LPP buy-in: worth it or not? How to calculate it, the three-year lock-in and the 31 December deadline

Every year, the pension certificate shows a line that many employees look at without knowing what to do with it: the buy-in potential. Paying all or part of that sum into your pension fund reduces the year's tax, often by several thousand francs. But the money is then locked in, paid a modest rate of interest, and it will be taxed a second time, more lightly, when it is withdrawn. Whether the operation pays off is therefore a matter neither of intuition nor of slogans: it is a calculation with three parameters, which this guide sets out step by step, together with the rules that can make it fail.

1. What is a buy-in, and how much can you buy in?

A buy-in is a voluntary payment into your pension fund, on top of the contributions deducted from your salary, to fill a pension gap. A gap arises whenever the assets accumulated are lower than those provided for by the fund's rules for your age and salary: a late arrival in Switzerland, years in education, part-time work, a salary increase, a divorce, an advance withdrawal for a home.

The law sets the ceiling: the fund may allow a buy-in only up to the amount of the benefits provided for by its rules (art. 79b para. 1 of the Federal Act on Occupational Old-Age, Survivors' and Invalidity Pension Provision, LPP). The exact amount is calculated according to each fund's rules; it appears on the annual pension certificate or can be obtained on request. Three items reduce it, under the OPP 2 ordinance:

• Vested benefits that have not been transferred into the current fund are deducted from the buy-in amount (art. 60a para. 3 OPP 2). A forgotten vested benefits account therefore reduces your potential by the same amount.
• Pillar 3a assets that are too high also reduce the potential, for the portion that exceeds the sum of the maximum deductible contributions since the age of 24, interest included (art. 60a para. 2 OPP 2). This mainly concerns former self-employed people.
• Retirement benefits already received are deducted from the potential of a person who resumes work after drawing their pension (art. 60a para. 4 OPP 2).

Two situations have their own rules. A person arriving from abroad who has never been a member of a Swiss fund may not buy in more than 20% of their insured salary per year for five years (art. 60b OPP 2): with an insured salary of CHF 80,000, CHF 16,000 a year at most. And a person who has obtained an advance withdrawal for their home must in principle repay it before being able to make a voluntary buy-in (art. 79b para. 3 LPP). Buy-ins following a divorce, by contrast, are exempt from the limitations (art. 79b para. 4 LPP). Our guide to occupational pension provision (LPP) explains how to read the pension certificate.

2. How do you calculate whether a buy-in pays off?

The buy-in is deducted from taxable income, with no tax ceiling of its own, for direct federal tax (art. 33 para. 1 let. d of the Federal Act on Direct Federal Taxation, LIFD) as well as for cantonal and communal taxes (art. 9 para. 2 let. d of the Federal Act on the Harmonisation of Direct Taxation, LHID). Three figures are enough to judge the operation:

• Your marginal tax rate (m), that is the rate that applies to the top slice of your income. It is this rate, and not your average rate, that measures the tax saving: a buy-in of CHF 50,000 with a marginal rate of 30% reduces tax by CHF 15,000. The real cost of the buy-in is therefore only CHF 35,000.
• The number of years (n) between the buy-in and the withdrawal of the capital, during which the money earns the rate credited by the fund (i). The statutory minimum rate, which applies only to the mandatory portion of the assets, is 1.25% in 2026; the fund may credit more or less on the extra-mandatory portion.
• The tax rate on the lump sum (s) paid on withdrawal. Pension capital is taxed separately from the rest of income; for federal tax, at one fifth of the ordinary scale (art. 38 LIFD). Each canton applies its own method.

The equivalent annual return of the buy-in is obtained by comparing what you get back net of tax with what the buy-in really cost you:

Which tax on the lump sum should you assume?

The figure depends on the canton, the commune, marital status and above all the total amount withdrawn, since the scale is progressive. Simulations with the Federal Tax Administration's tax calculator give the following orders of magnitude for 2026 (man aged 65, no religious affiliation, federal, cantonal and communal taxes included):

A buy-in comes on top of capital already built up: what counts is therefore the rate applicable to the top slice of the capital, which is higher than the average rate. For a single person in Geneva, the tax rises from CHF 4,125 on CHF 100,000 to CHF 37,051 on CHF 500,000: the additional CHF 400,000 is taxed at 8.2% on average. That is why the examples in this guide assume a tax of 8% on the capital resulting from the buy-in, a central assumption: for a single person, the slice from CHF 100,000 to CHF 500,000 is taxed at between 7.6% (Zurich) and 9.3% (Lausanne), and the return is lower if your rate is higher.

