Lorenza, 28, had just come home from her first day at a new job in Switzerland when she received a call from her father. After the usual greetings, he asked, “Have you thought about your 3rd pillar yet?” Lorenza sighed, surprised by her father’s apparent urgency. “Dad, I just started working. I haven’t even finished paying off my e-bike. Isn’t it a bit early?”On the other end of the line, she could almost hear him smiling: “Of course there’s time — but the sooner you start, the better.”While it may seem premature, Lorenza’s story reflects a common reality: individual retirement planning often gets pushed aside. But why is starting early with the 3rd pillar so important? Let’s find out.
Switzerland’s pension system is structured around three key pillars:
1st Pillar (AHV/IV): The state pension — mandatory, designed to cover basic living expenses.
2nd Pillar (Occupational Pension): Also mandatory for employees, this builds on the first.
3rd Pillar (Private Pension): A voluntary and flexible savings tool to supplement and strengthen future income.
Though voluntary, the 3rd pillar plays a vital role in ensuring a comfortable retirement. Contributions to this private savings plan are tax-deductible (up to a legal limit), offering a clear financial benefit. This means that in addition to building a personal nest egg, contributors enjoy annual tax relief — a win-win.
One of the strongest reasons to start investing in the 3rd pillar early is the power of compound interest. Swiss banks and pension providers often highlight that those who start contributing small monthly amounts in their mid-20s typically accumulate significantly more than those who wait until their 30s or 40s.Why? Because interest doesn’t just grow your savings — it multiplies them. Over time, interest earns interest, creating a snowball effect. This is why financial advisors often say: “Start early and stay consistent.” It’s far more effective than waiting for a higher salary ten or twenty years down the road.
Young professionals often see the 3rd pillar as a long-term commitment that can be postponed. But there are three strong reasons why it pays to start as soon as possible:
Tax Benefits: The earlier you start contributing, the more years you benefit from tax deductions. Over a career, this can add up to a substantial amount saved.
Flexibility: The 3rd pillar offers a range of savings and investment options — from conservative accounts to more dynamic, market-based funds. Starting early allows you to take on more risk with a long-term outlook and adjust your strategy over time.
Financial Security: With life expectancy rising and economic trends becoming more volatile, relying solely on the 1st and 2nd pillars is no longer enough. The 3rd pillar acts as a critical buffer for long-term stability.
A recent survey by the Swiss Federal Statistical Office (FSO) found that individuals who begin their 3rd pillar savings at age 40 accumulate, on average, 30–35% less than those who start at 25 — even when monthly contributions are the same. Take Marco and Chiara:
Marco began contributing CHF 200 per month at age 25. By 65, the combination of steady payments and investment growth gave him a solid capital reserve to supplement his state and occupational pensions.
Chiara, however, started at age 40 with the same monthly contribution. At retirement, her savings were less than half of Marco’s.
The difference? Time and compound interest. The more time your money has to grow, the more resilient it becomes — even during market downturns.
The beauty of the 3rd pillar is that you don’t need a large income to begin. Many Swiss insurers and pension providers offer savings plans with low monthly contributions, designed for young professionals or those with variable income. Here are some practical tips:
Define your time horizon: The longer your investment timeline, the more you can lean into higher-risk strategies like equity funds. Shorter timelines call for more conservative solutions.
Diversify: Don’t put all your savings in one basket. A good 3rd pillar plan might combine stocks, bonds, and cash to balance risk and return.
Maximize tax deductions: Tailor your contributions to get the most out of your yearly tax allowance.
Review regularly: Life changes — and so should your savings plan. Adjust your strategy as your career, family, and goals evolve.
Conclusion: The Decision You Make Today Shapes Your Tomorrow
Lorenza, Marco, and Chiara’s stories all highlight one truth: there’s no “perfect” time to start your 3rd pillar — but the sooner, the better. Every year you wait could mean thousands of francs less at retirement.Starting early isn’t just smart math — it’s an act of foresight and responsibility. It means protecting your long-term goals, supporting your family, and ensuring peace of mind down the road.Your retirement isn’t some distant illusion. It’s a real, reachable goal that begins with the choices you make today. Even small monthly contributions can grow into something meaningful — thanks to compound interest and tax advantages that young professionals often overlook.So take that first step. Whether it’s researching providers, setting up your plan, or making your first contribution — your future self will thank you.And who knows? One day, you might be the parent on the other end of the phone, saying: “There’s time. But the sooner you start, the better.”