If you don’t have much money to spare, you can withdraw your retirement savings from your pension fund and Pillar 3a to buy a home. Answers to nine important questions about state home ownership support.
Retirement savings are usually the largest assets of the Swiss resident population. It makes sense to invest these funds in home ownership.
Karin Hofer / NZZ
Switzerland is a special case in Europe: the proportion of homeowners in the population is not increasing, but is actually shrinking slightly. While 38 percent of the population still lived in their own four walls in 2015, the proportion fell to 36 percent by 2021. This is shown by the latest real estate monitoring from the real estate consultant Wüest Partner. The paradox is that home ownership would actually be in great demand – according to a survey by the same company, around half of rented households among 30 to 50 year olds are thinking about buying home ownership.
For most people willing to buy, the dream of owning their own home remains a castle in the air. You do not have enough income and assets to obtain a mortgage from a financial institution. In addition to the affordability of interest and maintenance, lenders usually require a fifth of your own funds for a home loan. A tenth of the property price must be provided in the form of liquid assets, savings, securities, inheritance advances or assets from the voluntary, tied pillar 3a.
At least 10 percent of the purchase price must consist of equity that does not come from the pension fund. Experts talk about “hard” equity. The fact is: the retirement assets in the vested benefits account, in the pension fund or in a pillar 3a account are usually the largest assets. It makes sense to invest these funds, which are actually intended for retirement, in home ownership.
The advance withdrawal of pension funds requires advance notice
Florian Schubiger is co-founder of the mortgage comparison platform Kredite.ch in Zurich. He warns that when buying a home you have to be aware that receiving pension funds as part of the home ownership promotion (WEF) can take a certain amount of time. “You just have to inform a seller about it at the right time. If a seller wants to sell quickly, the length of time for a WEF advance withdrawal should be clarified with the pension fund beforehand.
For married couples with two pension funds, it is important to check which of the two should make a WEF withdrawal. All actions regarding WEF withdrawals and repayments should be coordinated. To do this, you have to know the most important rules as well as the advantages and disadvantages of a WEF reference.
1. What is meant by state home ownership support?
In order to promote the purchase or creation of owner-occupied residential property, the legislature has provided that pension funds can provide funds or securities for this purpose. The goal of home ownership promotion (WEF) is for more people to be able to afford their own home with the help of retirement savings. Within the framework of the WEF, you are allowed to withdraw or pledge missing capital from the tied pension plan. It regulates many details Ordinance on the promotion of home ownership using occupational pension funds from October 3, 1994.
2. For what purposes is a WEF advance withdrawal possible?
The advance withdrawal can be used to purchase or create home ownership. The funds can also be used to repay a mortgage loan on residential property, to purchase shares in residential property (cooperatives) or to finance renovations or value-adding investments. Permitted forms of home ownership also include real estate under building law. An early withdrawal is not possible for holiday properties or second homes – as is the case for the purchase of a mobile home, a boat or a business property.
Sven Pfammatter, division manager at the VZ Vermögenszentrum in Zurich, says: “Even a photovoltaic system that produces more electricity than just for its own needs cannot be financed with a WEF advance withdrawal. This also applies to investments in the garden. The criteria are simply summarized: personal use, for living space, no luxury buildings.”
3. What are the conditions for the WEF advance withdrawal?
In order to finance the purchase of a home, you can withdraw part or all of your pension savings. You can withdraw your entire savings capital from the pension fund up to the age of 50. From the age of 50, a maximum of half of the pension capital saved or the amount that was available at the age of 50, if this is higher. A WEF withdrawal is usually only possible up to three years before the date of retirement. The maximum withdrawal amount is usually stated on the pension fund statement that is sent annually. When it comes to pension fund money, at least 20,000 francs must be withdrawn – for a single, owner-occupied property.
This minimum amount does not apply to the purchase of share certificates for housing cooperatives and similar investments or to claims against vested benefits institutions. There is no minimum amount for Pillar 3a. A WEF advance withdrawal can only be claimed every five years.
4. Should you fShould you first withdraw PF money or Pillar 3a credit to purchase a home?
Florian Schubiger from Kredite.ch in Zurich answers this question: “For most people, they should always use pillar 3a first and only then the pension fund. The reason: This means you don’t build purchases into the second pillar for the purpose of tax optimization. Many people are not aware that you first have to pay the entire WEF withdrawal back into the pension fund in order to be able to make deductible purchases into the second pillar again.
5. In which cases does a withdrawal make more sense than pledging the pension fund assets?
Instead of withdrawing the pension fund money, you can also pledge it. The advantage: The retirement savings saved remain in the pension fund and the pension and insurance benefits remain the same. The pledged retirement assets serve as security for the bank in the event of the mortgage customer’s insolvency. The disadvantage: Home buyers have less equity and need a larger mortgage. And that costs money. Pfammatter says about the withdrawal: “A withdrawal is mandatory if this is the only way the bank can afford a mortgage.” Schubiger says: “In most cases, pledging makes more sense than withdrawing.”
6. What are the tax consequences of a WEF advance withdrawal?
A WEF withdrawal is taxed in exactly the same way as a capital payment from the pension fund at the time of retirement. Anyone who withdraws money from tied pension plans must pay a capital withdrawal tax that varies from canton to canton. The cantonal tax rates are generally between three and a good ten percent – depending on how much money is withdrawn. Anyone who receives the money in several tranches usually pays less due to the progressive tax rate in some cantons. The tax amount is calculated separately from other income.
7. What are the consequences of a WEF advance withdrawal for my retirement savings?
An early withdrawal of retirement capital reduces future interest credits. The old age pension is therefore lower. This is not necessarily a disadvantage, as living in your own home also reduces housing costs until the end of your life. And the increase in value of the property is often higher than the interest on the retirement savings in the pension fund. Good to know: After a withdrawal from the pension fund, tax-effective pension fund purchases are only permitted again once the WEF advance withdrawal has been repaid in full.
An early withdrawal of pension fund money can be disadvantageous in the event of later disability. Because there are pension funds that calculate disability pensions not from the insured salary, but from the retirement savings. And if it falls, the pension will be smaller. You can check the pension fund regulations to see whether this is the case. If the disability pension falls, you should consider taking out loss of earnings insurance in the event of disability in the event of a lump sum withdrawal. Such risk insurance is relatively inexpensive.
8. Do you ever have to repay a WEF advance withdrawal?
Yes, if the property financed with WEF capital is sold again, the capital must be paid back to the pension fund. The exception: You buy a new property within a certain period of time as part of the home ownership promotion. However, the transfer of home ownership to a beneficiary under pension law – such as a minor child, a spouse or an ex-spouse – does not trigger any repayment obligation. The amount withdrawn must be repaid not only if it is sold to a non-beneficiary person, but also if rights to this residential property are granted that are economically equivalent to a sale – such as when establishing a usufruct.
9. Can you voluntarily repay WEF advance withdrawals?
Yes, the voluntary repayment of the WEF advance withdrawal is possible as long as the insured person has not yet acquired a statutory entitlement to retirement benefits or has not yet made a declaration of intent to retire early. The minimum amount for repayment is 10,000 francs. Pfammatter says: “It makes sense if someone wants a higher pension in old age. In addition, repayments can make sense if you want to use the pension fund again for tax-deferred purchases.” If a repayment leads to liquidity problems, it is better to avoid it. Voluntary purchases generally improve benefits in old age and, depending on the pension fund, also benefits in the event of disability or death. Voluntary purchases are particularly recommended from the age of 50.
2024-02-08 05:45:53
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