The marginal rate: the assumption that weighs most

Your marginal rate is found by comparing the tax calculated on your income with and without the amount of the buy-in, for example in your canton's calculator or in the tax return software. It varies considerably: low for a modest income, it can approach or exceed 40% for a high income depending on the canton, which the cantonal calculator lets you check. The same buy-in is therefore not worth the same for two people:

Common assumptions: interest credited at 1.25% a year, tax of 8% on the lump sum at withdrawal. These returns are calculation results, not guaranteed rates.

3. Why does the time until withdrawal change everything?

Because the tax advantage is collected only once, at the time of the buy-in, whereas the following years earn only the fund's interest. The longer the money stays in, the more this initial gain is spread over a large number of years, and the closer the annual return comes to the credited interest rate.

Buy-in of CHF 50,000, marginal rate of 30% (real cost of CHF 35,000), interest of 1.25% a year.

In this calculation, the conclusion is counter-intuitive: the buy-in pays off most in the last years before retirement, provided the three-year deadline is respected. At 40, a buy-in locks the money in for more than twenty years for a return that tends towards the fund's, and it deprives you of that sum for other projects. It remains attractive if your marginal rate is high and your fund pays a good return on assets, but the tax saving alone then weighs much less. The right moment depends on your situation: a tax or pension adviser can put figures on your case.

A buy-in is not lost for good to life projects: the assets can still be used to buy a home or to set up on your own account, and they can be paid out in cash, in whole or in part, to a person who leaves Switzerland for good. But each of these withdrawals counts as a lump sum withdrawal for the purposes of the three-year deadline, detailed in section 5.

4. What if you take a pension rather than the lump sum?

The calculation changes in nature. There is no longer any tax on the lump sum, but a higher pension, taxed every year as ordinary income. The capital resulting from the buy-in is converted into a pension at the fund's conversion rate: 6.8% as the statutory minimum on the mandatory portion at 65 (art. 14 LPP), but a freely set rate, often lower, on the extra-mandatory portion.

Buy-in of CHF 50,000 ten years before retirement, grown to CHF 56,614 at 1.25% a year; real cost of CHF 35,000 with a marginal rate of 30%; assumed tax rate on the pension of 25%. Calculation without discounting.

When you take a pension, the buy-in is therefore a bet on longevity: the longer the pension is paid, the more it pays off, and the pension does not stop with age. On the other hand, there is no three-year trap: the deadline in article 79b applies only to lump sum payments.

5. What happens if you withdraw capital within three years?

Article 79b para. 3 LPP is brief: benefits resulting from a buy-in may not be paid out as a lump sum before a period of three years has elapsed. Tax law has derived a severe rule from it, which the Federal Supreme Court has tightened ruling after ruling:

• The reversal is automatic. Since a 2010 ruling (2C_658/2009), any lump sum withdrawal within the three-year period causes the loss of the deduction for the buy-ins made during that period. ATF 148 II 189, handed down at the end of 2021, specifies that there is no need to examine whether there is tax avoidance: breaching the deadline is enough. If the deduction has already been granted, it is corrected by a supplementary tax assessment.
• The rule applies from one fund to another. In a 2021 ruling (2C_6/2021), an employee had bought in CHF 45,000 into their fund, then less than three years later withdrawn CHF 20,813 from a vested benefits account with another institution. The supplementary assessment covered CHF 20,813: the reversal is capped at the capital withdrawn, but it is not limited to the fund that received the buy-in.
• Several withdrawals count as capital: the advance withdrawal to buy a home, the withdrawal to become self-employed and the cash payment on leaving for abroad for good. Taking a pension is not affected.
• The deadline is counted to the day, from the date of the buy-in to the date the capital is paid out. The Geneva tax administration points this out: the deduction is not possible if you receive a 2nd pillar lump sum benefit less than three years, to the day, after the buy-in.

The cantons apply the rule with nuances. Under a practice published in 2015 in its Steuerbuch, Zurich for example does not reverse the deduction where buy-ins do not exceed CHF 12,000 a year; above that, the deduction for the entire buy-in is reversed, up to the capital withdrawn. One exception has been recognised by the Federal Supreme Court: a payment intended to fund an AVS bridging pension remains deductible despite a simultaneous withdrawal of capital.

6. Buy in all at once or over several years?

Since the income tax scale is progressive, every franc bought in brings income down into a less heavily taxed bracket. A buy-in of CHF 150,000 in a single year uses up the highest brackets, then is deducted at lower and lower rates: the average saving is below the initial marginal rate. Spreading the same amount over three or four years makes it possible to deduct each time at the highest marginal rate.

Spreading has one constraint: each buy-in starts its own three-year period. If you plan to withdraw your capital at 65, the last buy-in must take place no later than three years to the day before the payment. A typical timetable for retirement with a lump sum on 1 July 2032:

A withdrawal in several stages, for example part as a lump sum and part as a pension, or capital paid by two institutions in different years, must be built into the same timetable. Our guide LPP: simulator and withdrawal details the conditions for withdrawal.

