3rd pillar for young people: when to start?
Starting to save in a 3rd pillar from your first job is one of the best financial decisions a young person can make in Switzerland. Thanks to the power of compound interest and immediate tax advantages, every year of head start makes a considerable difference to the final capital at retirement.
Why start early: the power of compound interest
Compound interest is often called the "eighth wonder of the world". The earlier you start, the longer your money works for you. Here is a concrete example:
| Start of contributions | Annual contribution | Capital at 65 (3% return) | Of which interest |
|---|---|---|---|
| Age 20 | CHF 7'258 | ~CHF 580'000 | ~CHF 254'000 |
| Age 25 | CHF 7'258 | ~CHF 475'000 | ~CHF 185'000 |
| Age 30 | CHF 7'258 | ~CHF 380'000 | ~CHF 126'000 |
| Age 35 | CHF 7'258 | ~CHF 295'000 | ~CHF 77'000 |
Starting at 20 rather than 35 means nearly CHF 285,000 more at retirement, including CHF 177,000 in additional interest. Run your own simulation with our 3rd pillar calculator.
Immediate tax advantages
Even with a modest salary, the 3rd pillar 3a tax deduction is a tangible advantage from the very first year:
- 3a contributions are deductible from taxable income (up to CHF 7,258 in 2026)
- Average tax savings for a young person: CHF 1,000 to 2,500 per year
- Returns on the 3a account are exempt from income tax and withholding tax
- 3a assets are exempt from wealth tax
Learn more about the 3rd pillar tax deduction.
How to get started: step-by-step guide
Step 1: choose the type of pillar 3a
Two options are available to you:
- Bank pillar 3a: flexible, no minimum duration, variable amounts. Ideal for beginners
- Life insurance pillar 3a: includes coverage (death, disability), but commits you for the long term
Our advice for young people: start with a bank pillar 3a for its flexibility. You can always add a life insurance later if your needs evolve (family, property, etc.).
Step 2: choose your investment strategy
With a long investment horizon (30-40 years), young people can afford a more dynamic strategy:
- 3a savings account: fixed rate, maximum security, modest return (~0.5-1.5%)
- 3a pension funds: equity investment, higher potential return (~3-5% long term), but with fluctuations
- Our advice: for a young person with a 30+ year horizon, pension funds with a high equity allocation (50-80%) are generally recommended
Step 3: define a contribution amount
There is no mandatory minimum amount. Some benchmarks:
- Ideal: the maximum deductible of CHF 7,258/year (approximately CHF 605/month)
- Tight budget: start with CHF 100-200/month and increase gradually
- Tip: set up a standing order on the day your salary is paid
- Bonus and 13th salary: use them to make an additional payment at the end of the year
Step 4: open the account
Opening a 3a account is simple and quick:
- Choose your provider (bank or insurance)
- Fill in the opening form (often possible online)
- Provide an identity document and an employer certificate
- Set up an automatic payment
Request a personalized offer to compare the best solutions on the market.
Digital vs traditional providers: how to choose
Young people today have the choice between traditional 3rd pillar providers (major banks, insurers) and digital solutions (neobanks, fintechs). Here are the essential comparison criteria:
Digital solutions (VIAC, frankly, finpension, etc.)
- Low management fees: generally between 0.39% and 0.50% per year (all-inclusive)
- 100% online opening: in a few minutes from a smartphone
- Wide choice of strategies: equity allocation adjustable from 0% to 97%, often via low-cost ETFs
- No minimum duration: total flexibility, variable amounts
- Drawback: no personalized in-branch advice, no death or disability coverage included
Traditional solutions (UBS, Credit Suisse, Zurich, AXA, etc.)
- In-branch advice: possibility of meeting an advisor
- Combined products: some offerings include death and disability coverage
- Higher fees: often between 0.80% and 1.50% per year
- Sometimes limited fund choice: in-house funds with higher management fees (TER)
Our recommendation for young people: digital solutions are generally more advantageous thanks to their lower fees. Over 40 years, the fee difference between 0.40% and 1.20% can represent more than CHF 40,000 less capital. Compare offers with our free comparison tool.
