Using pension funds to buy property or pay off your mortgage 5 year per institution

Finance, Taxes, Banking, Insurance and Retirement
1

It’s commonly known that you can use pension funds to buy property e.g. as part of a deposit or to pay off a mortgage. This is subject to various restrictions.

One restriction is that you can make such a withdrawal only once every 5 years. However, I’ve seen on the finpension website that the 5 year limit is per pension institution (whatever that means).

EDIT example for clarity:

I’m trying to understand what the rules are for pillar 2 and pillar 3a. Let’s say in the example case where you have 2 of each and want to make 4 payments to pay off the mortgage in 4 consecutive years to understand:

  1. If it is allowed; and
  2. If there is special tax treatment
2

Good question. It appears that withdrawals from Pillar 2 are regulated in the WEFV (Wohneigentumsförderverordnung) and withdrawals from 3a in BVV3 Art. 3. Both say that you can make a withdrawal every five years.

As far as I can see, these are entirely separate laws and therefore your example should work.

3

Some laws are here:

But I saw no reference to the 5 year rule applying per institution.

The interesting thing is my Pillar 2 and Pillar 1e are in different pension funds and so if there is the possibility to withdraw every 5 years for each, then that’s a lot more flexibility.

4

It clearly says so in the regulations I mentioned. But feel free to keep looking elsewhere.

5

Every 5 years, but I don’t see they say every 5 years per institution e.g. where you have 2 different Pillar 2 PFs.

6

You posted the answer with your link. 30a BVG defines each pension institution as an individual “Vorsorgeeinrichtung”. The rules for withdrawal then apply to each single Vorsorgeinrichtung individually.

1 Like
7

At least for 3a, it is not per account:

Nach Art. 3 Abs. 3 der Verordnung über die steuerliche Abzugsberechtigung für Beiträge an anerkannte Vorsorgeformen (BVV 3) können Leistungen gebundener Vorsorgeformen vor Anspruch auf die Altersleistungen ausgerichtet werden, wenn diese zum Erwerb bzw. zur Erstellung von Wohneigentum zum Eigenbedarf, für Beteiligungen am Wohneigentum zum Eigenbedarf oder zur Rückzahlung von Hypothekardarlehen verwendet werden. Eine solche Ausrichtung kann alle fünf Jahre geltend gemacht werden.

Ein Vorbezug für Wohneigentumsförderung kann längstens bis fünf Jahre vor Erreichen des Referenzalters der AHV geltend gemacht werden. Die Fünfjahresfrist bezieht sich auf die Gesamtheit aller Vorsorgeverhältnisse, und nicht auf ein einzelnes Vorsorgekonto (RGE vom 18.11.2010, 3-RV.2010.38).

Google translate:

According to Article 3, Paragraph 3 of the Ordinance on the Tax Deductibility of Contributions to Recognized Pension Plans (BVV 3), benefits from restricted pension plans can be paid out before entitlement to retirement benefits if they are used to purchase or build residential property for personal use, to acquire an equity interest in residential property for personal use, or to repay mortgages. Such a payment can be claimed every five years.

An early withdrawal for home ownership can be claimed up to a maximum of five years before reaching the AHV reference age. The five-year period applies to all pension arrangements in their entirety, not to an individual pension account (RGE of November 18, 2010, 3-RV.2010.38).

Extract of tax case re pillar 3a:

58 Kapitalzahlungen aus gebundener Vorsorge 3a (§ 45 Abs. 1 lit. b StG).
Kapitalzahlungen aus gebundener Vorsorge 3a zu Wohneigentumsför-
derungszwecken können nur alle fünf Jahre geltend gemacht werden
(Art. 3 Abs. 3 BVV 3 i.V.m. Art. 3 Abs. 4 BVV 3). Zwei oder mehrere Ka-
pitalzahlungen innerhalb von fünf Jahren werden zur Satzbestimmung
zusammengerechnet.

Aus dem Entscheid des Steuerrekursgerichtes vom 18. November 2010 in
Sachen K. + D.M. (3-RV.2010.38)

Aus den Erwägungen

3.1.
3.1.1.
Es ist unbestritten, dass die beiden Kapitalzahlungen der F. Vor-
sorgestiftung vom 30. Dezember 2008 und 27. Januar 2009 von je
CHF 25’000.00 unter dem Titel der Wohneigentumsförderung er-
folgten und von den Rekurrenten zur Amortisation ihrer Hypothek
verwendet wurden. Ebenso ist unbestritten, dass es sich bei der F.
Vorsorgestiftung um eine der beruflichen Vorsorge dienende, aner-
kannte Vorsorgeform (gebundene Vorsorge; Säule 3a) im Sinne von
Art. 82 BVG sowie von Art. 1 der Verordnung über die steuerliche
Abzugsberechtigung für Beiträge an anerkannte Vorsorgeformen
(BVV 3) vom 13. November 1985 handelt.
3.1.2.
Zu prüfen, ist ob der Bezug von je CHF 25’000.00 aus der ge-
bundenen Vorsorge (Säule 3a) zwecks Wohneigentumsförderung in
zwei aufeinander folgenden Jahren zulässig ist.

Google translate:

58 Capital payments from restricted pension plans 3a (Section 45 (1) (b) of the Tax Act).
Capital payments from restricted pension plans 3a for the purpose of promoting home ownership can only be claimed every five years (Article 3 (3) of the BVV 3 in conjunction with Article 3 (4) of the BVV 3). Two or more capital payments within five years are added together to determine the rate.

From the decision of the Tax Appeals Court of November 18, 2010, in the case of K. + D.M. (3-RV.2010.38)

From the considerations

3.1.
3.1.1.
It is undisputed that the two capital payments of CHF 25,000.00 each made by the F. Pension Fund on December 30, 2008, and January 27, 2009, were made under the heading of home ownership promotion and were used by the appellants to amortize their mortgage. It is also undisputed that the F. Pension Fund is a recognized form of occupational pension provision (tied pension provision; Pillar 3a) within the meaning of Article 82 of the BVG (Local Employment Act) and Article 1 of the Ordinance on Tax Deductibility for Contributions to Recognized Pension Funds (BVV 3) of November 13, 1985.
3.1.2.
It must be examined whether the withdrawal of CHF 25,000.00 from the restricted pension plan (Pillar 3a) for the purpose of promoting home ownership is permissible in two consecutive years.

8

I am tempted to post Castro’s little meme here …

Your first example is about splitting pillars 2 and 3a. I answered. Then you bring up two pillar 2 accounts. I answered. Now you go back to 3a.

And no, BVG of course only deals with “beruflicher Vorsorge” like the name implies. 3a is not regulated there.

9

I’m trying to understand what the rules are for pillar 2 and pillar 3a. Let’s say in the example case where you have 2 of each and want to make 4 payments to pay off the mortgage in 4 consecutive years to understand:

  1. If it is allowed; and
  2. If there is special tax treatment

At least for 3a, I’m not sure if it is allowed, but it seems if you make 2 payments within the 5 year period, then there is special tax treatment.

Now I’m trying to figure out what the rules are for pillar 2.

10

You are not allowed to have two pillars 2 generally.
You have one while you work, and can open one at a bank when unemployed to transfer the total.

You don’t have “control” of pillar 2 at a transaction level, each Pillar 2 sends the whole balance to the next.

11

A common situation where you have two pillar 2 accounts is where your employer provides a 1e scheme.

12

Anyway. I talked to my pension provider who confirmed for Pillar 2 they operate with independent 5 year time limits and so confirm the Finpension position.