Quick answer: Yes, you can use funds from your pension fund and Pillar 3a for owner-occupied property. This helps with financing -- but reduces your retirement provision. Get advice before you decide.
You want to buy a house, but you do not have enough equity?
Many young families in Eastern Switzerland know this situation. Property prices have risen, and saving up 20 percent equity takes years. That is why many consider tapping into their pension fund. In principle a good idea -- but with some catches.
In Switzerland, you are allowed to use retirement assets to purchase owner-occupied property. This is provided for by law. But there are significant differences depending on whether you use your pension fund or Pillar 3a.
What does an early withdrawal from the pension fund offer?
You can use money from the 2nd pillar directly for a home purchase. This is called a WEF early withdrawal. Here is how it works:
- Early withdrawal: You withdraw capital from the pension fund and use it as equity.
- Pledging: You pledge your pension fund balance as security for the bank. The money stays in the fund.
The early withdrawal sounds tempting. But be careful: your retirement assets decrease, and so does your future pension. Additionally, risk coverage for disability or death is reduced. In the canton of St. Gallen, a capital benefits tax applies to the withdrawal.
Expert tip from Nico: Consider pledging before making an early withdrawal. This way, your money stays in the pension fund and continues to grow. Banks often accept this as collateral, and you retain your full insurance coverage.
Is Pillar 3a worthwhile for buying a home?
Pillar 3a assets can also be used for homeownership. A withdrawal is possible every five years. The major advantage: you have already deducted the contributions from your taxes. Upon withdrawal, only a reduced capital benefits tax applies.
The combination works like this:
- You contribute annually to Pillar 3a and save on taxes.
- When buying a home, you withdraw the balance as equity.
- The property provides additional tax deductions -- mortgage interest, maintenance costs, renovations.
Which is better -- pension fund or Pillar 3a?
There is no one-size-fits-all answer. It depends on your situation. A few rules of thumb:
- Pillar 3a first: The withdrawal has less impact on your retirement provision.
- Pension fund only if necessary: And then prefer pledging over withdrawing.
- Combine both: Many use Pillar 3a plus a portion of their pension fund.
In the canton of St. Gallen, property prices are lower than in Zurich. A single-family home in Wittenbach or Gossau costs significantly less than at Lake Zurich. This makes getting started easier -- and the withdrawal amount smaller.
Expert tip from Stefan: Before making an early withdrawal, check how your insurance coverage changes. Many people forget: with less pension fund assets, benefits for disability and death also decrease. Clarify in advance whether supplementary insurance is needed.
Can I repay the money?
Yes. You can repay a pension fund early withdrawal up to three years before retirement age. This is voluntary but highly recommended. The repayment closes your retirement gap -- and you can claim the repayment as a tax deduction.
Conclusion
Using retirement assets for a home purchase is possible and sensible in Switzerland -- if you do it right. Also read our article Buying a home in Eastern Switzerland -- what matters. At Rüttimann Vision, we analyze your situation and find the best solution for you and your family.