Investing your third pillar assets: options, risks, and returns

Before discussing financial performance, it is essential to understand why tax savings represent the most tangible benefit of pillar 3a. Unlike the return on a fund or financial market, the tax benefit is guaranteed, immediate, and completely independent of economic fluctuations.

Here is a concrete example for a 30-year-old taxpayer, single and residing in Lausanne:

By investing CHF 7,258 in his pillar 3a, this person will save CHF 2,291 in taxes per year, representing an annual tax savings equivalent to 31.57% of the contribution. Over 35 years, this strategy alone will allow him to reduce his tax liability by more than CHF 80,000.

Summary :

Items	Amounts (CHF)
Annual contribution	7,258
Duration (years)	35
Total invested	254,030
Annual tax savings	2,291
Total tax saving	80,185
Tax upon withdrawal	17,740
Net profit after tax	316,575

Tax savings therefore represent a significant financial lever, one that is often underestimated. It is the primary component of the overall return on a pillar 3a account.

Withdrawals from a pillar 3a account are taxed separately from other income, at a reduced and progressive rate. The exact amount depends on your canton of residence, but tax treatment is generally much more favourable than standard income tax. The higher the amount withdrawn, the higher the tax rate, which sometimes makes it advisable to stagger pillar 3a withdrawals whenever possible.

Inflation, otherwise known as the general rise in prices over time, gradually erodes the real value of your savings, even when it seems low. For example, if you leave CHF 7,258 (the maximum 3a amount) in an account with a return that is lower than inflation, then:

In other words: even if you don’t lose money in nominal terms, you actually lose money. Your capital remains stable, but prices are rising around you. What could be bought yesterday with CHF 7,000 can no longer be bought tomorrow.

The tax savings from a pillar 3a account far exceed inflation. In our example, saving CHF 2,291 per year already equates to a return of 31.57%, well above an inflation rate of 2%. But this is an immediate benefit. To grow your capital over time, investing then becomes the most relevant strategy.

How can you make this capital grow in nominal terms over several years? Over the long term, the goal is not only to protect the real value of the money but to increase the capital amount in nominal terms. Historically, markets, and global equities in particular, are among the investment vehicles that have generated significant nominal growth over several decades.

Therefore:

For a young person with a long-term horizon, this combination is simply the most effective.

A third pillar in the form of life insurance includes coverage in the event of death and/or disability. It thus offers additional security but involves often higher fees that delay profitability. This solution is particularly well-suited for people seeking to combine savings and protection over the long term. In some cases, combining insurance with a 3a bank account can be a wise option.

When starting to invest, people often think that the markets are “too risky.” In reality, time is your best ally because the longer the time horizon, the more crises (such as those in 2008 or 2020) become mere episodes in an overall positive trajectory. Investing remains a highly attractive option.

A third pillar typically involves a 25- to 40-year time horizon. Over this period, major stock market indices like the MSCI World have posted an average return of 8–10% per year over several decades. For your investment, this means that:

In short: time transforms short-term declines into long-term opportunities.

The “time” factor must be taken into account from the very start when setting up a third-pillar solution. Planning for retirement requires a stable long-term strategy, whereas buying real estate requires savings to be available sooner. If you’re planning to pass assets on to the next generation, it’s best to prioritize solutions that offer protection for your loved ones.

Asset allocation refers to how your money is distributed across different types of investments: stocks, bonds, real estate, cash, etc. The “allocation strategy” is the primary driver of long-term performance.

Why? Because each asset class reacts differently depending on the economic context:

A good portfolio allocation = a balanced combination tailored to your investment horizon and profile.

Since pillar 3a is a very long-term investment (20 to 40 years), the main objective is not to avoid short-term market fluctuations, but to accumulate maximum nominal growth. This is achieved through stocks, particularly global ones, which involve short-term volatility but subsequently guarantee better return potential. This is why banks and insurance companies offer 80–100% stock strategies designed for very long-term horizons, such as retirement.

A good asset allocation depends on three simple parameters:

With VariaInvest, you can combine security and performance in the proportions that suit you and adjust your strategy as your life changes, choosing from five investment plans: