Tax glossary
Lump-sum pension withdrawal (Kapitalleistung)
A lump-sum pension withdrawal is a one-off payout from your pension fund, vested benefits account or pillar 3a — it is taxed separately from your other income at a reduced rate.
If you withdraw assets from occupational pensions (pillar 2) or tied private pensions (pillar 3a) as capital, a separate annual tax is due. The lump sum is not added to your other income; it is taxed on its own at a reduced rate. This applies to withdrawals at retirement as well as early withdrawals for home ownership, cash payments when starting self-employment and when leaving Switzerland for good.
In the Canton of Zurich, the tax is calculated at the rate that would apply if one-twentieth of the lump sum were paid out annually instead; however, the simple cantonal tax is at least 2 percent. This amount is then multiplied by the tax multipliers of canton, municipality and, where applicable, church. For direct federal tax, the tax is one-fifth of the ordinary rate (tax period 2025).
All lump sums received by one person — or by both spouses together — in the same calendar year are added up. Because the rate is progressive, it rises with the total. That leads to the most important planning rule: spread withdrawals over several years.
What is taxed as a lump sum
The special taxation applies to capital payments from pension schemes. A pension paid as an annuity is different — it is income and taxed each year together with your other income.
- Withdrawal of retirement capital from the pension fund
- Payout of pillar 3a accounts and 3a securities accounts
- Early withdrawal for owner-occupied property (WEF)
- Cash payout when starting self-employment or leaving Switzerland permanently
- Lump-sum death benefits paid to survivors
- Tax-free: vested benefits transferred to a new pension fund within one year
Staggering withdrawals
If you hold several pillar 3a accounts, you can close them in different years — at the earliest five years before the statutory retirement age. Depending on your fund's regulations, pension fund capital can also be split over two years, for example with partial retirement.
For married couples, both partners' withdrawals in the same year are added together. If the husband closes his pillar 3a in the same year his wife retires and takes her pension capital, part of the staggering effect is lost.
- Open several 3a accounts, ideally years before retirement
- Put the spouses' withdrawals in different years
- Respect the three-year lock after a pension fund buy-in
After the withdrawal
Once paid out, the capital becomes part of your private assets. From the next reference date it is subject to wealth tax, and the income it generates — interest and dividends — is taxable. A lump-sum withdrawal is therefore not just about the one-off tax, but also about planning your assets for the years that follow.
Example: retiring in Winterthur
A married Winterthur resident with no church affiliation takes CHF 300,000 of retirement capital from his pension fund. One-twentieth would be CHF 15,000 a year — the rate for that is below 2 percent, so the minimum rate applies. The simple cantonal tax is 2 percent of CHF 300,000 = CHF 6,000. Multiplied by the cantonal (95%) and City of Winterthur (125%) multipliers, that gives CHF 13,200 in cantonal and municipal tax. Federal tax is added at one-fifth of the ordinary rate.
Had he also withdrawn CHF 100,000 from pillar 3a in the same year, that amount would also have been taxed at the cantonal minimum rate, but the federal rate would have risen because of the addition. Spreading the 3a withdrawals over the years before retirement reduces the overall burden noticeably — especially for larger amounts, where the cantonal minimum rate no longer applies.
Frequently asked questions: Lump-sum pension withdrawal (Kapitalleistung)
Do I have to report the lump sum in my tax return?
Yes, in the relevant section of the return. The pension fund or bank also reports the payout directly to the tax authorities. The tax is charged with a separate invoice.
Which is better for tax — pension or lump sum?
The lump sum is taxed once at a reduced rate; the pension is taxed in full as income every year. For tax purposes, the lump sum often comes out ahead — but the decision also depends on life expectancy, your need for security and how you invest.
Is the lump sum added to my other income?
No. It is taxed separately and does not push up the rate on your other income. Only several lump sums in the same year are added together.
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