Using Swiss pension funds to buy property

Dear all

We are moving back to Spain and we would like to buy a property as a 1st. residence. Before that I will have the swiss passport. I would like to know if it is possible to use the 2nd pillar to buy a house as 1st residence in Spain.

Regards

Javier

Hi Javier. Yes, you can withdraw the mandatory part of your Swiss pension fund benefits to buy a primary residence in Spain. This is allowed. You apply to your vested benefits foundation for an early withdrawal to buy a home, just as you would if you were buying a home in Switzerland.

Normally, the money will need to be transferred to a blocked account from which it can only be used for financing a home (paying the down-payment or mortgage payments, etc.).

The non-mandatory part you can withdraw anyway when you leave Switzerland. You do not need to request an early withdrawal for a specific purpose. You may have non-mandatory pension savings if your employer paid more than the minimum required to your pension fund, or you made voluntary payments into your pension fund.

Moneyland has a good article covering this which I would recommend:
https://www.moneyland.ch/en/buy-property-swiss-pension-fund-pillar-3a-guide

Hello

My wife and I are looking to purchase our primary residence in France. I work on Geneva and have done so for the past 5 years. My wife does not currently work.

We’ve accumulated quite a bit of money in our Pillar 2 and also Pillar 3.

I understand both Pillar 2 and 3 can be used against the purchase of a primary residence, however I can’t seem to get clarity on using them to pay the notaire fee in France. I have one broker telling me no Pillars can be used and another saying Pillar 3 can be used

Any ideas? 
thank you

Generally the laws governing withdrawals to buy property are the same for the pillar 3a as for the pillar 2, unless a difference is clearly specified.

According to the rules, retirement savings can be used:

• To pay for the property
• To pay the downpayment for the mortgage
• To amortize a mortgage
• To pay for renovations which maintain the property's value
• To make improvements which increase the property's value
• To pay for housing cooperative shares
• To pay for shares from a housing corporation
• To lend money to a housing development company

There is a clear rule saving that capital withdrawal taxes cannot be covered by pillar 2 retirement savings. There is also a clear rule that notary fees cannot be covered by pillar 2 retirement savings. Given that I can't find any exceptions to those rules for the pillar 3a, it's safe to assume that the same applies to the pillar 3a.

The main pattern is that money from retirement savings should be converted into equity in a home. Money spent on taxes, notary fees, and the like does not build equity in a home.

Thanks very much for the explanation

I had a follow-up question

I am going to withdraw my Pillars 2 and 3 for the purchase of a house in France (I'll continue working in Switzerland). I'll submit the various documents to the Pension Foundations once I have them signed by the notaire. At this point, I will still be living in Switzerland though the money will be transferred to a notaire in France. I suspect I will move permanently to France in October.

Can you advise on the tax situation? Will the notaire receive the full amounts and I will then receive a follow-up tax bill from the Canton of Geneva? Or will a withholding tax be deducted from my Pillar 2 and 3, and the balance will be paid to the notaire?

We are also getting a mortgage, so I'm trying to calculate the amounts from the Pillars such that I can request the correct mortgage

Thank you very much in advance 

The general rule is:

The money can only be paid out when the property becomes your primary residence. Therefore, when withdraw Swiss pension benefits you buy a property outside of Switzerland, the Swiss withholding tax applies (in the canton where your pension fund is located). The money is taxable in your country of residence (France, in your case). You can reclaim the Swiss withholding tax by proving your tax residence in France.

So the Swiss withholding tax will be deducted, and the remaining balance will be paid out. I would highly recommend that you look into possible French taxes on the withdrawals, so that you can account for those in your calculations. The Swiss withholding tax is only temporary, as you can reclaim it.

These two guides provide useful information about using Swiss pillar 2 (occupational pension fund) and pillar 3a (tax-priveleged private retirement savings) assets to finance real estate:
How to Use Swiss Retirement Savings to Buy a Home
Indirect Amortization of Swiss Mortgages: Does it Make Sense?

Hello everybody, thank you for making this entry so full of precious information! 
I have one more question for you guys. Do you know, or have any experience, if second pillar institutions will release the funds to pay part of the first down payment for a house that is being built and for which the final transfer of ownership is scheduled to be in 12 months from now? 
We are looking to buy a new property, meaning something newly built, and all payment schedules for the projects we saw, were more or less structured as such:

- anything between 30.000 to 50.000 chf as reservation 

- 20% of the full price minus what paid as reservation when the contract at the notary is signed (usually one month after the reservation)

- 80% at the property transfer (end of the project) 

The bank already told me that they can only issue the mortgage, and therefore any payment, at the final step and not before. This makes some sense, because anyway you should have 20% upfront of your own funds. However if I want to withdraw or pledge the second pillar for the 10% allowed, I should be able to access those funds before the completion of the building. Therefore I’m wondering if also second pillar custodians will apply the same approach as the banks or not. I’ve asked my consultant in AXA and still waiting for an answer, in the meantime if you have any suggestion or knowledge of the matter, would be fantastic. 
I will update you all once I got an official reply from AXA. 

According to the law, you can use pillar 2 money towards building a home that will be used as your main residence. The tricky part is that a withdrawal from the pillar 2 for buying/building a home has to be recorded in the notary documents for that piece of real estate (by the Grundbuchamt). Once the property has an entry in the Grundbuch, then a withdrawal shoud be possible.

I'd be interested to hear what Axa says because I'm curious to know which checks they perform to ensure that the property being constructed is really/will really be your primary residence.