Pension fund and pillar 3a for a home: withdrawal or pledge

Advance withdrawal

With a withdrawal the capital is paid out and goes into the purchase as equity. It is available at most every five years, the minimum is CHF 20,000, and from age 50 the amount is capped. The payout is taxed separately from your other income at a reduced rate; if you repay it later, that tax can be reclaimed. The drawback stays with you: retirement capital falls, and often disability and survivors’ benefits fall with it.

Pledge

With a pledge the capital stays in the pension scheme and serves the bank as security. No capital-withdrawal tax falls due, retirement benefits are untouched, and the bank accepts a higher loan-to-value. In exchange the mortgage is bigger, and so are the interest cost and the affordability sum. Pledging suits you if your income carries the larger mortgage; where it does not, withdrawing is the way through.

Minimum withdrawal (2nd pillar)

CHF 20,000

Frequency

At most every five years

Use

Owner-occupied residential property only

On sale

The withdrawal must be repaid

Before withdrawing, check how far your disability and death benefits drop. Many schemes cut them proportionally, and topping up risk cover then costs less than the gap is worth.