Opening a 3rd pillar is good; knowing when and how to withdraw it is what determines much of its real return. Because at withdrawal the capital is taxed, and a few decisions made at the right moment can significantly reduce that bill.
When can you withdraw your pillar 3a?
As a general rule, pillar 3a is withdrawn at retirement, or at the earliest five years before the statutory retirement age, i.e. from age 60. If you keep working beyond the reference age, you can defer the withdrawal by a further five years, which lets the capital keep growing for longer.
The early-withdrawal cases
Before age 60, the capital is generally locked in, except in specific situations that allow an early withdrawal:
- Buying or repaying your primary residence: a down payment for owner-occupied housing, or paying down a mortgage.
- Leaving Switzerland permanently: moving abroad lets you recover the capital you have built up.
- Becoming self-employed: moving to a self-employed activity allows the funds to be released.
- Disability, or payment to your loved ones in the event of death.
Pillar 3b, on the other hand, has none of these constraints: it is available at any time, with no conditions.
How is the withdrawal taxed?
The capital of a pillar 3a is not added to your other income. It is taxed separately, at a reduced rate, as a tax on capital benefits (federal and cantonal portions). The amount depends on the sum withdrawn and on your canton: each canton applies its own scale, and the tax is progressive, so the larger the amount taken out at once, the higher the rate climbs.
Because the taxation is progressive, withdrawing a very large amount in a single year costs proportionally more than spreading the withdrawals out. Hence the value of planning ahead.
Reducing tax at withdrawal: the right habits
- Stagger withdrawals over several years: by opening several 3a accounts and withdrawing them in different years, you break the progressive effect and reduce the rate applied to each portion.
- Coordinate within the couple: splitting withdrawals between both spouses and across separate years avoids adding the amounts together in the same year.
- Mind the overlap with the 2nd pillar: a capital withdrawal from the pension fund in the same year can be added to the 3a in the calculation. The timing should be planned in advance.
If you leave Switzerland, the withdrawal is subject to a withholding tax whose rate depends on the canton where the foundation holding your 3a is based. Depending on your destination country and the applicable treaties, part of it can sometimes be reclaimed. This is a point to sort out with an adviser before withdrawing.
Preparing your withdrawal well
The best time to think about withdrawal is well before you do it. The number of accounts, the timing, and coordination with the 2nd pillar are ideally decided several years in advance. If you live in Geneva, the cantonal scale matters: see our guide to the 3rd pillar in Geneva. And if you are self-employed, the topic is all the more strategic since the amounts at stake are often large: see our guide for the self-employed.