There’s a non zero chance increasing a mortgage shortly before a withdrawal would be tax evasion, esp. doing it repeatedly (and those things would be very much visible to tax office since you declare your mortgage).
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I don’t understand what this means
Let’s say mortgage is 800K. 3a is 200K
You withdraw 100K from 3a. Now mortgage is 700K. 3a is 100K
Now you have taken more mortgage and now mortgage is 800K, 3a is 100K
Why this is a game? This is normal use of 3a
Nope, it’s not in the spirit of the inventor. See for example federal court ruling 2C_325/2014 bzw. 2C_326/2014; summarized here, point 929:
In German: “Bezieht ein Versicherter Leistungen aus der Säule 3a für die Rückzahlung eines Hypothekardarlehens und erhöht er gleichzeitig oder kurz darauf eine andere Hypothek auf dem gleichen Grundstück, liegt kein Vorbezug im Sinne von Art. 3 Abs. 3 lit. c BVV 3 vor. Der vorbezogene Betrag wird ordentlich besteuert”.
Not sure how it’s handled if you increase the mortgage first, though, but likely could end the same.
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I see.
So taking additional mortgage after withdrawing pension money is considered tactics to evade tax.
Exactly, at least when it’s so obviously a scheme. You can currently still withdraw step by step to break tax progression, just not increase the mortgage again the same time.
I’d still give credits to the parties involved in that court case: The smart-ass for having the idea 15 years ago, the local tax office for not having it, and then the rascal again for being committed enough to their scheme to lawyer up and take it to the federal court, over taxation of a 40k withdrawal, no less.
Good times… 
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Yeah you’d need to prove that wasn’t your plan (basically things that don’t make sense from financial point of view and are done purely for tax benefits can be treated as tax evasion).
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Sorry, I’m not following. What does it mean to increase mortgage on the same real estate object? Is it to finance some kind of renovations?
There are mainly two reasons:
- Valuation of property increased, your LTV can increased as well.
- Valuation of property is increasing due to simulation of planned renovation, your LTV can be increased.
They went for an early withdrawal to amortize their mortgage (which is fine). But at the same time, they increased the mortgage by a similar amount. So the tax office, and eventually the court ruled that this isn’t a legit early withdrawal, as they didn’t seem to really want to amortize their mortgage.
I didn’t read this ruling word for word. It does specify that it’s about the same place (which makes sense), and also a second mortgage (which likely doesn’t matter). What matters is as in nabalzbhf’s comment, does the whole transaction make sense? Or is it a scheme to evade taxation?
I guess even after you withdraw early to amortize, you could increase your mortgage again later without tax issues, e.g. if your affordability or the interest rate change, an unexpected renovation comes up, etc. Just any plausible reason not connected to your previous withdrawal.
It probably “added insult to injury”, because one is expected to repay the “second” mortgage.
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I’m still not sure about the first case. If I now get a market price of my current apartment and, say, it ends up 100k higher than what I paid, how do I benefit? Move more from the pillar 2 while not reducing my mortgage? What for? Or can I somehow extract cash that I can invest?
Normally, the plot your property was build on gains in value. Let’s assume, you paid CHF 1 Mio, got a CHF 800k mortgage and you have to amortize CHF 10k per year (because CHF 800k - CHF 650k (65% of purchase price/valuation) / 15 years).
Let’s assume, the valuation of the property increased by CHF 200k (20%) in year 10 of getting a mortgage. So, the ratio of your CHF 800k mortgage to the new valuation is 66.7%.
Most banks allow increasing the mortgage to 80% of the valuation again; mostly, if you are doing some renovations etc.
Most banks allow increasing the mortgage to 65/66/67% (depends on the bank) and you are mostly not obliged to invest it in your property (most insurance companies do not allow this so called “Zweckentfremdung”; e.g. leveraging your property to buy another property, stocks, holidays, a car, etc. etc.).
In my specific case, there is a unleveraged property and I am thinking of getting a mortgage of 25-30% LTV to invest it in the stock market (higher would be hard since I’m not having enough income for higher mortgage; the bank is using a rate of 4.75% p.a. for the affordability calucation, whereas I can get a Saron-margin of 0.35% due to bank-internal policies).
