Staggering your capital withdrawals to reduce tax

Why the timing of the withdrawal matters

Pension capital is taxed once, separately from other income, at a reduced rate. But that rate is progressive: the larger the amount withdrawn in a single year, the higher the tax rate applied.

As a result, withdrawing a large lump sum all at once costs proportionally more than spreading the same amount over several years. This is where staggering comes in.

The principle of staggering

Staggering means spreading capital withdrawals across several separate tax years, so that each withdrawal is taxed at a lower rate. Overall, the tax saving can be substantial.

Note: in most cantons, withdrawals of the same type of provision made in the same year are added together to set the rate. Spreading must therefore span different calendar years.

Several 3a accounts: a key lever

Holding several 3rd-pillar 3a accounts rather than one lets you close them in different years, and thus naturally stagger withdrawals. It is one of the simplest and most effective optimisations.

In practice, it is often recommended to open several 3a accounts over your career, to then have this flexibility at the time of withdrawal.

Coordinating 2nd pillar, 3rd pillar and spouse

The LPP capital withdrawal can also be planned, sometimes over two years around retirement. By coordinating the 2nd pillar, the 3a accounts and, for a couple, each spouse's withdrawals, you multiply the reduced-rate brackets.

The timing of each withdrawal, the departure age and your canton of residence at the time of withdrawal are all parameters to weigh together.

Plan several years ahead

Staggering needs preparation: opening accounts early enough, planning the closing dates and checking cantonal rules are steps to anticipate several years before retirement.

RetirePlan simulates different withdrawal schedules and quantifies the tax of each scenario, to identify the sequence that cuts your tax bill the most.

Frequently asked questions

Why stagger your capital withdrawals?

Because the tax on pension capital is progressive: spreading withdrawals across several tax years lowers the rate applied to each withdrawal and reduces the total tax.

How do you stagger in practice?

By spreading withdrawals across different calendar years. Holding several 3a accounts and closing them in separate years, and planning the 2nd-pillar withdrawal, are the main levers.

Are same-year withdrawals added together?

In most cantons, yes: pension-capital withdrawals made in the same year are combined to set the rate. Hence the value of spreading across several calendar years.

When should you start planning?

Several years ahead. Opening several 3a accounts early enough and planning the withdrawal schedule lets you fully benefit from staggering when the time comes.