(another) Pillar 2 optimization question

Banks, Insurances & Third Pillar
1

Tried to search the forum but couldn’t find the answer.

My pension fund allows withdrawal every 5 years to buy a house or reduce mortgage till age 50. Post 50,I can withdraw 50% of the pot

Let’s I say I withdraw (not pledge) pillar 2 for buying a house in 2026. I can not make voluntary buy-in as I don’t want to payback. Then every 5 years I withdraw the amount accumulated (through normal contributions, around 25k per year) to reduce mortgage. I do this till mortgage reduces to 65%. This saves “free capital” being used for principal payments. At the retirement age, I would anyways withdraw pillar 2 than use it as annuity / pension.

For a marginal tax rate of 30% - this makes sense right? (even assuming pillar 2 returns are 2% p.a. and free capital is on VT ETF at 5% p.a.). Also staggers the pillar 2 withdrawal tax in a way

2

Yes, depending on circumstances.

3

What is your mortgage interest, then? Why would you liquidate an investment growing at 2% compounded interest to pay back a debt with 1% simple interest?

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4

It wouldn’t be useful anyway, everybody’s situation is different.

5

Hmm, I think I start to guess what you mean. Have you looked at mortgages with indirect amortization where the amortization amount is paid to 3a and invested? See e.g.

6

Motivation is to avoid using free capital for paying principal amount which can be put in ETF instead…so pillar 2 return vs ETF return ..at least in my head

7

Yes…for pillar indirect amortization…atleast able to get ETF type returns but not able to get those through standard pillar 2

8

Not sure this is even relevant. Your income does not change either way, so income tax stays the same.

Makes sense to me.
One thought, the closer you come to retirement, the less sense it makes to withdraw early with to pay back the principal. Keep in mind that you would be able to do a buy-in to your 2nd pillar max. three years before retirement. This will reduce your income tax. At retirement you can still decide if you want to partially withdraw some pension fund money and have the rest as annuity.

9

But you don’t have to pay it back if you do indirect amortization. If the property appreciates well, maybe you don’t have to repay anything ever.

10

I understand you want to amortize the lowest amount possible, and do so via p2 early withdrawals? Possibly on top on what you withdraw as part your initial equity.

Your marginal tax is indeed not that important then.

If I got the question right, because they have to, at least from e.g. 80% down to 65%.

Question is whether a bank will accept it. Indirect via 3a (up to the limit) is common, but the bank regulations likely consider it differently from using regular p2 contributions every 5 years.
I assumed the required amortization is usually at least annual, whether direct or indirect.

If they don’t go for it, your best bet would be indirect via 3a for equity-like returns.

If you want to be able to amortize beyond 65%, I’d do the opposite: Not withdraw p2, but buy-in voluntarily, at least for a few years.

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