Specific scenarios: students and apprentices
Apprentices
Apprentices receive a salary subject to AHV/AVS from the start of their training (generally at 15-16 years old). However, AHV/AVS contributions are only mandatory from age 18 (or 17 in certain cases). As soon as they contribute to AHV/AVS, they can open a pillar 3a and deduct their payments.
- Average apprentice salary: CHF 800 to 1,500/month in the 1st year depending on the sector
- Recommended 3a contribution: CHF 50 to 100/month, i.e., CHF 600 to 1,200/year
- Tax savings: modest (low income), but the compound interest effect is maximal over such a long horizon
- Key advantage: starting at 18 instead of 25 can add more than CHF 100,000 to the final capital
Students who work
Students working part-time and earning income subject to AHV/AVS can also open a pillar 3a. However, note:
- AHV/AVS contributions are only mandatory if income exceeds CHF 2,300/year from the same employer
- The 3a deduction is limited to the income actually subject to AHV/AVS: if a student earns CHF 5,000/year, they can deduct a maximum of CHF 5,000 (not the ceiling of CHF 7,258)
- Paid internships count as AHV/AVS-subject income if they exceed the threshold
Even with modest amounts, opening a pillar 3a during studies is an excellent habit. See our guide on opening a 3rd pillar.
Investment options comparison for young people
With an investment horizon of 30 to 40 years, young investors benefit from favoring solutions with a high equity allocation. Here is a comparison of the main options:
ETFs (exchange-traded index funds) vs actively managed funds
Most pillar 3a providers offer pension funds invested in equities, bonds and real estate. The essential distinction concerns the management style:
- ETFs / index funds: replicate a stock market index (e.g., SPI, MSCI World). Very low fees (TER of 0.10% to 0.30%). Performance in line with the market. Recommended for the majority of young investors
- Actively managed funds: a manager selects the securities. Higher fees (TER of 0.80% to 1.50%). Objective to beat the market, but statistically the majority of active funds underperform their benchmark index over 10 years or more
Recommended allocation by profile
- Conservative (20-30% equities): for young people who cannot tolerate fluctuations, even with a long horizon. Expected return: ~2-3%/year
- Balanced (40-60% equities): good compromise between return and volatility. Expected return: ~3-4%/year
- Dynamic (70-97% equities): suitable for young people aged 20-35 with a 30+ year horizon. Expected return: ~4-6%/year. Providers like VIAC or finpension offer strategies with up to 97% equities
For a 20-year-old investing CHF 7,258/year for 45 years, the difference between a 2% return and a 5% return is spectacular: approximately CHF 490,000 vs CHF 960,000. The choice of investment strategy is therefore as important as the act of contributing. Compare 3rd pillar return options.
Common mistakes to avoid
- Putting it off: every year without contributions is a year of compound interest lost, and you cannot "catch up" on missed years
- Taking out life insurance too early: only commit long-term if you are sure of your needs
- Forgetting 3a at year-end: contributions must be paid before December 31 to be deducted for the current year
- Not investing in funds: with a 30+ year horizon, a classic savings account offers a much lower return than investment funds
- Opening only one account: plan to open multiple 3a accounts over the years to optimize your future withdrawals
Planning for the future
Starting early also means anticipating life's major milestones:
- Property purchase: your pillar 3a can serve as equity for buying your home
- Couple life: discover optimization strategies for couples
- Retirement: see our guide on retirement planning
- Pension system: understand how it all works with our Swiss pension system guide
Don't wait any longer: request your free offer and start building your pension today. Every franc invested early is worth far more than a franc invested late.
Guides to get started
- Open a 3rd pillar — step-by-step process
- Pillar 3a guide — everything about pillar 3a
- Bank or insurance? — which type of 3a to choose when starting out
- 3rd pillar returns — invest early to maximize gains
- Maximum deductible amount — current contribution ceilings