7. What risks does a buy-in carry?

• Interest below the assumption. The minimum rate of 1.25% guarantees only the mandatory portion of the assets. In the event of underfunding, the fund may even, for five years at most, pay interest on retirement assets of up to 0.5 percentage points below the minimum rate (art. 65d para. 4 LPP). Before buying in, reading the funding ratio published in the fund's annual report is a useful precaution.
• A falling conversion rate. For anyone who will take a pension, the value of the buy-in depends on the conversion rate applied at the time of retirement, which the fund can reduce on the extra-mandatory portion.
• The money is no longer available. Apart from the withdrawal cases provided for by law, the capital bought in stays in the fund until retirement. A buy-in must never eat into the reserve you might need before then.
• Tax rules can change. The taxation of lump sum withdrawals was put back on the table in 2025 by a Federal Council proposal as part of its budget relief programme. Article 38 LIFD nevertheless remains unchanged in the law in force and in the amendments already published for 2027 and 2028. A buy-in is calculated with the known rules, without certainty about those that will apply at withdrawal.

The minimum rate itself changes: on 31 August 2026, the Federal Commission for Occupational Pension Provision recommended raising it to 1.75% in 2027. The decision lies with the Federal Council, which had not yet taken it at the date of this guide.

8. How do you buy in before the end of 2026?

The buy-in is deducted in the year in which it is paid. The Geneva tax administration asks you to state in the tax return the total amount of buy-ins made during the year. For a deduction on 2026 income, the money must therefore reach the fund in 2026. Some funds set an earlier internal deadline in December to process payments: the Medpension fund, for example, requires the payment to reach it by 15 December at the latest. The process takes place in four steps:

• Request the calculation of the buy-in amount from the fund, which checks vested benefits, pillar 3a and advance withdrawals. The figure on the annual certificate may be several months old.
• Estimate your marginal rate by simulating your 2026 tax with and without the buy-in, and choose the amount accordingly.
• Check your withdrawal timetable: no capital, from this fund or another, must be paid out within three years.
• Pay before the fund's deadline, with the reference requested, then keep the buy-in confirmation, to be attached to the tax return.

9. Taxed at source or a cross-border worker: can you deduct the buy-in?

Withholding tax scales take account of ordinary 2nd pillar contributions, but not of a buy-in. To deduct it, you need a subsequent ordinary assessment (TOU), which replaces the year's withholding with a full calculation of the tax, deductions included. The request must be filed by 31 March of the following year at the latest: for a buy-in in 2026, before 31 March 2027. Without a request, no additional deduction is granted.

For a cross-border worker taxed at source in Switzerland, in Geneva for example, quasi-residence is therefore the only way in, and it must be requested every year. Cross-border workers within the meaning of the agreement between Switzerland and Italy on the taxation of cross-border workers cannot obtain a subsequent ordinary assessment on the basis of quasi-residence (art. 14 para. 3 of the ordinance on withholding tax): this route is not open to them for deducting a buy-in in Switzerland. Our guide on correcting withholding tax in Geneva details the procedure and its deadlines.

For a cross-border worker taxed in their country of residence, Switzerland does not tax the salary, or only through a limited withholding, and the deduction of the buy-in is a matter for that country's tax administration. Caution is called for: in France, the Lyon administrative court of appeal ruled on 5 June 2025 (no. 24LY02533) that the buy-in in question did not fall within the contributions deductible without limit, in particular because the taxpayer had not shown that it related to compulsory contributions, and rejected their request to deduct the whole of their buy-in. The tax administration had allowed the deduction only as a concession, within a limit modelled on the buy-back of twelve quarters under the French scheme. Before a large buy-in, you should have the tax treatment confirmed in writing by the tax administration of your country of residence. Our guide to cross-border worker taxes sets out who taxes what depending on the canton of work.

10. Funding a buy-in with savings in euros: what does the exchange cost?

A buy-in is paid in francs. For a person from the euro area who funds the buy-in with savings still held in euros, the conversion is a cost that has to be deducted from the gain calculated above. On a buy-in of CHF 50,000, an exchange margin of 2% (assumption) represents around CHF 1,000, or almost 7% of the tax saving of a taxpayer with a marginal rate of 30%. The same question arises again on the way out, if the capital has to go back to a euro account.

ibani is a Geneva-based financial intermediary, not a bank, specialising in transfers between the euro area and Switzerland, with a Swiss IBAN in your name. The exchange margin is degressive, from 0.40% to 0.15% depending on the amount; it is 0.35% between CHF 10,000 and 50,000, that is at most CHF 175 on CHF 50,000, with no transfer fees. You choose when to convert before transferring the francs to your fund. The daily rate can be followed on our CHF-EUR converter, and our pension withdrawal page covers the reverse journey, at retirement.

11. Frequently asked questions