Unlocking Homeownership: The Essential Guide to Pledging Your Pension Funds

Unlocking Homeownership: The Essential Guide to Pledging Your Pension Funds                                                                         Basel, 21.03.2024

Pledging pension assets offers an alternative to early withdrawals for those seeking to finance a home in Switzerland. When pledging, these assets are considered equity, enabling banks to finance up to 90% of the home’s value compared to the usual 80%. This method avoids the immediate tax liabilities associated with early withdrawals and maintains the potential for tax-optimized withdrawals later. It allows continued contributions to pension funds and does not affect the risk coverage for disability or death. Processing fees for pledges are generally lower than for withdrawals. However, a higher mortgage means more interest payments, which could negate some financial benefits.

The decision between pledging and withdrawing depends on several factors, including the performance of pension fund investments versus mortgage interest rates. If pension investments yield higher returns than the mortgage costs, pledging could be financially advantageous. Nonetheless, banks have significant leeway in determining affordability, which may not always favor the borrower despite the potential for improved conditions through pledging.

To pledge pension assets towards homeownership in Switzerland, the following rules apply:

• Property Type and Use
  • Pledging is permitted solely for mortgages on owner-occupied residential properties. This does not extend to second homes or investment properties.

• Pledging Deadline
  • Pension Fund assets can typically be pledged up until three years before the retirement age. This timeline also applies to pillar 3a assets.

• Age Considerations for Pledging
  • From the age of 50 onwards, individuals may pledge up to half of their current retirement assets or the amount available at age 50, whichever is greater. This is to ensure that pension savings remain protected as retirement approaches.

• Special Conditions Post 50
  • For those looking to make an advance withdrawal from their pension fund for homeownership after age 50, there are specific limits to how much can be pledged, designed to safeguard retirement savings.

Ready to take the next step towards homeownership? If you have any questions or need guidance, we’re here for you. Contact us today to unlock the door to your dream home!