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-   -   2nd Pillar: Pledge vs. Early Withdrawal for Mortgage (https://www.englishforum.ch/housing-general/303028-2nd-pillar-pledge-vs-early-withdrawal-mortgage.html)

energyale 07.03.2021 13:39

2nd Pillar: Pledge vs. Early Withdrawal for Mortgage
 
To the EF experts who have done this, what is the most optimal solution for utilisation of 2nd Pillar assets if you plan to live and stay in Switzerland? TIA.

1. What are the pros and cons of Early Withdrawal of the 2nd Pillar?


2. What are the pros and cons of Pledging the 2nd Pillar? If you pledge your 2nd pillar, what exactly are the tax benefits which are not available for the early withdrawal option? Also, did anyone get a reduction on your interest rate when taking out a mortgage because you have deposited an additional security?

newtoswitz 07.03.2021 15:30

Re: 2nd Pillar: Pledge vs. Early Withdrawal for Mortgage
 
Main advantage of early withdrawal is you can invest the money in something with decent return.

That's what I did - I had enough investments for the mortgage down payment, but left most where they were and pulled money out of my pension.

Pension tax gain is already realised, and when I have to pay it back in my investments will (almost certainly) be way higher than what I took out.

axman 11.03.2021 13:39

Re: 2nd Pillar: Pledge vs. Early Withdrawal for Mortgage
 
Does anyone know if withdrawing the 2nd pillar is still possible a few years after the property has already been bought?

For example, to reduce the mortgage amount during refinancing?

EPMike 11.03.2021 13:42

Re: 2nd Pillar: Pledge vs. Early Withdrawal for Mortgage
 
Quote:

Originally Posted by newtoswitz (Post 3282843)
Main advantage of early withdrawal is you can invest the money in something with decent return.

That's what I did - I had enough investments for the mortgage down payment, but left most where they were and pulled money out of my pension.

Pension tax gain is already realised, and when I have to pay it back in my investments will (almost certainly) be way higher than what I took out.

Interestingly, on this very forum I was advised against doing that.

Mica 11.03.2021 14:30

Re: 2nd Pillar: Pledge vs. Early Withdrawal for Mortgage
 
Quote:

Originally Posted by EPMike (Post 3284448)
Interestingly, on this very forum I was advised against doing that.

It depends on your pension set-up.

One aspect is risk insurance:
If the risk insurance in your pension is tied to the amount you have paid in, it is a risk to withdraw from your pension (in case of accident, illness or death your benefits may be lower). If the risk insurance is tied to the amount of the currently insured salary, then withdrawing from the pension has no effect on this (but merely on the pension, i.e. old-age benefits).

hoover1 11.03.2021 14:48

Re: 2nd Pillar: Pledge vs. Early Withdrawal for Mortgage
 
Quote:

Originally Posted by axman (Post 3284447)
Does anyone know if withdrawing the 2nd pillar is still possible a few years after the property has already been bought?

For example, to reduce the mortgage amount during refinancing?

Yes, you can do every 5-years or so ..

there may be age related limitation on withdrawn - something like 55 or so - read it once somewhere if I remember correctly .

ipoddle 11.03.2021 16:53

Re: 2nd Pillar: Pledge vs. Early Withdrawal for Mortgage
 
If you take money out of your pension for your mortgage, any overpayments into your pension are not tax deductable from your income until you pay back what you took out.

May or may not be a factor, depending on your circumstances.

axman 11.03.2021 17:04

Re: 2nd Pillar: Pledge vs. Early Withdrawal for Mortgage
 
Quote:

Originally Posted by ipoddle (Post 3284532)
If you take money out of your pension for your mortgage, any overpayments into your pension are not tax deductable from your income until you pay back what you took out.

May or may not be a factor, depending on your circumstances.

Not really a factor, as the reason I want to take money out is to take it out, not to pay in. But I do see that when getting closer to retirement and my investment horizon gets shorter, being able to save taxes then can be attractive.

What about taxes to take the money out early?

newtoswitz 11.03.2021 21:45

Re: 2nd Pillar: Pledge vs. Early Withdrawal for Mortgage
 
Quote:

Originally Posted by axman (Post 3284537)
What about taxes to take the money out early?

There is a tax for this but it's way lower than the original tax saving. Sorry I can't remember or find how much it was.

st2lemans 11.03.2021 21:51

Re: 2nd Pillar: Pledge vs. Early Withdrawal for Mortgage
 
Quote:

Originally Posted by newtoswitz (Post 3284638)
There is a tax for this but it's way lower than the original tax saving. Sorry I can't remember or find how much it was.

3p is just under 5% in Ticino, don't know about other cantons.


Tom

st2lemans 11.03.2021 21:51

Re: 2nd Pillar: Pledge vs. Early Withdrawal for Mortgage
 
Quote:

Originally Posted by ipoddle (Post 3284532)
If you take money out of your pension for your mortgage, any overpayments into your pension are not tax deductable from your income until you pay back what you took out.

May or may not be a factor, depending on your circumstances.

Only for 2p.

Tom

newtoswitz 11.03.2021 21:55

Re: 2nd Pillar: Pledge vs. Early Withdrawal for Mortgage
 
Quote:

Originally Posted by st2lemans (Post 3284642)
Only for 2p.

Tom

Correct, 3a just keeps going with the normal annual allowance.


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