Advance withdrawal of pillar 3a: renovations etc.

The earliest you can withdraw your pillar 3a savings is five years before you reach the state retirement age – but there are exceptions. Here’s an overview.

Lara Surber Foto
Lara Surber

15.01.2023

A couple in their 50s sit on a sofa thinking about withdrawing their pillar 3a savings.

iStock / RyanJLane

1.Pillar 3a withdrawal options
2.Standard withdrawal of pillar 3a
3.Early withdrawal of pillar 3a
4.When is advance withdrawal of pillar 3a savings possible?
5.Drawing down your pillar 3a
6.Early pillar 3a release to buy a home
7.FAQs

1. Pillar 3a withdrawal options

Payments into pillar 3a accounts are tax-deductible. However, your options for withdrawing the 3a pension cash value are limited. A distinction is made between standard and advance withdrawals. You can find more information about pillar 3a payouts here.

2. Standard withdrawal of pillar 3a

The savings accumulated in a pillar 3a account may be withdrawn no earlier than five years before the state retirement age (64 years for women, 65 years for men). The savings are payable when the beneficiary reaches this age. It is still possible to receive a payout later if you continue to work after this age. You must withdraw your savings at the latest five years from when you stop working (by the time you are 69 or 70 respectively).

3. Early withdrawal of pillar 3a

Early withdrawal is when you take out your pension savings before you reach the state retirement age. Advance withdrawals are only possible in some specific cases.

4. When is advance withdrawal of pillar 3a savings possible?

It is possible to withdraw savings early in the following cases:

In the case of banks, advance withdrawal is generally possible at no extra cost. However, ending a pension policy or life insurance policy from an insurance company ahead of time is usually very costly.

5. Drawing down your pillar 3a

The balance of each pillar 3a account must be withdrawn in its entirety.To avoid paying too much tax when you withdraw the capital, it is advisable to spread your 3a assets across multiple accounts and phase your withdrawals over time. 

6. Early pillar 3a release to buy a home

You can use money from pillar 3a to finance a home that you will live in. You have the following options:

1. Finance a home you will live in through advance withdrawal or pledging security

Early 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. You may make withdrawals 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.

Collateralization: you can also use your pension assets as collateral in order to secure a mortgage. This means your pension savings are not paid out to you but serve as security for the lender. As a result, some lenders may offer you a larger mortgage loan or lower mortgage rate. The advantage of this option is that the money remains in your account and can accumulate tax-free.

2. Withdraw pillar 3a savings to repay an existing mortgage

You can also use your pillar 3 money to amortize a mortgage. A distinction is made between direct and indirect amortization:

Direct amortization means the borrower withdraws pillar 3 money and pays it straight to the lender. This lowers the principal amount and thus reduces your monthly outgoings in the form of interest payments. Lower interest payments mean less to deduct tax on, however. You can withdraw savings once every five years.

Indirect amortization means the borrower makes regular payments into the (collateralized) pillar 3a account instead of paying the lender directly. The advantage of this option is that the money remains in the account and can accumulate tax-free.

3. Withdraw pillar 3a savings for renovations and conversions

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 guidance

FAQs

Access to pension accounts is restricted. You are allowed to withdraw pillar 3a savings no earlier than five years before statutory retirement age. If you continue to work beyond your statutory retirement age, you can defer withdrawal until up to five years after statutory retirement age.

You can also withdraw from your pension account if you switch from one type of self-employed activity to another (change of industry). Once again, you must withdraw the amount within one year of taking up the new activity.

If you draw a full disability pension (DI – IV/AI), you are entitled to withdraw the balance of the pension account if the disability risk is not insured under supplemental insurance. You cannot draw a pension from this account. You are eligible for a full disability pension if your degree of disability is 70% or more. The disability insurance process must be completed before you can request a pillar 3a withdrawal.

You may make another withdrawal at a later time for the purpose of investing in your business. The investment must be used for stock and equipment and not to cover ongoing operating costs.

If you have a shortfall in occupational pension contributions, you can use third pillar pension savings to top them up with no tax implications. However, one condition is that any advance withdrawals to finance a property must have been paid back. Until you have paid back any withdrawn funds, you are not permitted to make tax-privileged payments into the second pillar.

You can request a withdrawal from the pension account under the following conditions:

  • The business constitutes your primary occupation so you are no longer obliged to pay into an occupational pension.

  • The amount is withdrawn within one year of you starting your business.

  • You have registered with the OASI (AHV/AVS) compensation office as self-employed.

  • Your business is a sole proprietorship (partner in a limited or general partnership is also possible). You cannot withdraw from your pension account if the business is a public limited company (AG/SA) or a limited liability company (GmbH/SARL).

The law permits you to access your pension account earlier in the following circumstances:

  • To purchase additional second-pillar pension benefits

  • If you leave Switzerland permanently

  • To start a business – and afterwards, if you change industry or want to invest in your business

  • To purchase or renovate your own home

  • If you draw a disability pension under Swiss disability insurance (DI – IV/AI)

  • To repay a mortgage

If you are leaving Switzerland permanently, you are allowed to withdraw your pension savings. However, this is only possible if you can prove that you already have a permanent address abroad. Withdrawing funds for a round-the-world trip, for instance, is not permitted. Upon withdrawal, withholding tax is deducted directly from the amount paid out.

This article was first published on 07.01.2021

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