Cashing out 2nd pillar or 3rd pillar to pay back mortgage

Dear forum,
I’m interested in getting your opinion: I plan on paying back part of our mortgage on our house. I thought I would cash out my pillar 3a for this. But now it struck me that I might be better off cashing out part of my 2nd pillar (bvg) instead. Why? Because:

  • The 2nd pillar pays a measily interest of 1.25%.
  • The 3a is invested relatively efficiently at VIAC (100% stocks).
  • I am pretty risk tolerant and plan long term.

Under these circumstances, wouldn’t it make more sense to cash out the 2nd pillar? What are the pros and cons of the two options?

Some info from Finpension

3a or 2a

Additional info

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I’d prefer to use 2nd pillar as you’ll never get the opportunity to re-fill the 3a.

Though assuming your mortgage rate is around the same as 2nd pillar, it might be advantageous not to pay it off as you have wealth tax savings and avoid the exit tax - unless you are close to retirement and the pay-off is part of a plan to spread out 2nd pillar withdrawal to minimize withdrawal taxes.

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Yes, but check conditions of insurances attached to your 2nd pillar and arrange additional insurances if you (not a guy selling insurances) think it is necessary.

Does your 2nd pillar only pay 1.25%?

That’s the current legal minimum - but most pension funds pay more than that.

Unfortunately, that’s indeed the case. We’re with AXA. What do pension funds typically pay?

I didn’t know there was a legal minimum. What does it apply to? I see this advert boasting about 0.4% interest and calling it competitive:

Save for retirement – vested benefits account – 2nd pillar | Credit Suisse Switzerland.

Vested benefits accounts receive and hold your personal old age savings from your previous pension fund. But they aren’t pension fund schemes themselves. Which means they’re not subject to the same minimum interest rates - but on the other hand can (as has been discussed on the forum) allow for more aggressive investment strategies.

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See here for examples: Schweizer Pensionskassen Rating -

I think I read somewhere that the minimum applies only to the mandatory part.

Yes (and, again, only in pension funds).

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Also, I wasn’t sure if the minimum had to apply annually or could be flexed down (e.g. if there is some kind of deficit/shortfall) and they only need to meet the minimum on some longer term averaged basis.

But when you do refill your 2nd pillar you won’t get tax breaks until you have paid back the money you withdrew, at least AFAIK.

Also, from what I understand, if you use 3rd pillar money and then move out and decide to rent out the place, nobody will complain, while you can’t do that with 2nd pillar. Or am I wrong?

I am with Axa and they invest part of the money in stocks, returning more than 1.25%.

No income tax breaks (since you already got them - otherwise, you can just withdraw and re-fill muliple times for infinite tax deductions!) but you still get shielded from wealth tax and dividend income.

True but if you had to do it, you could at that point liquidate 3a to pay back pillar 2.

Minimum applies, even if their investments return a deficit.

There is some leeway in exceptional cases of undercapitalisation/underfunding. This is not a routine thing or common occurrence.

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Actually I was wondering how does that work in following cases:

a) I stop working aka FIRE and then will rent the flat out. Who would want the money back given that when I stop working 2a will be payed on a Freizügigkeitskonto?
b) I change my employer and hence the Pensionskasse. How would the new PK know that money was used for a flat, and if I rent it out will the new PK come a ask to return the money?

What’s the interest rate, marginal tax rate, the reason to reduce the mortgage? Do you plan buy-ins to pillar 2 in the future? I would this quite relevant.

If you eventually want to reduce the mortgage, you might also consider to not withdraw now, but actually buy in, first.

Otherwise, it comes down to asset allocation and the unknown variables above.

No idea about a). For b), I think the new 2d pillar provider would ask you to declare whether you did withdraw money or not (or maybe the two PK maybe communicate this info when you change employer).

I expect the PK will hold a lien on your property until the amounts are repaid.