My 3rd pillar is pledged and locked

Banks, Insurances & Third Pillar
1

A couple of years ago, we bought a small house and my 3rd pillar account was pledged and being used to finance the amortization. I’ve just realized recently, when I wanted to move my fund to other 3rd providers, the pledgee which is my house bank was not able to release the fund. I wasn’t super informed back then and made that decision.

The problem that I’m facing today is I have to keep paying into the 3rd pillar account at my house bank and let them earn the fees. I can’t just not pay it because I’m contractually tied up to fulfill the obligations.

If I put more funds into Finpension or VIAC, is this still doable? I know I can only deduct around 6800CHF from taxes. Is this a good move or would you rather invest directly in ETFs without this special vehicle? Any other suggestions? Thank you!

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2

You can’t contribute more than 6883 per year, tax office will ask for a refund to your private account.

Which bank is it?

3

Pay a minimum that you are obliged for the amortization and the rest (up to the allowed maximum) to finpension. There is no other way.

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4

I have to pay the max to the pledged 3rd pillar account. That’s a done deal.

However, can I still invest using finpension or viac account? Is it allowed or will they check if I have another 3rd pillar account?

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5

I know. But what happens exactly, if I contribute twice the 6883 amount to 2 different 3rd pillar accounts? One is tax deductible and the other one is then what?

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7

No. At best, your transactions will be just reversed, but you also risk charges on tax evasion.

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8

I see. I will just invest in ETF through a normal brokerage account, the capital gain there is not taxable anyway, unless it pays out dividends.

A second 3rd pillar doesn’t bring any benefits anyway.

However, if I do a second mortgage in future, I’ll probably get my 3rd pillar pledged again. Why? because I have the funds to invest to make more than paying them upfront.

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10

? I don’t follow. I didn’t say accumulating funds are tax free. I said capital gain is tax free.

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11

This. Indirect amortization is better even with shitty 3a funds. With direct amortization you would just save 1% on interest (before taxes). Even the worst 3a funds will do better than that. Use the rest of your savings for IBKR.

That’s why a mortgage with Viac seems so interesting :smiley:

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12

Exactly! The only thing I regret is that I didn’t do with VIAC :smiley:
Back then VIAC didn’t even exist. After the 1st mortgage term is done, I’ll sure go with VIAC or something similar.

13

That’s only partially true, yes capital gains are not taxed, but accumulating funds are taxed even though they don’t pay out dividends. The tax office uses the accumulated amount as a dividend.

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Yes, I totally understand that part. I would argue that investing in an index fund with most growth stocks makes the dividend tax negligible.

Take spy as an example, with a portfolio of 500k, the annual yield is 1.36% which is roughly equal to $7000. You will have to pay income tax on that amount. It’s almost non-existent. I pay probably 15%-20% on that, so it’s 700-1400. I don’t care about that.

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15

When is your mortgage (or more specifically the re-negotiation) due? You can ask the bank to reevaluate the property and if it increased in value you might no longer need to pledge the 3a in the first place.
I recently did that and now happily moved my mortgage to another bank and the uninvested 3a to finpension.

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16

Interesting to know! The mortgage is due in roughly 6 years as only 4 years have past.
My property is located in one of the most demanded places in Switzerland. The price has sure increased over the past 4 years. But I doubt that it increased so much that it can offset the amortization difference.

The bank told me that they wanted to re-evaluate and give me another deal. Of course, they want to do that to get more money from me. I will just pay them the amortization all at once and move my 3rd pillar fund to finpension or VIAC.

17

Easily.

If you bought it with 20% own assets, the price only needs to increase by 20% to reduce the LTV down to 66.6%. Might have already happened because prices went up 10% in the last 12 months alone.

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18

Good thought!! I need to talk to my advisor!

19

Or/and fire him/her for not bringing it up themselves.

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20

Haha, I blame myself for not being knowledgeable enough in this area. It was our first new home, got too excited back then.

Well, the advisor told me that I am tied to the contract and there is no other way around it. Is that really so or were they lying to me? Hmm, I need to study the contract once again.

21

After reading the contract about the pledge conditions, I didn’t become smarter.
Mostly, the bank has the right to exercise my 3rd pillar fund anytime, if something goes wrong. However, there is a line saying that I have to inform the bank about the change of my 3rd pillar account.

Does this mean that my 3rd pillar does NOT necessarily have to be with the bank and still need to be pledged to the bank? If this is true, I can have my 3rd pillar at finpension and have it pledged to my house bank. But why didn’t my advisor tell me that? I was simply told that I can NOT change my 3rd pillar account to another provider as it is already contractually bound to the mortgage. This doesn’t make any sense to me!

Is my advisor trying to confuse me and bs me here? I doubt they dare to do that. It’s a big bank. But what was your experience?

22

It’s pretty simple: Ask your advisor to send you the exact paragraphs where it says that you cannot change your 3rd pillar. They should have to prove to you that you can’t do it, not the other way round.

If they can’t do that, contact another 3a provider to see if you can pledge there.

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