Indirect Amortisation via Pillar 3a
Comparison: pay off mortgage directly vs. indirectly via pillar 3a. Tax savings, capital accumulation, and net advantage.
With indirect amortisation, the mortgage is not paid off directly. Instead, the amortisation amount is paid into pillar 3a. The mortgage remains in place, and the 3a capital is used later for repayment. This provides a triple tax advantage: 3a deduction, mortgage interest deduction continues, tax-free growth.
How does indirect amortisation work?
Instead of reducing the mortgage directly, you pay the amortisation amount into a pillar 3a pension solution, which is pledged to the bank as collateral.
Tax effects:
1. 3a contribution is deductible from taxable income
2. Mortgage stays the same amount, so the mortgage interest deduction continues
3. 3a capital grows tax-free (no income or wealth tax)
4. Upon withdrawal: privileged capital withdrawal tax (separate, lower rate)
When is it worthwhile?
Indirect amortisation is almost always worthwhile when:
- You are not yet making the maximum 3a contribution
- Your marginal tax rate is above 20%
- The term is at least 5 years
The higher the marginal tax rate and the longer the time horizon, the greater the advantage.
Risks and limitations
- 3a maximum: Employees max. CHF 7,258/year (2025/2026)
- Lock-in: 3a funds are locked in until 5 years before retirement (exception: residential property)
- Investment risk: 3a securities accounts carry market risk
- Waiting period: Advance withdrawal for residential property only possible every 5 years
- Pledge: The 3a account is pledged to the bank as collateral -- at the end, the capital is used for amortisation
Frequently Asked Questions
- Which is better: 3a savings account or 3a securities?+
- Can I combine indirect and direct amortisation?+
- What happens if the property is sold?+