillar (employee benefits insurance) of the Swiss pension system are intended to maintain the standard of living after retirement. Together, they only cover between 60 and 70 percent of the previous household income. Pillar 3a makes it possible to close individual pension gaps. Anyone who wishes to use this option can therefore contribute the maximum amount to Pillar 3a and benefit from several advantages at the same time.

The higher maximum amount for gainfully employed persons without a pension fund allows self-employed persons, for instance, who as sole proprietorships are not affiliated to a pension fund, to compensate for the accruing pension gap.

Those who contribute the maximum Pillar 3a amount earlier save more

The amount you want to pay into your pillar 3a account must be credited to the pension account on or before December 31, 2020. To avoid losing the tax benefits, it is advisable to make the deposits at an early stage – it is best to do so before the holiday period. It is even better to transfer the maximum amount at the beginning of the year. This is because the interest earned on the 3a account is significantly greater than a private or savings account.

Save taxes with maximum Pillar 3a contributions

These two examples provide an impressive demonstration of how much tax married couples and single people alike can save by paying into Pillar-3a. 

On payout, the retirement capital is taxed separately from other income, at a reduced rate.

Example 1

Single person, Protestant, taxable income: CHF 60,000, tax rates for 2019, maximum contribution for 2020, City of Zurich

 

Without pillar 3a

With pillar 3a 
Part payment

With pillar 3a  
Maximum amount

Annual payment   CHF 3,000 CHF 6,826
Total taxes CHF 7,220 CHF 6,579 CHF 5,824
Annual tax saving*   CHF 641 CHF 1,396

Example 2

Married couple, Protestant, taxable income: CHF 120,000, tax rates for 2019, maximum contribution for 2020, City of Zurich

  Without pillar 3a With pillar 3a
Part payment
With pillar 3a
Maximum amount
Annual payment   CHF 3,000 CHF 6,826
Total taxes CHF 18,088 CHF 17,326 CHF 16,355
Annual tax saving*   CHF 762 CHF 1,733

The tax benefits of Pillar 3a

  • The annual savings deposits can be deducted from taxable income up to the statutory maximum amount.
  • No wealth, income or withholding tax throughout the entire term of the savings plan.
  • On payout, the money saved will be taxed at a reduced rate, separately from other income.
  • The assets in the 3a account can be used for purchasing owner-occupied residential property. The withdrawal is subject to tax – although at a reduced rate and separately from other income.

Are you looking into your private pension provision and have questions about the third pillar?

Schedule a consultation This link target opens in a new window
We will be happy to assist you. Call us at 0844 200 114.