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Pension Fund Voluntary Purchase: When It's Worth It, When It's Not — And How to Split It Optimally

By Thierry Borgeat, CFA & Co-Founder · Last updated: March 2026 · 14 min read

There's a tax optimisation in Switzerland that many employees don't know about — even though it can be worth tens of thousands of francs. The voluntary pension fund purchase (also called "PK-Einkauf", "buy-in" or "voluntary buy-in") allows you to pay additional money into your pension fund — and deduct the entire amount from your taxable income immediately.

No maximum amount like Pillar 3a. No annual limit. The only limiting factor is your personal purchase gap — and for some employees, that gap can amount to several hundred thousand francs.

But a pension fund purchase isn't right for everyone. There are situations where it's the best tax decision of your life — and situations where you're better off investing your money elsewhere. This guide explains everything: how it works, when it pays off, which risks you need to know, and how to split the purchase optimally over multiple years.

What is a pension fund voluntary purchase?

Every employee in Switzerland with a pension fund (Pensionskasse) has a retirement balance that grows over the years through employer and employee contributions plus interest. Depending on salary development, job changes and life circumstances, this balance may be lower than the maximum possible — there's a gap.

The voluntary purchase allows you to close this gap wholly or partially by paying private money into the pension fund. The special feature: the entire purchased amount is fully deductible from taxable income. Unlike Pillar 3a (maximum CHF 7,258/year), there is no annual maximum for pension fund purchases — the limit is solely your individual purchase gap.

Your maximum possible purchase amount is shown on your pension fund statement under "Possible purchase" or "Maximum buy-in amount". If you can't find your statement or don't understand it, our guide helps: Your pension fund statement explained.

How does the purchase gap arise?

The purchase gap is calculated as the difference between the maximum possible retirement balance (as if you'd been continuously insured at your current salary from the earliest possible point) and your actual balance. There are typical reasons why almost everyone has a gap:

Salary increases and career jumps

The most common reason — and the one fewest people know about. Every time your salary rises, your maximum possible balance also rises. But your actual balance was accumulated based on the lower salary in the past. The difference becomes a purchase gap. Example: you earned CHF 80,000 for 10 years, then jumped to CHF 120,000. Suddenly a gap of CHF 30,000–50,000 opens up — because the new maximum is based on the higher salary, but your accumulated balance is based on the lower one.

Late career start

BVG savings contributions start from age 25. Anyone who entered the workforce at 28 or 30 (after a long degree or time abroad) automatically has a gap for the missing years.

Job changes and gaps

With every job change, your vested benefits are transferred to the new pension fund. Gaps can arise — for example if the new fund has a more generous plan than the old one, or if you had a break between positions. More: Vested benefits explained.

Divorce

In a divorce, the pension fund balance accumulated during the marriage is split equally. The portion going to the ex-spouse becomes a purchase gap.

Part-time work

Reducing your work percentage reduces the insured salary — and thus the savings contributions. The gap grows insidiously, often unnoticed over years. Especially affected: parents working part-time. More: What 5 years without a pension fund really cost.

Home ownership advance (WEF)

If you made an advance withdrawal of pension fund money to buy property, a purchase gap arises equal to the withdrawn amount. This must be fully repaid before tax-deductible purchases are possible.

The tax savings: Concrete examples

The tax effect of a pension fund purchase is direct and immediate: the purchased amount is fully deducted from taxable income. The actual savings depend on your marginal tax rate — which depends on your income, canton and marital status.

Example 1: Middle income, Canton Zurich

CHF 8,300 saved — from a single transfer. The money isn't gone: it sits in your pension fund account growing. At retirement you get it back as a pension or lump sum (taxed, but at a significantly lower rate).

Example 2: High income, split over 3 years

Nearly CHF 28,000 in tax savings over 3 years — on a purchase of CHF 75,000. That's an "instant return" of 37% on the capital deployed. No other legal financial instrument in Switzerland offers a comparable return.

The splitting strategy: Why not all at once

One of the most common mistakes with pension fund purchases: paying the entire possible amount in a single year. This is suboptimal in most cases. Here's why:

Swiss income tax is progressive — the higher the income, the higher the rate. If you purchase CHF 75,000 in one year, it massively reduces your taxable income. But: the tax savings per franc decrease as your taxable income drops lower. The first CHF 25,000 reduction might save you 37 centimes per franc — the last CHF 25,000 only 25 centimes.

If you split the purchase into 3 years of CHF 25,000 each, you save at the highest tax rate every year. The progression effect works for you instead of against you.

Worked example: Split vs. all at once

Nearly CHF 5,000 more in tax savings — for an identical total purchase. That's why tax advisors almost always recommend splitting.