The plan would be, to reduce the mortgage by 2nd and pillar 3a during the lifetime to have free cash available and to benefit from a lower tax burden.
Obviously, I also wanted to check for experiences in this forum, since I am not interested in getting in conflict with the law.
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And here we go: https://archive.md/bl9he
The proposed changes will only destroy the confidence in our 2nd and 3rd pillar system. If there is the slightest chance that they change the rules during the game, who wants to play that game?
The most shitty proposal is to forbid lump sum takeouts in the 2nd pillar completely. Even there is no chance for any of the changes to pass a vote, there are decades ahead for most of the slave-savers of our pillar system. And just the proposal of such actions is disastrous.
The only thing I can recommend is to do what I did: take out all and invest it yourself as fast as possible. Even if that means taking a year holliday in a beautiful place like I did. If you want/have to keep working later at least you had a nice year and some of your money is out of touch for the politicians.
2nd and 3rd pillar are dead, whatever happens now does not change that.
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It has to be changed anyway because of the increased life expectancy. But in the last vote, they grouped together three or four changes. If you only agree with one, you have to vote no.
I can’t believe this will pass, since it essentially forbids access to your own capital.
The expert group first proposed it as a way for the state to save money or generate income to fix the budget deficit. Unfortunately, politicians have not shown enough resistance to abolish this idea. Perhaps it’s because the tax options are still the cheapest and least impactful for average people?
Unfortunately, this is not realistic for most people. Also, this would have to be done at the end of one’s working career, not in the middle or at the beginning, because otherwise there would be new money locked up.
No, a vote on this matter can still happen, right? I can’t imagine it will pass.
Other countries say “Hello, you worked 40 years and died 1 year into retirement? Well, so long and thanks for all the fish, bub” 
Edit: yes, I know it doesn’t happen like that, but I feel calling it “forbidding access to your own capital” is a stretch. The difference is that Pillar 2 is a “funded” type system, while Pillar 1 is a “redistributive” system. One’s family/survivors get the pension so it’s not like the money is lost, it’s just lost to the dead guy 
Does it? Was supposed to be personal savings before they started to support retired folks with 2nd pillar money of working people.
No, it won’t. This time. But in 40-50 years of time, who can say.
It started when politicians went to fly around having a good time and sign contracts with other countries to fuck their citizens. At the beginning you could take out the money even if you only went to Spain, not anymore. Now you have to leave Europe… which is still what I recommend. You can live a year in most countries of the world with what you spend in Switzerland in a month, just do it when you feel it is time to secure your money from the fingers of those politicians.
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Lowering the Umwandlungssatz I give you, but why should there be higher taxes on my own, personal savings (which pillars 2 and 3 are) because of increased life expectancy?
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Thanks for the cached article. What I didn’t know is that the 100k was per year, so if you split 3a contributions like you should it’s a total of 500k which would not be affected by this new tax.
Of course, I would much rather my money would be invested 100% in diversified global index funds because of the 40 years investment horizon but what I get is sub 2% yearly interest to pay the boomers their pensions 
. (off-topic)
I was referencing the statement about changing the rules of the game and answering that we won’t get away with making no changes at all. The tax obviously has no connection to the life expectancy.
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I think the news article is mixing up two different things (Tax increase and Pension reforms)
The federal tax increase on lumpsum withdrawals is not because of life expectancy. It’s because government wants to raise revenues. Now nobody likes mores taxes but in the end government need to balance the budget. So the money need to come from somewhere.
We can argue if pension withdrawal tax should change or not. But what if they would have proposed an increase in income tax or wealth tax? Was the reaction going to be any different?
Following is my summary of the proposal
- 3a withdrawals wouldn’t be negatively unless someone withdrew more than 100K in any given year. Remains no brainier to invest unless marginal tax rates are very low
- 2nd pillar withdrawals would definitely attract higher tax versus previous rates. Voluntary contributions should be carefully reviewed for risk/reward
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The pension reform which was rejected was meant to fix the whole pension system which has become complicated due to higher life expectancy & lower market returns. This is separate topic and will need to be addressed.
The demographics will make it difficult to pass any major reforms because people closer to retirement would outnumber the younger ones in CH.
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