Advance payment to finance home ownership
How can I use my pension to finance buying my own home? How much of my retirement savings can I withdraw for this purpose? What costs and taxes are payable? Do I have to repay the amount withdrawn? What you have to look out for when making an advance payment from your pension with comPlan in order to buy your own home.
So, you’re planning to buy your own home and need extra equity to finance it. Depending on your age, you can withdraw all or part of your retirement savings for the purpose of buying your own home, under the law on the promotion of home ownership. While you access additional equity by doing this, the funds available for your retirement are reduced. The advance withdrawal, as a lump sum payment, must be taxed separately from your other income. The taxes payable must not be paid using equity tied to the pension.
You can make an advance payment for the purpose of buying, building or renovating your own home. You can also use your retirement savings to pay off the mortgage on your home or to acquire shares in a cooperative housing association or similar participations. To be able to do these things, though, you have to be living in the residential property yourself.
The Swiss Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans (BVG) allows you to draw on your retirement savings in order to finance the purchase of residential property for your own use. Before reaching the age of 50, you can withdraw all the capital for this purpose. After then and until 3 years before retirement, you can withdraw no more than the savings you would have been entitled to at the age of 50, or half your present termination benefits (whichever is the greater). You can find the amount that applies to you on your statement of insurance on comPlan Online. We also carry out a calculation to check that the amount withdrawn in advance does not exceed your ownership interest less debt financing. You should also note that the law does not allow you to take out an advance payment of retirement savings more often than once every five years. It follows that any previous advance payment must have been received at least five years ago.
Submit the application form to comPlan, including all relevant documents, early enough for the payment date to be met.
You can apply for an advance payment from your retirement savings using our form on comPlan Online. If you’re married or living in a registered partnership, the consent of your spouse or registered partner is required in writing. This rule still applies if you’re separated. The document must be signed in person and officially certified by a notary, by an official of the municipality in which you live or by the Swiss embassy or consulate in the country in which you live.
Getting an advance payment from your retirement savings is a very complicated business. That's why we charge fees for the processing of your application and for the payment of the advance as well as for the processing of the transfer of the advance payment to a new property. The processing fee is CHF 500 for each advance withdrawal for home ownership (incl. costs for registration in the land register) and CHF 600 for each transfer of existing withdrawal to a new object (incl. costs for registration in the land register). You pay the fee to comPlan at the same time as the application form is submitted. You are liable for any land registry costs due for the deleting of the sales restriction. Once we receive the bill from the Land Registry, we will forward it to you for settlement.
You must also pay tax on the advance payment of your retirement savings. The rule is that you must pay the tax from those of your own funds that are not tied to the pension (except in the case of withholding tax payable by persons resident abroad). The advance payment is taxed separately from the rest of your income and at a reduced rate. The tax burden is dependent on the amount of your advance payment (progressive scale), your place of residence, your civil status and your denomination. If you’re liable to tax abroad, we have to deduct the withholding tax directly from the advance payment and pass it on to the tax authorities. Depending on the country in which you are resident, you may be able to reclaim the withholding taxes there.
Go to your cantonal tax authority and find out from them how much your tax bill will come to in the event of an advance withdrawal.
The advance payment will be entered in the land register when ownership is transferred with what is termed a restriction on disposal. What that means is that, if the property is sold, the amount withdrawn in advance has to be repaid to us or to the pension fund with which you’re insured at the time of the sale.
The biggest advantage of having an advance payment of your retirement assets is that you have additional equity available to buy a home. This reduces the amount of your mortgage and your future mortgage payments will be lower after purchase. The most substantial disadvantage is that your retirement benefits are reduced. There are also taxes that become due when the advance payment is made, and you have to pay them from your own free resources. Finally, you can purchase no more benefits under our pension fund regulations until the advance payment is fully repaid.
Before deciding to opt for an advance payment of retirement saving, give serious thought to its advantages and disadvantages. Consider as an alternative pledging your retirement savings.