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Advance withdrawal

Under the home ownership promotion program (WEF), you can use the Pension Fund’s pension capital to finance your owner-occupied home. You have the two options of advance withdrawal or pledging pension assets.


In the case of an advance withdrawal all or part of your retirement assets are paid out in cash. Pledging means that your money remains in the Pension Fund, but your pension benefits are pledged to the creditor as collateral. You should carefully weigh up the advantages and disadvantages – and don't forget to take the tax implications into account.

Pension Fund assets can only be used as an advance withdrawal or pledge for your own use. You must personally use the property as your place of residence or as your usual or regular domicile (in Switzerland or abroad). Renting out the property is generally not permitted. If the use of the residential property is temporarily not possible, for example due to a short-term, job- or health-related change of location, renting out the property may be possible after consultation with the Pension Fund.

In the following you can see what kinds of things qualify or do not qualify for WEF advance withdrawal or pledging of pension assets.

Approved

  • Acquisition and construction of residential property. This includes:
    • Sole ownership
    • Joint ownership (condominium)
    • Ownership in common (with spouse)
    • Separate and perpetual ground lease
  • Making value-enhancing investments in residential property
  • Making mortgage repayments
  • Acquisition of participation certificates in cooperative housing associations or similar forms of participation


Not approved

  • Vacation home
  • Second home
  • Purchasing building land
  • Chattel buildings (e.g. trailers, mobile homes, etc.)
  • Funding standard maintenance work (repairs, etc.)
  • Paying mortgage interest
  • Paying the taxes incurred by advance withdrawal
  • Paying reservation charges

Advantages and disadvantages of advance withdrawal

Advantages

  • Higher equity capital
  • Lower mortgage payments
  • Less debit interest
  • Tax progression can be reduced through advance withdrawals if a lump-sum withdrawal is planned at retirement or envisaged under the Pension Fund's regulations

 

Disadvantages

  • Immediate taxation on the sum withdrawn
  • Reduced retirement pension on retirement, survivors' benefits lower
  • Lower debit interest deductible from income subject to tax
  • Repayment obligation if residential property is no longer owner-occupied
  • It is only possible to make tax-effective purchases of pension benefits when the advance withdrawal is paid back

Amount of the advance withdrawal

The total pension capital available to you for the promotion of home ownership is shown on your insurance certificate under "Amount available for home ownership." The basic conditions are:

  • Until the age of 50 you can withdraw the whole of your retirement savings capital.
  • Thereafter you can make an advance withdrawal up to the amount of capital you had accrued at age 50, or half of your current retirement savings capital – whichever is the higher.
  • The minimum advance withdrawal is CHF 20,000, but this does not apply to the purchase of participation certificates in a cooperative housing association or similar participations.

Procedure

We prepare a before-and-after calculation detailing your personal situation. To carry out the calculation we need to know the amount of the advance withdrawal and the expected payout date. If you decide in favor of an advance withdrawal, we send you the necessary forms. We charge you the administrative costs for making the requisite land record entry amounting to CHF 200.

To check the intended purpose of the withdrawal, we will require the following documents: 

For construction of residential property

For purchase of residential property

For value-enhancing investments

For mortgage repayments

For participations

Sale of residential property

The pension assets invested in your residential property may be used solely for owner-occupied residential property. The sale of the residential property is not permitted without the consent of the Pension Fund. This restriction can be removed if you have repaid the advance withdrawal or an insured event has occurred in the meantime (retirement, disability, death). Renting out your home is deemed equivalent to a sale.

In contrast, transferring your home to a pension beneficiary – such as your spouse, for example – is not equivalent to a sale. But this person is still subject to the same restrictions on the right of disposal as you are.

Taxes

Both the Swiss federal government and the cantons levy an annual tax on the advance withdrawal. You must pay the entire tax liability at the time of the advance withdrawal to the tax authority at your place of residence, regardless of the duration of your tax obligation in the canton in question. The advance withdrawal cannot be used to settle this tax liability.


Tax assessment
The advance withdrawal is taxed separately from your other income. It depends on the tax multiple in the municipality where you live. You should contact the tax office at your place of residence and ask for the relevant calculation. Some tax authorities offer tax calculators with which you can determine the approximate amount of tax.

Tax rebate
If you have repaid all or part of the advance withdrawal, you will receive an attestation and an updated insurance certificate from the Pension Fund. You can use this repayment attestation to reclaim the taxes paid on the advance withdrawal from the relevant cantonal tax authority. You should submit a request in writing. You have three years from the date when you repay the advance withdrawal to apply for the rebate. After this period, your entitlement to a rebate lapses.


Advance withdrawal within three years following a purchase of pension benefits
According to the ruling of the Swiss Federal Supreme Court, no lump-sum withdrawals may be made within three years of purchasing pension benefits.

If you fail to satisfy the three-year period, the tax advantage associated with purchasing pension benefits will be revoked retroactively. Therefore, please consult the tax authority about the tax deductibility of purchasing benefits from the Pension Fund followed by and a lump-sum withdrawal shortly thereafter, and request written confirmation of such tax deductibility.

Repayment

Voluntary repayment
You have the option of making voluntary repayments to close the pension gap created by the advance withdrawal. You may repay the entire advance withdrawal or make a partial repayment of at least CHF 10,000. These repayments are not considered to be a purchase of pension benefits for tax purposes and therefore are not deducted from your taxable income.

If you or your employer make payments into the Pension Fund, these funds will be used to repay the advance withdrawal.


Mandatory repayment
If you cease to fulfill the conditions for the advance withdrawal, the amount withdrawn must be repaid to the Pension Fund. This applies in the following cases:

  • If you sell your residential property. This repayment obligation is limited to the outstanding total of advance withdrawals or to the proceeds of the sale, whichever is lower.
  • If you grant someone rights to your residential property that, in economic terms, are equivalent to a sale (e.g. rental, residential rights, right of usufruct).
  • If you die and no pension benefits are payable on your death under the BVG, such as surviving spouse's and children's pensions, the Pension Fund can call on your heirs to repay the advance withdrawal.



Exceptions to the mandatory repayment
The following restrictions apply to repayments:

  • The minimum repayment is CHF 10,000. If the advance withdrawal is lower, a one-time repayment must be made.
  • Repayment is possible at any time before retirement.
  • No further repayments can be made after disability or death has taken place.
  • Repayment is possible until cash payment of your vested benefits or until you leave the Pension Fund.

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