Staggered pillar 3a withdrawal: how to lower the withdrawal tax

Why the withdrawal is taxed at all

Contributions to pillar 3a lower your taxable income every year — this advantage is the main reason for the third pillar. In return, the state taxes the balance on withdrawal. This capital-benefits tax is deliberately lower than ordinary income tax and is calculated separately from the rest of your income. But: it is progressive. The larger the single withdrawal, the higher the tax rate on the whole amount.

This is exactly where staggering comes in.

The principle of staggering

Anyone who pays into a single account for 40 years may end up with CHF 150,000 or more — and withdraws everything in a single tax year. The progressive schedule then hits in full.

Spread the same balance instead over several accounts and withdraw them in different tax years: each withdrawal is taxed separately and therefore at a lower rate. Two levers work together:

1. Several accounts — A 3a account can only ever be closed in full. Only someone who opened several accounts early can later withdraw individual accounts in different years.
2. Several tax years — Withdrawal is generally possible up to five years before the AHV retirement age. The payouts can thus realistically be spread over about five years.

A worked example

Suppose you have saved CHF 150,000 in pillar 3a:

• One withdrawal of CHF 150,000 lands entirely in the upper part of the progressive schedule.
• Three withdrawals of CHF 50,000 each, in three different years, are each taxed in the lower schedule band.

Depending on canton and amount, the saving quickly adds up to several thousand francs. The concrete capital-benefits tax rates differ greatly between cantons — but the same logic of progression applies everywhere.

What you need to bear in mind

• Married couples are added together. If both partners withdraw in the same year, the tax offices add the amounts together for determining the rate. So spread the withdrawals not only over years but also between the partners.
• Pension-fund withdrawals count too. If the pension-fund capital is also withdrawn, it falls into the same calculation. Plan 3a and pension-fund withdrawals together.
• Open several accounts early. An existing large account can no longer be split later. Anyone wanting to use staggering ideally opens the additional accounts years before retirement.
• The canton of residence in the withdrawal year counts. Decisive is the residence in the year of withdrawal — a move can influence the withdrawal tax.

First contribute, then optimise

Staggering optimises the withdrawal — but the bigger lever is the contribution: every franc paid in immediately lowers your taxable income. How much that amounts to for your income and in your canton is shown by the pillar 3a calculator. And because both the contribution saving and the withdrawal tax depend on the canton, a look at the cantonal tax comparison is worthwhile — especially if a move is on the cards anyway.

Note: general information, not tax advice. The capital-benefits tax and the rules on staggered withdrawal are governed by cantonal law; have a concrete withdrawal plan checked by your tax administration or a professional.