Max Out Pillar 3a or Put All Savings Into ETFs?

Hello all!

Although contributing to my pillar 3a provides tax reductions & a low tax rate upon withdrawal, does it make sense to ignore it and simply pour all my savings into an equity ETF?

My thinking is that the ETF will generate a better return, so there’d be less point in contributing to pillar 3a as well.

I’m with VIAC (97% equity strategy) and the ETF I’d be investing into is VWRL.

Thank you in advance for your wisdom!

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Hi Marco,

It depends on your tax rate, investing horizon and the returns you’d expect outside of your 3a and inside of it. With a 97% invested solution with VIAC, it’s probably going to be difficult to beat.

What are your calculations and what led you to this reflection?

Other parameters like the availability of these funds can also have an impact on that reflection.


Only advantage for VWRL is lower TER (0.22% instead of 0.51%), so you might think that you’ll end up getting a better return (+0.29%/year). But there are so many factors that are making investing in your 3rd pillar a total no-brainer.

  1. Dividends aren’t taxed at source due to several tax treaties. So you’ll get the full dividend from US stocks for example.

  2. Dividends aren’t taxed as income.

  3. Depending on your marginal rate (assuming a gross income of 85k, no kids, not married you’ll have something around 25%) you’ll save a lot of taxes by paying into your 3rd pillar. You can invest those ~1700 CHF (or whatever it is) that you save each year additionally into VWRL.

The 1st two alone will make up for the higher TER.


What about the fact that capital gains are taxed in 3a?
If I remember well someone here made a calculation about this but I don’t remember how much of a difference it made.


Where do you have that information from? The only taxation in 3a happens when you withdraw the money and yes if you originally invested let’s say 30k CHF but later take out 60k CHF you will get taxed on 60k CHF and not on 30k CHF. However the tax rate for 3a withdrawals are lower than the regular rate…


That is exactly my point, you would not be taxed on the extra 30k outside of 3a. So you get taxed on capital gains but at a lower rate than income tax.
Also you would not pay wealth tax on these for a while so there is some offset.
Depending in which canton you live it might not be negligible in the end.


In my opinion and calculation, it does not.

Even with a modest 25% marginal rate, pillar 3a can be very attractive. IF you can invest in the same product at comparable fees.

For 10´000 earned, you can invest 10´000 in 3a (not in a single year, just to have round numbers).
But you can only invest 7´500 in your ETF after taxes.

Let´s assume that you expect a nice 7% return: 2% dividends and 5% capital gain.
And that your 3a investment is 0.3% more expensive than the ETF.

After tax, your ETF yields 6.5%. The dividend is taxed every year.
The 3a yields 6.7% (reduced by higher fee) and is not taxed for now. Only when you take it out, maybe at 10%. Both the dividend and gains, as @Gesk explained, but only at the end.

Try it in your calculator or spreadsheet. For 10, 25 or 40 years. With 3% or 7% expected return. Or 25% vs. 35% tax rate. With a similar investment product, the ETF will never catch up the tax advantage. It does gives you more flexibility, of course.


I’ve put together a quick spreadsheet that probably won’t stay online for long, is very simplistic and doesn’t take wealth tax into account. For taxable investments to beat 3A, you need to either have a very low marginal tax rate, a very high taxation when you retrieve your 3A assets and/or a significantly better yield in your taxable account.

It’s probably very rare with high equities solutions at VIAC, Finpension or Frankly. It may happen if the 3A solution is a more fees heavy one (I had first made a comparison with Swisslife LPP-Mix 75 and my conclusion was that I was better off investing in a taxable account).

White cases are for personable variables to set yourself.
Yellow cases are the results.

Let anybody feel free to correct any mistake or make it on a more permanent support (I wanted to try googlesheets but they seem to require a Google account?).


Thank you so much everyone for your thoughtful replies!

Based on the informaton, I’ve decided to invest into my pillar 3a and VWRL at a ratio of 5:7, respectively.