Pillar 2 withdrawal

Investing / Funding & Currency conversions
1

Context: house purchase and pillar 2 withdrawal

I understand that you can’t withdraw pillar 2 AVC (additional voluntary contribution) for 3 years since the buy-in.

However, I understood that you could withdraw the non-AVC part.

Is this correct?

A friend is telling me that the AVC buy in locks the whole pillar 2 (AVC and non AVC) for 3 years.

Thank you

2

I don’t know the answer to your question, but I guess one option to “use” the money before 3 years have passed is to pledge them for up to 10% of the value and thus taking a mortgage of up to 90%.

Also, IIRC, in Zurich you can buy in 12K/year without “locks” being set in place.

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3

Yes thank you. One option is indeed pledging but this will increase the mortgage amount.

I will speak with the fund manager but trying to figure if early withdrawal of the non-AVC part is an option or not.

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4

If it’s not possible, you could also split the (indeed larger) mortgage such that a first tranche would expire exactly when the 3 years after the buy in have passed, then you can free the money and pay back the tranche.

5

This statement is correct.

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6

I made AVCs into my pension fund in 2021. I received the statement from my pension fund which shows “Max amount for home purchase purposes” and interestingly the value is the total pension transfer value reduced by the AVCs

7

Hmmm. Art. 79b Abs. 3 BVG isn’t 100% clear on that. @San_Francisco ?

8

I was under the impression that you can still withdraw before the 3 years are up, but have to pay back the saved taxes.

Can someone cite the 12k/yr no lock statement? Is this tax residence specific?

9

The 2nd pillar is seen as a whole (even if you have several plans) for a person.

If cashing out the money within 3 years (property purchase or not), the tax authorities will most likely reopen the past tax bill and cancel the deduction.

Art. 79b al. 3 LPP is not crystal clear but includes the withdrawal for property purchase within 3 years.

However, it’s limited to the person insured. If married, an alternative could be to use more money from your wife second pilar (unless she recently made a repurchase too).

Running some simulations will help you in choosing the best option.

Extra info
https://www.taxinfo.sv.fin.be.ch/taxinfo/display/taxinfofr/Prévoyance+professionnelle (FR+DE)

From a foundation:

DE - https://www.ciepp.ch/documents/31425/62480/Erläuterung+zur+Wohneigentumsförderung+mit+Mitteln+der+beruflichen+Vorsorge+Zum+1.+Januar+2021.pdf/25e87a4f-0f7b-b740-efe9-a6b74bdfcc05?t=1609164394112

FR - https://www.ciepp.ch/documents/31425/62480/Note+explicative+relative+à+l’encouragement+à+la+propriété+du+logement+(EPL)+au+moyen+de+la+prévoyance+professionnelle+au+1er+janvier+2021.pdf/3ec94b3b-bfb6-9dae-ef3b-8fe7b491d751?t=1609164344919

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10

Thank you Guillaume.

In my case both myself and my wife made AVC in Nov/Def 2021 and I was planing / hoping to withdraw the non-AVC part in Jan 2022.

We have not even claimed any tax deduction give the short time between buy-in and need of withdrawal.

I will ask my accountant but do you think we can withdraw the non-AVC pillar 2 part and during the tax declaration mentioning to tax man that we made the AVC but we will claim no tax benefit? Thx

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11

“Nur der dem Einkauf entsprechende Betrag inklusive Zinsen (…) kann während 3 Jahren nicht in Kapitalform zurückgezogen werden. Demzufolge ist das ganze, vor dem Einkauf erworbene Vorsorgeguthaben durch diese Bestimmung nicht betroffen.”

Mitteilungen über die Berufliche Vorsorge Nr. 88

Though yes, as has already been said, one should clarify the consequences tax wise, as the tax authority may be inclined to “revoke” the tax deductions.

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12

Thank you all.

I understand speaking with an accountant that there 2 options here

  1. pledge the pillar 2 as Giff mentioned. Downside you pay more interests as loan value goes up
  2. you could still withdraw pillar 2 even within the 3 years period but you lose the tax benefit of the AVC.

Using a pillar 2 is a way to raise capital for property purchase. However, it’s not tax efficient as you need to pay back all the pillar 2 that you withdrew before starting to get a tax benefit again

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13

yes, you could increase the loan-to-value ration above the 80% cap with this. But you need to be able to afford the increased “Tragbarkeits” criteria according to the lenders calculation (i.e. 5% interest, 1% maintenance, plus armortisation cost). That’s why pledging the 2nd pillar is not always a smart idea and only available if you have sufficient income but lack the capital (i.e. not often in todays market).

For me the pledging vs. withdrawal discussion has both pros and cons and there is probably not one correct answer to it. I would love someone with more expertise to explain the different aspects on taxation and opportunity costs, and give some guidance on this.

14

Pledging

  • You save taxes by not withdrawing it.
  • Higher interest costs are offset by pension fund yield.
  • You can deduct more interest costs from your income and thus save taxes.
  • Nothing is mentioned in the Grundbuch.
  • Amortization will be higher as your LTV is higher than 80%. So more freely available money gets trapped into the property. You might favor trapping your 2nd pillar and invest the rest in stocks.
  • Higher income needed to get the loan. You’ll need up to 21% (if LTV is 90%) of the buying price as annual gross salary instead of 17.5% to get to 33.3% Tragbarkeit.
  • As pledging your 2nd pillar is basically useless to the bank (especially with wife and kids), most banks will require an additional life insurance wich covers the pledged amount in case you die.
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15

Did you measure the impact (tax and cash flow) of these extra interest for the pledge option?

250 KCHF @ 1.3 % would add CHF 3’250 of interest per year.

While the tax bill for a withdrawal of 250 KCHF in Lausanne (example) for a married couple will amount to CHF 23’200. Money you can claim back (without interest) once you have reimbursed your pension fund.

By pledging, you can continue your buybacks. Last but not least, use your 3A to amortize the debt every 5 years.

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16

We can add to your list that you keep full disability insurance coverage with pledging.

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17

Usually linked to insured salary and not capital (at least with good pension funds).

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