The 5 risks you need to know

Risk 1: The money is locked up

Purchased money is trapped in the pension fund until retirement (or until one of the few permitted early withdrawal reasons: home ownership, self-employment, permanently leaving Switzerland). You cannot retrieve it if you need it for something else. Only purchase what you genuinely don't need long-term.

Risk 2: The 3-year lock-in period

If you withdraw capital from your pension fund within 3 years of a purchase, the tax authority can reverse the tax deduction. This also applies to home ownership advances. Plan the purchase at least 3 years before any capital withdrawal — and at least 3 years before retirement if you want capital instead of a pension. More in the lock-in section.

Risk 3: Pension fund underfunding

If your pension fund falls into underfunding (funding ratio below 100%), it can take remedial measures — such as lower interest rates or even contribution increases. Your purchased money is affected just like your regular balance. Check the funding ratio before every purchase. More in the funding ratio section.

Risk 4: Declining conversion rate

If you're making the purchase to increase your pension, note: the conversion rate (which converts your balance into an annual pension) will very likely decline in coming years. More balance at a lower conversion rate may not deliver the hoped-for pension increase. If you plan to take your money as a lump sum, this risk is irrelevant.

Risk 5: Opportunity cost

The money you pay into the pension fund could alternatively be invested freely — for example in an equity fund. In the open market, you have the chance of higher returns (but also higher risk), and capital gains in Switzerland are tax-free. In the pension fund, the interest rate is often lower (typically 1–3% for the BVG mandatory portion), and you pay tax on withdrawal. The tax deduction on purchase must compensate for this return disadvantage.

The 3-year lock-in: The biggest pitfall

The lock-in period is the most important rule for pension fund purchases — and the most frequently misunderstood.

Basic rule: If you withdraw capital from your pension fund within 3 years of a purchase (whether full or partial, whether as a home ownership advance or at retirement), the tax authority can reverse the tax deduction. You would then have to repay the saved taxes — plus penalty interest.

What this means in practice: If you make a CHF 50,000 purchase in 2026 and retire in 2028 taking a lump sum, that's less than 3 years. The 2026 tax deduction gets cancelled. You've gained nothing — worse, you pay back taxes plus interest.

The strategy: Make the last purchase at the latest 3 years before a planned capital withdrawal. If you want to retire in 2030 and take a lump sum, the last purchase must be in 2027 at the latest — better 2026 to be safe.

Funding ratio: Is your pension fund healthy enough?

The funding ratio shows the relationship between your pension fund's assets and its obligations. A ratio of 100% means: the fund has exactly enough money to pay all promised benefits. Above 100% means reserves. Below 100% (underfunding) means: the fund currently cannot meet all its promises.

Always check the funding ratio before a purchase.

Above 110%: Green light. The fund is well positioned; a purchase generally makes sense.

100–110%: Generally okay, but no large reserves. Check the trend: is the ratio rising or falling? And: how was the fund affected in the last stock market crisis (e.g. 2022)?

Below 100%: Caution. In underfunding, the fund can take remedial measures that affect your entire balance (including purchases). In the worst case, your money earns lower or even negative interest. A purchase into an underfunded fund is usually a bad idea.

The funding ratio is typically found in your pension fund's annual report (not on the pension fund statement!). Ask your HR department or the fund directly.

PK purchase vs. Pillar 3a: What should you do first?

Both pension fund purchases and Pillar 3a offer tax benefits. But which should you prioritise if you can't max out both simultaneously?

Basic rule: Always maximise Pillar 3a first.

The reason: Pillar 3a offers more flexibility and control. You choose the provider, the investment strategy, and you can withdraw 3a from age 60 (5 years before retirement) in a staggered way. With the pension fund, you're tied to the employer, the chosen fund, and its regulations.

Additionally, the risk with 3a is lower: your 3a investments are segregated assets that belong to you — independent of any pension fund's health. With a PK purchase, you bear the risk of the funding ratio and conversion rate.

The optimal sequence: Step 1: Max out Pillar 3a (CHF 7,258). Step 2: If you still have money left over and at least 3 years until retirement, consider a PK purchase. Step 3: Everything beyond that, invest freely — for example in the arvy savings plan or the arvy Equity Fund.

Calculate your 3a tax savings: 3a Tax Savings Calculator.

When the purchase makes sense: 5 concrete scenarios

Scenario 1: You received a big salary increase

The salary increase has opened a purchase gap. Your marginal tax rate is high. You have savings you won't need long-term. And you're at least 4 years from retirement. Ideal case for a staggered purchase over 2–3 years.

