What is the maximum ceiling for the 3rd pillar?

As you know, an increase in the prices of everyday consumer goods began at the end of 2022. However, this bad news brings better news, as it has also resulted in an increase, but this time concerning 1st pillar pensions as well as linked individual pension ceilings. Want to find out more about this, and what the maximum 3rd pillar amount will be in 2024? Find out all about it in this article.

As mentioned in the introduction, the rise in the cost of living has led to an increase in the ceilings for payments into an individual pension account. This decision seems quite logical, since if annuity amounts were fixed at the time of contract signature, and the prices of everyday products continued to rise, it would be difficult to meet our needs at retirement. This is why the Swiss Federal Council has increased the pension ceilings for 2024. As a general rule, these are revised every two years, the last change having indeed taken place in 2021.

Furthermore, it seems important to clarify the fact that only the upper limit amount - in other words, compulsory occupational benefits - can be defined by the Federal Council. On the other hand, according to BVV 3 (which refers to the Ordinance on tax-allowable deductions for contributions to recognized forms of pension provision), you can deduct 8% of the upper limit amount from your taxable income every year if you are dependent on a pension fund. Otherwise, you can still pay up to 40% of the upper limit into your retirement savings account.

If you are employed in Switzerland and belong to a pension fund, you can pay a maximum of CHF 7,056 a year into your linked retirement savings account towards your retirement capital. If you are self-employed and do not have an occupational pension plan, i.e. a 2nd pillar, you can pay up to 20% of your net annual income into your 3rd pillar. However, you must not exceed the ceiling of CHF 35,280 per year.

These maximum amounts relate to the money paid in for your retirement between January 1 and December 31 of each year. Individual pension plans offer attractive tax advantages, since your payments are deductible from your income tax. This is why it is often advisable to make your contributions before the festive season. You also have the option of making a single payment corresponding to the maximum amount of the 3rd pillar.

With free pension provision - or 3rd pillar 3B - the maximum ceilings for your retirement savings are non-existent, since payments are not limited. The amount and frequency of your savings are entirely up to you. This is partly because they are not tax-deductible, in the majority of cases.

However, tax deductions may be possible with free pension provision, but only in the cantons of Geneva and Fribourg.

For example, in 2022, single, widowed, divorced or separated people could deduct a maximum sum of 2,196 francs per year, in the canton of Geneva. For married or cohabiting couples, the maximum tax deduction was 3,294 francs. Finally, for each dependent child, the sum of 898 francs is granted with a free pension plan. It is possible that these amounts may be doubled in certain situations, so it's best to check with your cantonal tax authorities for further information.

To build up capital for your retirement, you can choose between several solutions when it comes to payments into your personal pension account. In most cases, you can decide on the frequency of payments and the amount when you take out your pension contract. However, you can change these later on.

When it comes to the rate at which you plan to pay into your 3rd pillar account, this depends on your situation and the way you work. For example, if you want to worry as little as possible, opt for automatic payments. That way, you won't forget. You can also decide to make monthly, quarterly, semi-annual or annual payments. If you plan to set aside your entire 13th month on the 3rd pillar at the end of the year, this may be a good option to avoid touching your monthly budget. How you pay in your savings is also up to you. In most cases, this will be by LSV direct debit, or by BVR, as both options make things easier.

In theory, to save in the most advantageous way possible, you should be able to pay in the maximum 3rd pillar amount for your retirement pension. In practice, however, this may not be possible for everyone. For example, a young person who has just started working will probably not have the same goals as someone who has been working for many years and is approaching retirement age. In one case, the payments will certainly be lower than in the other. This is another reason why individual pension provision is such an attractive solution, as it can be adapted to the different phases of your life and offers considerable flexibility. So it's hard to know exactly how much you should contribute to your 3rd pillar. However, you can analyze your monthly expenses and income to determine how much you can save for retirement.

You now know the maximum amount you can contribute to your 3rd pillar, whether you have a tied or untied pension plan. You'll also have more precise information on how and how often you can make payments, so you can look forward to a great retirement. However, if you feel you need any further information, please don't hesitate to contact a financial advisor!