The purchase prices for owner-occupied homes in Switzerland are sometimes immensely high. Banks and insurance companies will grant a mortgage for a maximum of 80% of the purchase price. This means that the 20% equity that you have to pay out of your own pocket can quickly turn into CHF 200,000 or more. To ensure that the dream of owning your own four walls does not fail due to insufficient own funds, it is possible to finance the purchase of residential property with the help of pension assets from the pension fund.
The Federal Law on Occupational Retirement, Survivors' and Disability Pension Plans (BVG) allows pension fund members to make an advance withdrawal or pledge pension assets.
The difference between pledging and early withdrawal lies in the fact that in the case of pledging, the pension assets serve as collateral for the bank and the insured person can obtain more borrowed capital in the form of a mortgage or obtain better conditions for the mortgage.
Provided that it is the main residence of the insured person and their family that they live in themselves, an advance withdrawal of at least CHF 20,000 may be made from the pension fund every five years. These funds can be used as equity, to repay the mortgage, as a participation in a housing association or for a renovation or value-enhancing investment.
If you take WEF over the age of 50, you can either withdraw the vested benefits at the age of 50 or half of the capital saved up to that point. The higher of the two amounts is available as equity.
The option of early withdrawal sounds tempting, but the withdrawal will reduce future pension benefits and, depending on the pension fund, also insurance benefits. For this reason, it is recommended that you take out supplementary insurance against a reduction in benefits in the event of death or disability. To avoid a reduction in your pension, you can repay the money drawn until retirement age.
As long as everything goes well, the pension assets remain intact in the event of a pledge and the pension benefits in old age are not affected. There are no tax consequences as a result of pledging, but if a pledge is realised, the capital payment is taxable, as with an advance withdrawal.
Pension fund assets withdrawn in advance are taxed at the separate rate for pension capital when they are paid out. When repaying the WEF, you can apply for repayment of this tax (without interest) within a period of three years.
Breaking the tax progression is often particularly worthwhile in the last few years before retirement and purchases are often made into the pension fund for this purpose. However, this is not possible as long as the money withdrawn for WEF has not been repaid beforehand.
The above points show that careful planning in relation to home ownership promotion in particular and pension funds in general is worthwhile in order not to miss any opportunities.
Sources:
Federal Law on Occupational Retirement, Survivors' and Disability Pension Plans: Art. 30a to 30g BVG, Art. 331d and 331e of the Swiss Code of Obligations and Ordinance on the Promotion of Home Ownership with Occupational Pension Funds.
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