You can use your pension assets in pillar 3a and the pension fund to buy an apartment or house. Pledging 2nd and 3rd pillar assets is one option, while early withdrawal is the second option for financing the purchase of your own home. We show you the options and their advantages and disadvantages. We also explain the tax implications of early withdrawal and pledging.
Real estate prices in Switzerland are among the highest in the world. As a result, your own free assets and mortgage are often not enough to buy or build your own home. The second and third pillar funds, which are actually tied up until retirement, can provide support by being counted as your own funds in the event of an early withdrawal if you intend to live in the property yourself. There are two options for using these pension assets: Pledging or early withdrawal.
Pledging or early withdrawal?
In the case of an advance withdrawal, the money is taken from pillar 3a or the pension fund and used as “cash” to finance your own home. The mortgage portion remains the same, but your own funds increase. An early withdrawal is possible every 5 years. However, this time limit applies per pension fund. For example, if you have several pillar 3a accounts with different institutions, a higher cadence is also possible. The same applies to the 2nd pillar – perhaps you and your spouse have a pension fund and a vested benefits account at a bank.
With a pledge, however, your own funds remain unchanged and the mortgage amount increases by the pledged portion of your 2nd or 3rd pillar instead. The pledge is in favor of the bank or mortgage lender, is entered in the land register and must be repaid when the property is sold.
What is an owner-occupied home?
Owner-occupied residential property is your main residence and center of life. Pension assets can therefore not be used for a vacation home, an investment property or a second home. The Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans (BVG) also refers to “residential property for own use”.
Multi-family houses (MFH) are a somewhat special situation. In this case, pension assets can only be used if you live in part of the apartment building yourself.
The minimum amount for early withdrawal of pension fund assets is CHF 20,000. However, there is no minimum amount for pillar 3a.
You can use pillar 3a for your owner-occupied residential property every 5 years. The pension assets can be used for the purchase or construction, conversion, renovation and repayment of a mortgage.
In most cases, a pillar 3a account can only be withdrawn as a whole. Partial withdrawals are not possible. Accordingly, it can also be worthwhile here to have more than one pillar 3a account (in addition to the possibility of optimizing the tax situation for retirement).
You will find the maximum possible amount on your pension certificate from the pension fund. The vested benefits at age 50 are also shown there. This is decisive if you are older than 50 and wish to use pension assets from the pension fund to purchase residential property.
If you have made a voluntary purchase into the pension fund in the last three years, it is not advisable to make an early withdrawal from the pension fund. If you do so anyway, the tax advantage you had when you made the purchase will be due as back tax. It is best to talk to a pension and mortgage specialist about this.
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In most cases, it is possible to use pension assets to promote home ownership up to 3 years before retirement. Ask your pension fund for the exact time limits.
Another important limit is 50 years. Up to the age of 50, you can use the entire balance in your pension fund. If you are older at the time of purchase, you can withdraw the higher of the following two amounts in advance: The amount you had in the 2nd or 3rd pillar at the age of 50 or half of the current pension assets.
The BVG gives insured persons the opportunity to use pension assets from the pension fund for owner-occupied residential property. The legal framework and requirements are governed by the Home Ownership Promotion Act (WEF)
You cannot use pension assets to pay the mortgage interest or even the ongoing maintenance of the property. It is just as impossible to buy building land (without an approved project) as it is to buy a vacation home, either in Switzerland or abroad.
Using retirement savings can help you realize your dream of owning your own home. However, it is essential that you keep an eye on your overall pension situation and the tax consequences. Only make decisions after careful consideration and, ideally, in consultation with an expert. However, if you have the right information, you can certainly make use of these personal funds.