It’s possible to make pillar 3a buybacks!
In case you missed it, you should know that you will be able to make Buybacks to Pillar 3a if you were unable to contribute in certain years. Here’s a brief explanation of this new feature, approved by the Federal Council last November.
This option, previously available only for the second pillar, has now been extended to pillar 3a by the Federal Council.
What’s it all about?
People in gainful employment in Switzerland who, from 2025 onwards, have not made the maximum allowable contributions to their Pillar 3a plan each year will thus be able to pay these contributions retroactively for up to ten years, and deduct these buybacks from their taxable income.
Under what conditions?
In addition to the regular contribution, a Buyback in Pillar 3a up to the maximum “small contribution” (i.e. CHF 7258 in 2025) will be permitted each year. The contribution gap for a given year can only be bought back once, even if the gap is not fully filled.
To be able to make a Buyback, a person must:
- have received income subject to AHV in Switzerland during the year for which you intend to pay retroactive contributions;
- meet this condition during the year in which the buyback is made;
- have, in fact, paid the full ordinary contribution for the year in question.
The Buyback amount is fully tax-deductible, in the same way as the regular annual contribution.
What time horizon?
The Federal Council Ordinance comes into force on January 1, 2025, and allows retroactive payments from calendar year 2025. Buybacks will be possible for the first time in 2026, for calendar year 2025.
What is the tax treatment?
At present, 3rd pillar capital withdrawals, including contributions and any buybacks, are taxed separately from other income and at a reduced rate. At the beginning of 2025, the Federal Council is likely to present the details of the future tax treatment of Withdrawals from the 3rd pillar. Nevertheless, higher taxation of Withdrawals from Pillar 2 and Pillar 3a is likely.