Remember, according to directives ASB for mortgage financing of owned housing for own use, a minimum share of equity on the collateral value, not coming from the 2nd pillar equity (advance payment and pledging), is required. This minimum share is 10%.
What equity is taken into account in order to finance the minimum 10% share?
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Important : a careful selection of equity capital should be made on the basis of yields, mortgage rate and IMR.
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When you choose the early withdrawal option, you are opting for a withdrawal before the legal retirement age. But what is really going on?
When the capital is withdrawn, two fundamental factors must be taken into consideration, first your taxation, and secondly your foresight, let’s see this in more detail.
IMPACT FISCAL
A tax levied by the confederation and the canton affects any withdrawal of pension capital, this tax is also called capital benefit tax, the latter is subject to a preferential rate, it is around 10% on average and can be calculated by going to the official website of your canton, Excel calculators are available.
IMPACT ON PROVISIONS
Depending on your pension plan, early withdrawal from your second pillar may have an impact that may penalize your retirement and disability benefits, as well as survivor benefits such as widow’s / widower’s / orphan’s pension.
As part of a premium contribution plan
Your retirement pension, your invalidity pensions as well as the widow / widower / orphan survivor’s pensions are calculated on your retirement assets without interest. Therefore, any withdrawal will reduce these benefits.
Example: Madame EPL withdrawal of CHF 100,000 at 45, minimum rate 1% according to LPP
Retirement pension:
100,000 to 1% for 19 years = 120,811 X 6.8% = 8,215 annual reduction
Disability pension:
100’000 X 6,8% = 6,800 annual reduction
Widower’s pension:
100’000 X 6,8% X 60% = 4,080 annual reduction
Orphan’s pension:
100’000 X 6,8% X 20% = 1’360 annual reduction
As part of a service provision plan
The plan of a fund with primacy of benefits offers benefits as a percentage of the insured salary. In this type of plan, retirement and risk benefits are calculated as a percentage of the last insured salary or an average of the last insured salaries.
Therefore, a withdrawal does not result in any reduction in benefits.
As part of a mixed or bi-primacy plan
In a dual or mixed plan, retirement benefits are calculated on retirement assets (premium contributions), as for risk benefits, they are expressed as a percentage of the insured salary (benefits primacy).
In such a case, you only reduce the retirement pension and the non-risk part.
HOW TO COMPENSATE THIS REDUCTION IN BENEFITS?
It is essential to take measures to fill these gaps, a buyback in the second pillar (LPP) will make it possible to replenish this lack, without forgetting that any withdrawal must first be reimbursed before making a buyback which may be tax deductible and this until the legal retirement age (new revision of additional benefits in 2021). Any refund results in a refund of the tax.
Another compensation solution can be implemented, a 3rd pillar savings with benefits with an incapacity to earn pension as well as a death benefit.
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If you choose the pledge option, no withdrawal will be made, in fact the bank places the relevant credit as collateral and lends you the sum in order to increase the amount of your loan.
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Important : just like the withdrawal, the pledge must be amortized at the latest over 15 years, at the latest at retirement age.
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Example:
Property worth 1’200’000.-CHF
80% advance rate: 960’000.-CHF
Minimum equity: 240,000 CHF, of which 120,000 CHF cannot come from the pension fund. Classic case 120’000.-CHF of LPP and 120’000.-CHF of hard capital.
During a pledge, the part of the 120’000.-CHF of the second pillar is finally pledged by the bank which will increase your loan to 1’080’000.-CHF instead of 960’000.-CHF initials. The interest charge will therefore increase annually and your income will have to maintain its 33% effort rate.
However, higher interest charge means higher mortgage interest deduction from income on your tax return.
Finally, compared to a withdrawal, a pledge allows your BVG capital to continue to benefit from capitalized interest of at least 1%, you can especially continue to make redemptions in your pension fund in order to obtain savings from ‘non-negligible taxes.
A calculation and a thorough analysis of your situation will make it possible to define the right choice.
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In practice, pledging takes place less frequently because the effort rate does not allow it, however this option can in certain cases prove to be much more advantageous in order not to penalize and reduce any provident benefit.
Several factors must be taken into consideration, do not hesitate to make an appointment in order to benefit from a suitable expertise.
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