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Old 17.08.2010, 10:15
Richard Richard is offline
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Re: Pay into 2nd pillar whilst drawing on 3rd pillar

It depends what you mean by effect...

Whilst loosely related the BVG and 3rd pillar accounts are treated differently as far as your handling of them is concerned but generally not as far as tax is concerned.

Perhaps the best indication of the answer to your question is this. If you cash in a 3rd pillar you can still pay money from your taxable income into a new or different scheme.

The principle behind the 3rd pillar is that it is a restricted savings account designed to top up your savings for those years ahead where you do not work. It often also has a very limited insurance scheme attached to it but this is not designed to do anything other than protect the savings amount.

The BVG on the other hand has three distinct components 2 of which are insurance policies. The first insurance policy is designed to provide for you in the event of injury and the second is a life assurance policy designed to provide for your family in the event of death. The BVG has a defined benefit payable dependent on the amount of money paid in and this is visible through a statement sent annually.

Taking money out of a BVG is not really to be advised as this takes from your family in the future in the event of an unwanted event. Therefore many banks will lend directly against a guarantee to pay from the BVG.

The 3rd pillar is different as in the event of a death it is simply paid out. Indeed you can cash the 3rd pillar in to buy into the BVG.

So for your situation.

When you plan to use money from your 3rd pillar you must sign documents to close the account to pay into a deposit account for the purpose of purchasing a house. You are then taxed on the amount of money you receive at a reduced rate. For this reason it is advisable to have multiple 3rd pillar pots and cash these in 30Kish at a time. You can still pledge the 3rd pillar as if it was cash without cashing it in. Practically all banks will accept this pledge (Raiffeisen might not). Dependent on your age the cashing in of these pots might or might not be advisable, but paying in at least one shows willing...

Assuming that your 3rd pillar amount cashed in is for the purchase of a house, any additional money paid into a BVG is tax deductable. Indeed you can additionally pay 6566 (2009/10 rate) into a 3rd pillar and receive tax benefits.

How to handle the "Vorsorge" (old age saving schemes) monies is really something to discuss with the bank you are looking to have the mortgage with. Ultimately the holding of debt caused by owning a house is not a bad thing as this removes very much of the potential for wealth tax and reduces the taxable part of your income through the interest payments deduction - this in turn offsets the "Eigenmietwert" (effective rental value to yourself).

Its not possible to give advice on this subject as to the best route for you as there are many things to consider but hopefully the above will provide some useful input.

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I am in the fortunate position of being able to pay excess money into my 2nd pillar (BVG) each year to reduce my tax burden (saves me 15-20k tax per year). I hope to do the same this year.

However, I also plan to buy a house this year using cash from my 3rd pillar accounts as part of the deposit.

Has anyone any knowledge/experience, whether by withdrawing from my 3rd pillar accounts in the same year would affect the tax reduction I would normally expect this year from paying into my 2nd pillar.

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