Retirement planning is not a subject reserved for 45-year-olds who are starting to worry about it seriously. It concerns you from your very first salary, even if retirement itself seems to belong to a very distant future.
What many young workers don't know
When it comes to retirement planning for young workers, two points are worth knowing early: what the AHV/AVS and the BVG/LPP really cover, and how pension gaps form, sometimes as early as your studies.
What the basic system really covers
On a payslip, the AHV/AVS and the pension fund often look like two abstract lines, percentages deducted without anyone really knowing what they correspond to. The AHV/AVS, or Old Age and Survivors' Insurance, is the 1st pillar, and its aim is to cover basic living needs in retirement. The pension fund, the 2nd pillar or occupational pension (BVG/LPP), comes on top of it to get closer to the standard of living you had while working.
According to the Federal Social Insurance Office, the AHV/AVS and the BVG/LPP together aim to replace about 60% of your last salary. In reality, however, this rate can vary widely depending on your salary, your career path and your pension fund. The gap with the income you earned while working can therefore be significant, which is why it is worth looking into early enough.
Pension gaps build up from the start
Pension gaps do not all take the same form. A career break can, for example, reduce the savings built up in the 2nd pillar. On the AHV/AVS side, a gap appears when a year's contributions are missing or incomplete, for example during your studies if nobody paid them.
The Swiss authorities' official portal explains that a single missing year reduces the AHV/AVS pension by about 2.3%, and that only gaps from the last five years can be made up.
Putting these questions off is in fact one of the financial mistakes people make most often. These are not bad decisions, but decisions that are never taken, because nobody thought about them at the right time.
Why starting early really makes a difference
Time is the main asset of young workers. When you start early, it helps your retirement planning in two ways: through compound interest, and through more years of tax benefits with pillar 3a.
Compound interest applied to retirement planning
This is probably the argument young workers underestimate most. Someone who pays in CHF 5,000 a year for 40 years, with a hypothetical average return of 4% a year, could build up capital of about CHF 475,000 by the age of 65. Starting ten years later, with the same CHF 5,000 a year for 30 years, the capital would reach about CHF 280,000.
The gap is therefore close to CHF 195,000, while the difference in personal contributions is only CHF 50,000. The rest comes from the extra time during which the capital was able to generate returns: the longer capital stays invested, the more the gains of previous years generate gains of their own. Ten years' head start at the beginning is worth far more than ten years of extra effort at the end.
This example is purely illustrative, with no fees or taxes. A 4% return is neither guaranteed nor constant, and real returns can be negative in some years. A 3a account actually pays far less, 0.05% at PostFinance for example: aiming for more means investing in funds, with a risk of losses.
The tax benefit from the very first years
Les cotisations versées au pilier 3a peuvent être déduites du revenu imposable, c'est-à-dire du revenu sur lequel l'impôt est calculé. Selon l'AFContributions paid into pillar 3a can be deducted from your taxable income, in other words the income on which your tax is calculated. According to the Federal Tax Administration, the ceiling for employees with a pension fund is CHF 7,258 in 2026, then CHF 7,373 from 2027.C, le plafond est de 7'258 CHF en 2026 pour les salariés affiliés à une caisse de pension, puis de 7'373 CHF dès 2027.
The tax saving depends on your income, where you live and your personal situation, so it can vary widely from one person to another. It is a benefit that exists from the very first payment, even with a modest starting salary, although it is smaller in that case. In return, the money in pillar 3a generally remains locked until retirement, which sets it apart from pillar 3b, which is more flexible but generally not deductible.
The first practical steps for a young worker
There is no need to sort everything out at once. Three simple actions are enough to start: read what you already have, open a 3a when your budget allows, and plan for unusual periods.
Understand your 2nd pillar
Even before thinking about the 3rd pillar, the first step is to look at what you already have. The pension certificate, sent to you every year by your pension fund, shows the capital you have already built up and an estimate of your future pension. Many people have never opened it, or have skimmed it without really understanding it.
