The five common mistakes in pension planning
13 March 2026 | Comment(s) |
Albino Arboit
Buying a home, providing for your family or simply saving for retirement? Pension plans depend on each individual's life goals and should ideally be set up as early as possible. However, with the various tools and strategies available, it is easy to become confused. In this article, we outline the five common mistakes made with the third pillar.
1. Confusing pillar 3a and pillar 3b
The first mistake in terms of pension provision is to confuse pillar 3a (restricted pension provision) and pillar 3b (unrestricted pension provision). While pillar 3a is strictly regulated by specific rules under Swiss law, pillar 3b is more flexible and regulated by a much freer and non-binding framework. Pillar 3a is only available for people who are gainfully employed and subject to AVS/AHV contributions, while pillar 3b is available to everyone.
When choosing a third pillar solution for your pension provision, it is important to understand the differences between pillars 3a and 3b:
Pillar 3a:
- Tax deductible
- Strict annual payment limits
- Money locked in until five years before retirement (except for a small number of exceptions: housing, expatriation or self-employment)
- Designed primarily for retirement provision
- Taxed at a reduced rate separate from other income (progressive depending on the canton) when the benefit is paid out. No taxation during the term of the contract.
- Goal of tax maximisation and preparation for a structured retirement. Ideal for indirectly paying off a mortgage debt.
- No tax deduction (except in the cantons of Geneva and Fribourg)
- No payment limits
- Free withdrawal at any time
- For retirement, but also for any other personal project or family financial
- Generally not taxed on the capital when the benefit is paid out. The repurchase value is taxed as wealth during the term of the contract.
- Goal of wealth accumulation, personal projects, flexibility and family financial protection.
2. Waiting too long to set up a third pillar solution
In Switzerland, taking charge of your private pension provision as early as possible means securing your peace of mind for the future. By setting up a third pillar solution at a young age, you can benefit from the time horizon, compound interest and significant tax advantages, while securing your future and that of your family.
Six reasons to plan ahead for your retirement
- Even with a lifetime of working, the first two pillars generally only cover around 60% of your final salary. The earlier you start saving to maintain your standard of living in retirement, the more you can fill these gaps with less financial effort over time.
- Money saved early works longer. Even small amounts invested at age 25, 30 or 35 can make a huge difference thanks to compound interest. At age 50, however, there is too little time left for savings to grow naturally.
- Annual payments into pillar 3a are capped for both employees and the self-employed. It is therefore not possible to make up for 20 or 30 years of missed saving in just a few years.
- Managing your pension provision early and proactively allows you to cope with and control life's potential surprises, such as divorce, family expenses or career changes.
- To prepare for financial independence. Private pension provision is not just about retirement: these savings can also be used to finance the purchase of a home, protect against disability, provide security for your family and plan your inheritance.
- The earlier you set up your third pillar, the more you can spread out your tax payments on withdrawals. By opening several pillar 3a accounts/policies early on, you can stagger your withdrawals, reduce your tax bill when you retire and avoid tax spikes.
3. Choosing investments that are unsuitable for your profile
Investment funds allow you to grow your third pillar savings, provided you choose the investment profile and solution that are right for your personal situation. Such an analysis allows you to best prepare for your financial future.
Which solution for which investment profile?
- Guaranteed capital: for people seeking absolute security, consistency and predictability, with short-term or medium-term plans (10 years or less). Also suitable for people approaching retirement, those who fear market volatility, those persons with modest incomes or families seeking protection in the event of death or disability.
- Investment funds (banks or insurance companies): for people who prioritise returns, performance and therefore growth of their assets while aiming for tax optimisation (3a funds). Their investment horizon is fairly long (10-15 years) and their risk tolerance is medium to high. This solution is suitable for young working people and those with a good savings capacity.
- Combination of both: a balanced mix of guaranteed capital and investment funds. The capital secures the savings objective and protects the family, while the fund builds returns to offset inflation and provide a comfortable retirement.
Your private pension plan should be tailored to your profile, your goals and your time horizon. Don’t hesitate to contact our pension experts to work together to set up a balanced solution that maximises security, returns and tax benefits.
Third pillar and returns: mistakes to avoid
- Believing that guaranteed capital is "free". It involves higher fees, limited returns and less flexibility. It is important to remember that inflation erodes the real value of low-yield capital.
- Not accepting the volatility of funds. Funds offer potential but can fluctuate significantly and therefore require a long-term horizon (at least 10 to 15 years).
- Relying solely on the past performance of funds. It is important to bear in mind the level of risk, the current economic scenario and your own investment horizon. Past performance is never a guarantee of future results.
- Putting all your savings into a single solution. Neither 100% capital guaranteed nor 100% funds. The balance depends on your age, pension objectives, income and risk tolerance. A lack of diversification actually increases risk.
- Not considering taxation. Choosing a 3b flexible pension plan when a 3a tied pension plan would have guaranteed an immediate tax advantage or changing the beneficiary clause without taking into account inheritance tax, particularly in the case of a 3b flexible pension plan.
4. Not diversifying your pension plan
As mentioned above, the best way to set up an effective and efficient third pillar solution for your retirement is to aim for diversification in every respect:
- Choose a banking and/or insurance solution that meets your needs. It is necessary to take into account the flexibility of payments, insurance against death or disability, guarantees, fees and the accessibility of funds.
- Find the right balance between leaving your contributions in a bank account, which may limit capital growth, and investing in securities for better long-term return potential.
- Spread your savings across several accounts to optimise taxation on capital withdrawal, especially as you come closer to retirement.
5. Never reviewing your pension strategy
Diversifying your pension plan also means redefining and reviewing your savings goals throughout your life. As each individual's circumstances are constantly changing, it is wise to assess and adjust your pension strategy as needed. Rising personal expenses, the desire to buy a home or start your own business: these factors are enough to prompt a review of your investment and insurance plans, whether for retirement or personal projects.
Death and disability: risks that should not be ignored!
Many people focus solely on building up capital for retirement, but forget that death or disability can have a significant impact on their income. Pension provision also serves to protect you and your loved ones financially in the event of unforeseen circumstances.
- A third pillar in the form of life insurance allows you to save money while also providing protection against the risks of death and disability. This gives you and your family financial security in the event of hardship.
- Life insurance policies (3a or 3b) can also include a premium waiver. If the insured person is unable to work due to illness or accident, the insurance company continues to pay the premiums on their behalf in order to guarantee the savings objective.
Groupe Mutuel's third pillar and life insurance solutions are tailored to each individual's circumstances, allowing you to save for retirement while protecting yourself and your loved ones in the event of death or disability. Take advantage of a free pension consultation with our experts today!
FAQ Private pension planning
1. At what age should you start contributing to the third pillar?
Ideally, as soon as you start working. The earlier you start, the more you benefit from compound interest and tax deductions each year. Even small regular amounts make a difference in the long term.
2. Can you catch up on pension contributions?
Yes. From 2026 onwards, it will be possible to make up for gaps in pillar 3a contributions by paying missing contributions retroactively for 2025 and subsequent years.
3. How do I know if my investments are right for me?
Your strategy should match your age, retirement horizon, risk tolerance and family situation. A regular check-up will help you determine whether your investments are still in line with your personal goals.
4. What is the most costly mistake in pension planning?
Waiting too long to start. Lack of time reduces capital growth, tax opportunities and the positive effects of a suitable investment strategy.
5. How often should I review my pension strategy?
Once a year or whenever there is a change in your personal circumstances, such as marriage, the birth of a child, the purchase of a property or a change of job. This will ensure that your strategy remains consistent and tax-efficient.
