The Federal Council recently made a major decision regarding retirement planning: starting next year, it will be possible to make up for missed contributions to Pillar 3a retroactively for up to ten years. This decision follows a motion proposed by Council of States member Erich Ettlin (The Centre), which was approved by Parliament. But what does this change mean for insured individuals, and what will be the tax implications?
Retroactive Contributions to Pillar 3a: An Opportunity for Private Retirement Planning
Until now, the maximum annual amount that could be contributed to Pillar 3a had to be utilized each year without any possibility of catching up later. If the maximum amount was not fully reached in a given year, the opportunity to make up for it was lost. Starting in 2025, this will change: insured individuals will have the option to catch up on missed contributions for up to ten years retroactively.
Pillar 3a is an essential pillar of private retirement planning in Switzerland, enabling working individuals to supplement their AHV and pension fund (LPP). In 2025, the maximum contribution limit for those with a pension fund will be 7,258 CHF. These contributions can be fully deducted from taxable income, reducing the overall tax burden.
Who Benefits from the New Regulation?
The option of retroactive contributions is available to anyone engaged in AVS-subject employment in Switzerland — both in the year of the purchase and for the year for which the contribution is made. The advantage is that even retroactive payments for previous years are fully tax-deductible.
However, not everyone is pleased with this new regulation. Some parties, particularly the SP, believe that this measure mainly benefits those with higher incomes. National Councilor Mattea Meyer emphasized that primarily high earners would profit from this new rule since they have the financial means to make such significant catch-up payments. For households with middle or lower incomes, the benefit would be limited.
Impact on Tax Revenues
The Federal Council expects significant tax revenue losses with the introduction of this measure. Initial estimates suggest that direct federal taxes could decrease by 100 to 150 million CHF annually. At the cantonal and municipal levels, the decline could range from 200 to 450 million CHF per year.
Despite these potential losses, the Federal Council sees the benefits in strengthening private retirement savings. Additionally, starting in 2025, the government plans to make further adjustments to the tax privileges of the second and third pillars to align the pension system with current economic realities.
Conclusion
The option for retroactive contributions to Pillar 3a offers a particularly attractive opportunity for high earners to optimize their retirement planning while benefiting from tax deductions. However, it remains to be seen how this change will affect tax revenues and social equity. One thing is certain: the debate on optimizing the Swiss retirement system is far from over.