Scenario 2: You're 55–60 and planning retirement

The purchase gap is clear, retirement is in sight. You want to maximise your pension or reduce taxes before a lump sum withdrawal. But watch out: lock-in period! Last purchase at least 3 years before the capital withdrawal.

Scenario 3: Inheritance or bonus

You suddenly have a larger sum (inheritance, bonus, property sale) and are looking for the most tax-efficient use. A PK purchase immediately reduces the tax burden on the additional income. But: don't put the entire bonus in one year — use the splitting strategy.

Scenario 4: After a divorce

The pension split has left a large gap. A purchase can rebuild retirement benefits — while simultaneously reducing the tax burden, which looks different after divorce (as a single person with potentially different progression).

Scenario 5: You work for an employer with an excellent pension fund

Some employers offer above-average pension fund solutions: high funding ratio (above 115%), generous interest rates, good super-mandatory benefits. If your fund falls into this category, a purchase is particularly attractive — because your money is well looked after there.

When you should keep your hands off

Funding ratio below 100%

A purchase into an underfunded fund is like pouring money into a sinking boat. Your purchased money is subject to the same remedial measures as all other balances. Wait until the situation improves — or invest the money freely instead.

You need the money in the next 5 years

Pension fund assets are illiquid. You can't access them (except for home ownership, self-employment or leaving Switzerland). If you need the money for a major purchase, emergency or investment: don't buy in.

You plan a capital withdrawal within 3 years

The lock-in period makes the purchase tax-ineffective. You'd have to repay the saved taxes. Make the purchase at least 3 years before any planned capital withdrawal — better 4 years for safety.

You haven't maxed out Pillar 3a yet

If you're not yet contributing the full 3a amount, do that first. Pillar 3a offers more flexibility, less risk, and in many cases better returns (when invested in equities).

You have an outstanding WEF advance

Repay first, then purchase. A buy-in before repaying the WEF advance is not tax-deductible.

Step by step: How to make a pension fund purchase

Step 1: Get your pension fund statement. Request the current statement from your HR department or pension fund. Find the "Possible purchase" or "Maximum buy-in amount" line. That's your capacity.

Step 2: Check the funding ratio. Ask for the current funding ratio. Below 100%? Wait. 100–110%? Check the trend. Above 110%? Green light.

Step 3: Check WEF repayment. Did you ever make a WEF advance? If yes: is it fully repaid? If not: repay first.

Step 4: Plan the lock-in. Do you plan to take a lump sum at retirement? Then there must be at least 3 years between the last purchase and the withdrawal. Calculate backwards.

Step 5: Plan the split. Spread the purchase over 2–4 years. Goal: each annual tranche optimally reduces taxable income without dropping too far into low progression.

Step 6: Make the payment. Transfer the amount to your pension fund (the bank details are usually on the statement or the fund's website). Ensure the payment is booked in the correct tax year — December transfers may not be credited until January depending on the bank.

Step 7: Claim the tax deduction. Declare the purchase in your tax return under "2nd pillar contributions / voluntary purchase". Attach the pension fund confirmation.

The purchase checklist: 10 points before paying in

Frequently asked questions

Conclusion: The PK purchase is powerful — but not automatic

The voluntary pension fund purchase is one of the strongest tax levers available to you as a Swiss employee. Used correctly — split over multiple years, with a healthy fund, enough distance to capital withdrawal — it can save tens of thousands of francs in taxes.

But it's not a one-size-fits-all solution. It requires planning, understanding of your own pension situation, and a critical assessment of your pension fund. The most important rule: maximise 3a first, then evaluate the PK, then purchase.

Saving taxes is good. But only if you understand where your money is going — and why.

With arvy, you can invest your Pillar 3a in parallel and build wealth through a savings plan in quality companies. The founders invest their own money in the same portfolio, FINMA-regulated, everything included.

More calculators and articles: Pension fund statement explained → · Pension Gap Calculator → · 3a Tax Savings Calculator → · Pension vs Lump Sum Calculator → · Lump Sum: Tax Optimisation → · Vested Benefits Explained → · FIRE in Switzerland → · Investing Switzerland Guide →

This article was written by Thierry Borgeat, CFA, and reviewed by Patrick Rissi, CFA, and Florian Jauch, CFA. Last updated March 2026.

Disclaimer: This article is for general information and does not constitute personal tax, pension or investment advice. All tax examples are approximations and may vary depending on individual circumstances. A pension fund purchase is a long-term decision with legal and financial consequences — consult a tax advisor or pension expert before purchasing. arvy is a FINMA-supervised asset manager with a CISA licence. Imprint & Legal Information