Financing home ownership with pension assets

Post from 28.07.2022

Anyone who fulfills the dream of owning their own four walls may also use pension assets to finance the property. What you need to bear in mind.

For many people, buying a home is the biggest investment of their lives. In order to be able to finance it at all, the main part of the purchase price is usually financed by borrowing. This means that a financial institution grants a mortgage - but charges interest in return.

In Switzerland, however, it is not possible to have the entire property financed by the bank. At least 20 percent of the purchase price of an owner-occupied property must be paid by the buyer's own funds. For example, if you buy a home for one million francs, you have to pay at least 200,000 francs out of your own pocket. This could be money deposited in a bank account or securities. Or even the saved pension assets from the second pillar: This is a welcome source of financing, as pension fund assets represent an important part of the assets of many Swiss citizens.

Some rules for withdrawal

Anyone who now wants to withdraw funds from the pension fund for home ownership must observe a few points: For example, early withdrawal is only possible if it is used to finance owner-occupied residential property. Financing a vacation home or an investment property is not permitted. In addition, 10 percent of the purchase price must be covered by "real" own funds - pension fund assets are not included here. For the example mentioned, this means that of the 200,000 francs of own funds brought in, at least 100,000 francs must be covered by own savings, while the remaining 100,000 francs may be drawn from the pension fund - provided that this much has already been saved in the pension fund.

An early withdrawal may be made every five years, the minimum withdrawal amount is 20,000 francs. In addition, the amount withdrawn is taxed at a reduced rate in the year of payment. From age 50, there are also restrictions on the maximum withdrawal amount: only the funds saved up to this age or 50 percent of the saved amount - whichever is higher - may be withdrawn early.

Reductions in pension as a result

An early withdrawal also has disadvantages: the accumulated retirement assets in the pension fund are smaller in one fell swoop, which reduces the pension in old age if the withdrawn funds are not paid back into the pension fund before retirement. There may also be reductions in benefits due to disability or death, depending on the pension fund in question.

If you prefer to leave your own pension fund untouched, you can also tap into other pension assets when buying real estate: an early withdrawal from pillar 3a for owner-occupied residential property is also possible.

Difference between second pillar and pillar 3a

The rules described in the text for withdrawing pension assets for home ownership relate to second pillar assets. This is the occupational pension plan, which is generally obligatory for people in gainful employment. This contrasts with pillar 3a, which is an individual and voluntary pension plan. Employees and self-employed persons may pay up to a certain maximum contribution per year into pillar 3a. As with the second pillar, these funds are also tied up and may only be withdrawn in exceptional cases - such as the purchase of residential property. Almost the same rules apply to early withdrawals from pillar 3a as for the second pillar. With a few important exceptions: The minimum withdrawal amount of 20,000 francs no longer applies, the 3a funds withdrawn may be counted towards the "real" own funds and repurchases are no longer possible after a withdrawal.

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