Unlocking the third pillar: How providers can transform 3a pension provision

Switzerland’s pension system faces mounting demographic pressure. The third pillar (3a) is capital-funded, and is therefore less vulnerable to demographic ageing. It offers individuals significant autonomy in their retirement planning, which is particularly useful when broader political reforms are slow to materialise. Yet its full market potential remains untapped.

A growing market with significant untapped potential

The 3a market has expanded considerably. According to the VVS association it now manages CHF 89 billion across 2.6 million accounts. However, average assets per client, at CHF 35,000, remains well below its potential level.

Despite an 81% approval rating among Swiss residents for the 3a pillar, our recent study shows that only half of eligible individuals contribute, and a mere 17% invest the annual tax-deductible maximum of currently CHF 7,258. Of course, not every household can put money aside to this extent. However, a recent survey shows that more than three-quarters of all people in Switzerland have a savings account, compared to just over half who have a Pillar 3a account, and this is despite the fact that pension provision was cited in the same survey as the most important reason for saving. This gap indicates a considerable market opportunity for private pension providers and the wider Swiss financial sector. According to our Swiss affluent clients study, being able to provide for pensions is the number one financial worry of affluent clients.

Financial market investments are underutilised

If there is one area with a long savings period, it is pension provision. This makes it ideally suited to take advantage of higher average returns on equity investments. According to the VVS, more clients are choosing investment accounts, with their numbers growing last year at twice the rate of overall Pillar 3a client growth. However, investment accounts still make up only about 40% of all 3a assets. This is echoed by our own research: just 9% of contributors invest their full 3a savings in financial markets, whereas twice as many avoid them entirely.

The digital advantage: Streamlining access and transparency

Addressing the pension provision market should not utilise only digital channels. However, the degree in which digital solutions have a particularly high share of investment accounts – about twice as high as for all 3a solutions, across all age groups – offers interesting insights for engaging clients in digital pension provision and beyond.

Digital leaders excel by offering:

• Efficient mobile onboarding: Streamlined, fully digital account setup in minutes. By contrast, 68% of users abandon apps during clunky sign-ups. As our Digital Maturity Study shows, Swiss banks have made considerable progress overall in digital onboarding, although further improvements are possible.
• Transparent pricing: Clear and easily understandable fee structures.
• Effective referral programmes: Utilising and strengthening word-of-mouth for client acquisition.

Optimising the user experience is of paramount importance. Our Digital Maturity Study reveals that Swiss banks and global peers often struggle with accessibility, customisation, and complex features. Addressing these shortcomings benefits capital market-based pension provision, enabling banks to boost cross-selling and to monetise digital touchpoints. For example, a client opening a pension investment account might readily open another for private investments, if easily accessible.

Fees for digital solutions tend to be lower, with Total Expense Ratios (TER) ranging from 0.15% to 0.55%. These primarily app-based platforms utilise passive investment strategies with ETFs and index funds, and operate on a self-service model without personal financial advice.

Higher price offerings often include a mix of passive and actively managed funds, access to branch networks, or personal advisory services. Costs are typically above 1% and can exceed 2% if additional fees, such as issuing, sales, or custody charges are included.

Behavioural finance has powerful tools for enhancing client engagement. For example, auto-enrolment or auto-escalation features can steadily increase contribution rates over time without requiring active decision-making by investors. Many schemes, particularly in the US and increasingly in the UK, offer options where contributions rise automatically by a small percentage annually or in line with salary increases, unless the client opts out. These options are found to have positive impact on long-term savings accumulation.

Likewise, targeted nudges can guide individuals subtly towards better financial decisions. This includes personalised communications showing the projected impact of increased contributions on future retirement income, or digital prompts that simplify the process of adjusting savings.

Call to action

For financial institutions, the following are key priorities for capitalising on the 3a market opportunity:

• Fee competitiveness: Banks must either align their fee structures with low-cost digital leaders or clearly articulate the unique value proposition that justifies any premium services.
• User experience: Seamless onboarding, intuitive mobile interfaces, and robust self-service tools are no longer differentiators but minimum expectations for client engagement.
• Targeted advanced services, such as automated financial planning: Make use of those services with particular relevance to pension provision and addressing client priorities.
• Behavioural finance: Implementing smart defaults, auto-escalation features, and targeted nudges can significantly increase contribution rates and investment engagement.