Just to complete the example:
| Income tax rate | 30.0% |
|---|---|
| Total return gross | 7.0% |
| Total return in 3a due to 0.5% higher fees | 6.5% |
| Total return outside 3a after income tax on 2% dividends | 6.4% |
| Investment 3a | 6’883 |
| Investment outside 3a after income tax | 4’818 |
| Capital withdrawal tax (rather high) | 10.0% |
Return after tax after 5, 10, 25 years:
| Return | 5 | 10 | 25 | ||
|---|---|---|---|---|---|
| 3a before withdrawal | 6’883 | 6.5% | 9’430 | 12’920 | 33’229 |
| 3a after withdrawal | 10.0% | 8’487 | 11’628 | 29’906 | |
| Outside 3a | 4’818 | 6.4% | 6’570 | 8’960 | 22’720 |
No, it really doesn’t matter (ignoring my second point of yearly fee/tax differences).
In your example you have CHF 57’654 after withdrawal from 3a.
You arrive at exactly the same amount if you were to pay the 10% before investing. You would invest CHF 5’400 instead of CHF 6’000. CHF 5’400 * 1.07^35 = CHF 57’654
Outside 3a you pay 30% of taxes before investing. I.e. you would invest CHF 4’200 instead of CHF 6’000. CHF 4’200 * 1.07^35 = CHF 44’842.
With 3a you have an extra 28.6% because of the lower taxes. You can also directly calculate this with the tax rates: (100% - 10%) / (100% - 30%) = 28.6%
I read that TrueWealth article as well. I don’t remember the details but I remember it included a bad calculation. I guess they realized at some point and deleted the post. Most likely it compared investing 6’800 pre-tax money into 3a with investing 6’800 post-tax money outside 3a, incorrectly accounting for tax savings separately. That’s commonly done, just like in the linked article, but it’s still a terrible comparison. You have to compare investing the 6’800 pre-tax into 3a with investing e.g. 4’600 post-tax outside 3a.
I think the simplest way to compare efficiency of 3a investment is to look when taxes saved become lower than taxes paid. Assuming a low marginal tax rate 20%, high withdrawal tax 10%, a very good investment return of 7% in CHF, our stake should double to achieve this situation. This should happen after
ln(20%/10%)/ln(1.07) = 10.2 years
If your income tax is 30%, the formula gives 16.2 years. If in addition we assume returns of 5%, it becomes 22.5 years.
Considering other parameters, I think that 3a investment should be more profitable than given by this simple estimate.
No, if I’m understanding this correctly, I don’t think this makes sense. With 3a you effectively invest the tax savings (as you invest pre-tax money), which means that your tax savings grow as part of your portfolio.
If we assume the yearly net return is identical (higher 3a fees are exactly compensated by absence of wealth and dividend taxes), it doesn’t matter how many years you leave your money in 3a. The tax effect won’t change (except for the progressive withdrawal tax).
Then, assuming a dividend yield of 2% on 3a investment, which can be increased by appropriately chosing what should go to the 3a account:
and a low tax rate of 20%, we get a 0.4% saving on taxes on dividend paid to 3a instead of a taxable account. This is enough to compensate TER difference between finpension or VIAC and taxable ETFs.
You are right. I did a lower estimate of 3a efficiency.
Very helpful, thanks for all the comments! So do we have a consensus on 3a contributions 
?
Not yet. If you are 25 and your marginal tax rate is 20% or less, then probably 3a investment is not worth it. Especially considering changing legislation risk.
My take: since we have those low cost, pick your amount of equity offers (frankly, viac, finpension), if your 3a is a small amount of your wealth, it’s likely a no brainer (you probably have a high marginal tax rate and don’t care about having the money locked in).
If not (e.g. early career professional), might make sense to wait until the lock-in doesn’t matter as much and the marginal tax rate is higher (higher savings), esp. with the likely upcoming legislation changes.
Thanks, I didn’t realize that this would be the same result.
You got lucky that I have no life besides my spreadsheets 
Thanks for the question, as it made me revise my plan. I went back to the drawing board and I can report the following findings:
Another interesting thing happens after retirement at age 65:
Withdrawing all capital and investing it leaves massively more money for you to spend and wealth for your heirs than leaving everything in the pension fund and getting a monthly “salary”.
Happy for anyone to review/comment my assumptions and calculations (Vorsorge vs. Investment - Google Tabellen)
Wow, thanks, this is incredibly helpful, really appreciated! Going to check it out more thoroughly asap.
I’ve already figured some mistakes of mine, like voluntarily contributing way too early and way too much to 2nd pillar 
So do I get it right, 3a is worth it at any age (even very young) as long as you earn more than 130k? You noted “20+” years, so that could be 30 years or more available?
Is that because in pillar 3a you can chose 100% stocks (unlike for pillar 2)?
With pillar 3a, you gain 3 times: a) less tax on the last CHF 6883.- of your income (as of 2022), b) investment with almost market returns (I say “almost”, because the most cost efficient investment setups are not available for pillar 3a investments) and c) dividends within pillar 3a are also tax-free. The higher your salary, the better the tax savings. This triple benefit works for any number of years.
There is even a 4th benefit: the amount in 3a is not included in your taxable wealth !
The marginal tax on wealth may be around 0.5 to 1% (location dependent), this tax savings is recurring annually.
I can only confirm/emphasize this!
In my canton a marginal wealth tax rate of 0.9% starts at “only” around 800k wealth. It’s admittedly a tax-hellish canton.
For every Rappen “hidden” in 3a or second pillar almost 1% annually is saved.
Wealth tax rate in Liechtenstein is 4% and starts after the first 25k, if I remember correctly. Never would have thought that the little income low-tax neighbor of Switzerland has created a hell of its own.
You can add some stocks to your portfolio that pay dividend exempt from income tax. Example: WIR Bank
Don’t know though if there are other stocks that pays thoses types of dividends on a stable basis…
Not quite that bad. 4% of your net wealth is added to your taxable income and you then pay income tax on that, as I understand it. So in the end you pay less than 1% (depending on your tax bracket) and dividends are not taxed separately. This sounds like taxes on investments are typically lower than in Switzerland, depending on canton and tax brackets.
Thanks for pointing this out! I have it now corrected in my personal scenario planning.