Print

I acquire the house of my dreams

Should I use the capital from the 2nd and/or 3rd pillar or should I pledge my pension capital?

MY HOUSE:A MEANS OF FINANCING MY RETIREMENT

  •  creating asset value by investing in secure assets
  •  influencing your retirement budget in a significant manner

EASIER ACCESS TO PROPERTY OWNERSHIP: WITH THE 2ND PILLAR AND TIED 3RD PILLAR, YOU BENEFIT FROM TAX ADVANTAGES AS WELL AS FROM EASIER ACCESS FOR YOUR PRINCIPAL RESIDENCE

  •  making the choice between capital payments and pledging
  •  knowing the advantages and disadvantages depending on your personal situation
  •  making a decision knowing all of the facts

CONDITIONS TO BE MET: DIFFERENT CONDITIONS FOR WITHDRAWING THE 2ND OR 3RD PILLAR

  •  use of the pension funds for the principal residence
  •  observance of the minimum of 10% of equity coming from the 2nd pillar

 

In order for becoming a home owner to cease being just a dream and become a concrete plan, learn how to make the most of your pension.

Discover what options need to be prioritised and which conditions need to be met in order to make the house of your dreams not only a reality, but also a means of financing your retirement.

 

WHEN THE PENSION BENEFITS TO THE PROPERTY OWNER

By purchasing a real estate asset as early as possible, you are acting on the most significant item in your retirement budget. In effect, at retirement age, the income from the 1st and 2nd pillars is not sufficient to provide all of the earnings and, as a result, the rental charges which often turn out to be significant can rapidly become a cause for concern.

 

MY HOUSE: A MEANS OF FINANCING MY RETIREMENT!

In addition, by investing in a secure asset, you create an asset value1 which you can exploit in different ways before or after retirement:

  •  use as your own residence
    → no rental charges
  •  renting out
    → regular additional income
  •  creation of capital following the sale of a real estate asset
    → reinvestment of capital

 

EASIER ACCESS TO PROPERTY OWNERSHIP WITH THE 2ND PILLAR AND THE TIED 3RD PILLAR

Taking out a tied 3rd pillar insurance policy is a means of establishing equity for purchasing a real estate asset or for amortising a mortgage loan.

As part of a pension, the Swiss Confederation provides for:

  •  the use of funds contributed under the 2nd pillar for easier access to property ownership;
  •  the use of funds contributed under the tied 3rd pillar for access to property ownership or for amortization of mortgage credit;
  •  a tax benefit of tied 3rd pillar contributions which are tax deductible to a maximum of 6,768.-2 per year for salaried employees (in the case of self-employed workers, the threshold for the deductible sum is 20% of the annual revenue with a maximum of 33,840.-2).
 

IMPORTANT CONDITIONS TO BE MET

Several important points which must not be overlooked and which should be borne in mind if you want to take advantage of your pension to finance the house of your dreams:

  •  In general, the 2nd or 3rd pillar may only be withdrawn 3 years after it is established (depending on the conditions for the pension fund or pension foundation).
  •  A minimum of 10% of the equity must not come from the 2nd pillar.
  •  Within a maximum period of 15 years or once the age of 65 is reached, the level of indebtedness to the bank must not exceed 66% of the value of the real estate asset which means that the equity must have reached a minimum of 34%. At the same time, the costs relating to the credit (interest, asset maintenance) must not exceed one third of the income.

The 3rd pillar may be considered as a form of savings dedicated to realising your life projects. These savings are also accompanied by the benefits of life insurance (death and disability) if it is accompanied by an endowment insurance.

However, it is important to remember that you do not have the option of contributing at your leisure owing to the limit on annual contributions because of tax benefits and, as a result, it is important to provide for the establishment of a 3rd pillar as early as possible

 

PLEDGING OR EARLY PAYMENT: WHICH OPTION TO PRIORITISE?

When using your 2nd or 3rd pillar to purchase a real estate asset, you have a choice between two options with different impacts.

 

Option n°1 PLEDGING

We talk about pledging when the capital from the 2nd or 3rd pillar is used as a guarantee for the purchase of a real estate asset and is thus not touched.

IMPACTS

  •  you benefit from tax savings (capital not withdrawn and therefore not taxed)
  •  you keep all of your entitlements to insurance benefits (2nd pillar)
  •  you earn interest on the capital established under the 3rd pillar
  •  the tax deduction is higher because the interest expense is higher
  •  the interest expense is higher

 

Option n°2 EARLY PAYMENT

In the case of early payment, the capital from the 2nd or 3rd pillar is used directly to purchase a real estate asset.

The use of the 3rd pillar for early payment is not subject to the conditions and all of the capital can thus be withdrawn.

conditions to be taken into account for withdrawal of the 2nd pillar

  •  only 10% of equity for the purchase of a real estate asset may come from the 2nd pillar
  •  minimum withdrawal of 20,000.-
  •  withdrawal possible every 5 years
  •  up to 50 years old: withdrawal of the entirety of the capital possible
  •  from 50 years old: option of withdrawing the highest sum between the capital saved before the age of 50 and half of the capital which will be available upon retirement
  •  redemption of capital from the 2nd pillar only possible after having repaid the early payment (not repayable with funds from the tied 3rd pillar)
 

IMPACTS

  •  you benefit from a lower mortgage and thus from lower interest expenses
  •  you no longer benefit from additional tax savings, in particular loss of the reduction of tax deductions, and taxation of the capital withdrawn
  •  you have less liquid assets available owing to the tax to be paid
  •  a pension gap may arise depending on the amount withdrawn

 

The advantages and disadvantages of the choice of pledging or early payment in relation to your pension, your interest expenses and in relation to your potential tax savings in summary.

Your choice between the two options should therefore be made based on your short and long term priorities.

 

 

PLANNING YOUR PENSION: the questions to ask

It is essential to take action early enough, be clear about your personal situation and keep yourself informed about the possibilities for action in terms of pensions.

BENEFIT FROM OUR APPROACH

  •  advice about planning your pension according to your personal situation
  •  provisional calculation  of your retirement income
  •  solutions for the capital to be established for retirement
  •  optimisation of your time assets

 

 

Call on our services: make an appointment for advice +41 (0)800 829 830

 

1 Creating asset value also leads to taxation.

2 Maximum sum determined by the Swiss Confederation in 2015 and reviewed every 2 years