The rules on promotion of home ownership distinguish between early withdrawal and pledging of assets held in an occupational pension fund. Early withdrawal means taking money out of your pension fund so as to increase your equity and reduce your mortgage.
Withdraw retirement assets early to buy a home
Taking money out of your pension fund early gives you more equity at your disposal. This makes it easier to fund your home purchase, and it also makes your mortgage smaller, so you end up paying less interest.
On the negative side, an early withdrawal leaves a gap in your pension cover, which is why you should pay it back by the time you retire or find a private pension solution that fills the gap. If you fail to pay it back, the benefits you receive from the pension fund when you retire will be lower. The benefits you receive if you become disabled or those your survivors receive on your death might also be lower, depending on the pension fund. Please consult your contact at PUBLICA if you are interested in an early withdrawal. He or she will help you to avoid suffering pension shortfalls in retirement.
Use your retirement assets to buy a home
Early withdrawals to buy a home are possible every five years. The minimum withdrawal is CHF 20,000. Any repayment must take place before retirement. The minimum repayment is CHF 10,000.
The amount withdrawn from your retirement assets is taxed separately from your other income at a reduced rate. The money withdrawn must not be used to pay this tax. If it is paid back to PUBLICA at a later date, the tax can be reclaimed, albeit without interest. Following an early withdrawal, voluntary pillar 2 buy-ins with tax relief are only possible once the money withdrawn has been repaid in full. The money must also be paid back to PUBLICA in full if the home is sold.
Pledge your retirement assets to buy a home
Instead of withdrawing capital from your pension fund, you can pledge your retirement assets to your bank, which increases your mortgage by the pledged amount. This allows you to use a higher level of debt to buy your home.
The conditions for pledging are similar to those for early withdrawals, but the pledged money remains with PUBLICA, and your insurance cover and retirement benefits remain unchanged. In addition, no capital withdrawal tax is payable, since the pledged money merely serves as collateral for the bank that can be called in if needed. The terms of the pledge are set out in a special pledge agreement. Because the pledge increases the amount of the mortgage, it results in higher interest payments. At the same time, however, it offers you tax benefits as a borrower.
