How can you use your pension to invest in property and provide for your future?
Buy a property with your pension.
If you want to own a home, consider withdrawing funds from your pension early. Swiss law allows you to do this under the Ordinance on the Encouragement of Home Ownership using Occupational Pensions (OEPL). This measure encourages home ownership, particularly for people who often need more property equity. Closing this gap in your pension before you retire is also possible.
Precautions when making an early withdrawal.
However, it's essential to note that early withdrawals can reduce your future benefits and create a gap in your pension fund if you become unable to work or in the event of your death. So, it is best to repay early withdrawals promptly or take out corresponding insurance.
Tax on early withdrawals
The lump-sum payment is taxable immediately. The tax rate varies depending on the canton you live in at withdrawal time.
If you repay the funds you've withdrawn, you can claim a refund of the tax paid, but without the interest. It is possible to claim back the tax paid on an early withdrawal within three years.
Alternative to pledging
Pledging is an alternative to early withdrawal. In this case, your money serves only as collateral for the mortgage, and your second-pillar benefits are not reduced. However, this impacts the amount of interest payable on your mortgage.
Long-term consequences
However, it would be best if you also considered the long-term consequences: funds withdrawn early may not only reduce your retirement pension. Still, they may also reduce your benefits if you cannot work. Therefore, It is essential to consider these factors before deciding to make an early withdrawal or pledge.