Taking ten minutes to read it gives you a concrete basis for your thinking, rather than moving forward blindly. Start by finding four pieces of information: your current retirement savings, the contributions paid, the projected benefits at retirement and the cover provided in the event of disability or death.
Open a pillar 3a as soon as possible
Many young workers put off opening a pillar 3a, telling themselves they will start when they can pay in the maximum amount. Yet there is no need to wait until you can pay the maximum before you start. It can be opened with a bank or an insurance company, two forms recognised by law that do not commit you in the same way.
Starting early does not guarantee that a small amount paid in over a whole career will produce more than a much larger amount paid in later: the result depends on time, on the sums invested and on the return achieved. Beyond compound interest, starting early also lets you gradually build a savings habit.
But before locking up part of your savings for the long term, it is still important to keep enough cash for your day-to-day expenses, your short-term plans and the unexpected. The first financial decisions at 20 follow the same order: a reserve first, investing afterwards.
Think about your pension even in unusual periods
A long trip, a part-time job, a move into self-employment: these periods all have consequences for your pension, which are better anticipated than discovered after the fact. This does not mean giving up on these plans, but including them in a broader look at your financial situation. After leaving Switzerland, for example, you generally no longer pay AHV/AVS contributions, apart from some exceptions, which can create gaps.
Conclusion
At 25 or 30, retirement seems to belong to a distant, almost abstract future. But the decisions you take now, even modest ones, are the foundations on which your future financial security is built.
Remember three ideas. The AHV/AVS and the BVG/LPP only cover part of your income, and gaps sometimes form as early as your studies. Time works in your favour thanks to compound interest. And the 3a comes after your reserve for unexpected expenses.
To take a first step today, find your latest pension certificate and note down your current retirement savings.
Every year counts, one way or the other.
To get started: the Academy's Foundations programme, free, helps you lay the groundwork for your financial freedom and see where you stand.
To go further: the AdvisorOne Diagnostic takes a few minutes to show you where you stand, with no commitment.
FAQ
At what age should you start paying into pillar 3a?
You can open a pillar 3a as soon as you have income subject to AHV/AVS contributions, which can already be the case during an apprenticeship. The earlier you start, the more compound interest can work for you, provided you first have a reserve for unexpected expenses.
What happens if you don't pay into the 3rd pillar when you are young?
Not paying in when you are young reduces the time during which your savings can benefit from compound interest. Since 2025, however, the law allows you, under certain conditions, to make up missing 3a contributions later, for the years from 2025 onwards and for ten years at most. A buy-in does not give you back the lost investment time.
Can you pay into pillar 3a as a student or intern?
Yes, provided you earn income from work that is subject to AHV/AVS contributions in Switzerland, for example during an apprenticeship, a paid internship or a student job. A student with no income cannot pay into a 3a, even if they pay the minimum AHV/AVS contribution for people who are not in work.
How do you read your pension certificate?
First look for your retirement savings, then the projected pension at retirement and the benefits in the event of disability or death. The law requires your pension fund to inform you every year about your entitlements, your contribution rate and your savings. If you are unsure about a figure, your pension fund can explain it to you.
Is the Swiss pension enough to live comfortably?
Not always, and it depends a lot on your career path. The target of about 60% of your last salary is only a guide: AHV/AVS gaps, part-time work or a low salary can significantly reduce what you receive. The 3rd pillar lets you top up your retirement savings according to your goals and personal situation.
⚠️ Important notice ⚠️
The information presented in this article is provided for purely informational and educational purposes. It does not in any way constitute a personalised recommendation, investment advice, an offer or a solicitation to buy or sell financial products.
Any investment decision should be made after a thorough analysis of your personal situation, your objectives and your risk profile, and may require the advice of an authorised financial adviser.
Past performance is no guarantee of future results. Investments involve risks, including the risk of capital loss.