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Payments into pillar 3a accounts are tax-deductible. However, your options for withdrawing the 3a pension capital are limited. A distinction is made between standard and advance withdrawals.
The retirement savings accumulated in a pillar 3a account may be withdrawn no earlier than five years before the statutory retirement age (64 years for women, 65 years for men). The pension capital is payable when the beneficiary reaches this age. It is still possible to defer drawing your pension assets if you continue to work after this age. You must withdraw the pension capital when you stop working, but this must be within 5 years (i.e. by the age of 69 or 70 respectively).
Advance withdrawal is when you withdraw your pension savings prior to retirement. With standard withdrawal, the accumulated retirement savings may be withdrawn no earlier than five years before statutory retirement age (64 years for women, 65 years for men).
It is possible to withdraw savings early in the following cases:
While banks do not usually charge any fees for an advance withdrawal, early termination of a pension or life insurance policy from an insurance company is often very costly.
To avoid paying too much tax when you withdraw the capital, it is advisable to spread your 3a assets across multiple accounts to enable staggered withdrawals. The balance of each pillar 3a account must be withdrawn in its entirety. Because these withdrawals are subject to a progressive tax system, it is worth having multiple accounts and closing them in different tax years to avoid paying excessive tax.
You can finance a home that you will live in using money from pillar 3a. The following options are available:
Advance withdrawal: you can withdraw pillar 3 assets ahead of time to purchase or build a home you will live in (house, condominium, share in a housing cooperative). There is no minimum amount. Such early withdrawals are possible every five years. The benefit of this option is that you pay less interest on your mortgage – your larger deposit means a smaller mortgage amount.
Pledging: you can also pledge pension assets to your mortgage lender. In this case, the pension capital is not paid out but serves simply as collateral for the lender. As a result, some lenders may offer you a larger mortgage amount or lower mortgage rate. The advantage of this option is that the money remains in your account and can accumulate tax-free.
You can also use capital from your third pillar to amortize a mortgage. A distinction is made between direct and indirect amortization:
Direct amortization: with direct amortization, the borrower withdraws the money from the third pillar and pays it straight to the lender. This reduces the mortgage amount and thus the monthly payments. This also means that the tax-deductible mortgage interest is lower. Withdrawals are possible every five years.
Indirect amortization: here, the borrower transfers no money to the lender but pays regularly into the (pledged) pillar 3a account. The advantage of this option is that the money remains in the account and can accumulate tax-free.
You are allowed to use pillar 3a pension assets for certain types of renovations and conversions if you live in the property in question. However, there are no clear guidelines on this. You should therefore discuss withdrawals for this purpose with your pension provider in advance.Independent pension advice
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