For many buyers, the assets in their pension fund (Pensionskasse, the occupational pension scheme of the second pillar) are an important building block of their financing. The home ownership promotion scheme (Wohneigentumsförderung, WEF) allows you to use funds from occupational pension provision for owner-occupied residential property. There are two ways to do this: the advance withdrawal (Vorbezug) and the pledge (Verpfändung). Each has different consequences for your retirement provision, your taxes and your mortgage.
The basic rules of home ownership promotion
Pension fund money may only be used for owner-occupied residential property, i.e. for buying or building a home, for value-enhancing investments or for repaying a mortgage. Holiday homes and let flats are excluded.
An advance withdrawal is possible up to three years before you become entitled to retirement benefits. The minimum amount is CHF 20’000, and an advance withdrawal can be made once every five years. From the age of 50, an upper limit applies: you may withdraw at most the vested benefits you had at age 50 or half of your current vested benefits, whichever is higher. The details are set out in your pension fund’s regulations.
Important for your financing: banks require at least 10 % of the purchase price to come from hard equity. Pension fund money does not count towards this. Savings, securities, gifts or funds from pillar 3a (Säule 3a), on the other hand, count as hard equity.
The advance withdrawal
With an advance withdrawal, the pension fund pays out part of your assets. The money goes directly into your financing and increases your equity. As a result, the mortgage is smaller, and with it the interest costs and the required amortisation.
However, an advance withdrawal has disadvantages. It is taxed separately from your other income at a reduced rate. In addition, your retirement benefits are reduced and, depending on the regulations, so are your disability and death benefits. Many pension funds offer supplementary insurance to close this gap.
You can repay the advance withdrawal later, in full or in part. When you repay it, you get back the tax you paid at the time, but without interest. If you sell the property, repayment is generally mandatory unless you reinvest the proceeds in new owner-occupied residential property within the deadline.
The pledge
With a pledge, the assets remain in the pension fund. You pledge them to the bank as additional collateral. Your pension cover is fully preserved, and no tax is due as long as the pledge is not realised.
Because the bank receives additional collateral, a pledge can make a larger mortgage possible or reduce the amortisation requirement. In return, the mortgage remains higher than with an advance withdrawal, and so do the interest costs. Moreover, a pledge does not replace hard equity.
Worked example
A couple buys a flat for CHF 900’000. They have CHF 180’000 in savings, i.e. 20 % hard equity. They could also use CHF 90’000 from their pension fund. The loan-to-value limit (Belehnungsgrenze) for the first mortgage is 65 % of CHF 900’000, i.e. CHF 585’000. For the interest rate, we assume a five-year fixed-rate mortgage at 1.32 % (as at October 2026).
| Item | Without pension fund money | With advance withdrawal | With pledge |
|---|---|---|---|
| Mortgage | CHF 720’000 | CHF 630’000 | CHF 720’000 |
| Second mortgage | CHF 135’000 | CHF 45’000 | CHF 135’000 |
| To be amortised | CHF 135’000 | CHF 45’000 | CHF 45’000 |
| Amortisation per year | CHF 9’000 | CHF 3’000 | CHF 3’000 |
| Actual interest per year | CHF 9’504 | CHF 8’316 | CHF 9’504 |
| Imputed costs for affordability | CHF 54’000 | CHF 43’500 | CHF 48’000 |
The imputed costs are made up of the imputed interest rate of 5 % on the entire mortgage, the amortisation and ancillary costs of 1 %, here CHF 9’000 per year. Without pension fund money, that is CHF 36’000 plus CHF 9’000 plus CHF 9’000, a total of CHF 54’000. With an advance withdrawal, the result is CHF 31’500 plus CHF 3’000 plus CHF 9’000, a total of CHF 43’500. For the pledge, we assume that the bank credits the pledged CHF 90’000 towards amortisation: CHF 36’000 plus CHF 3’000 plus CHF 9’000, a total of CHF 48’000.
The advance withdrawal reduces interest costs by CHF 1’188 per year and improves affordability (Tragbarkeit) the most. In return, CHF 90’000 has been taken out of your retirement provision and taxed. The pledge reduces amortisation by the same amount but leaves the money in your retirement provision. Whether and how a bank takes pledged assets into account varies from institution to institution.
Pillar 3a can also be used
Assets in tied private pension provision, pillar 3a, can also be withdrawn or pledged for owner-occupied residential property. A withdrawal from pillar 3a usually counts as hard equity. This withdrawal is also taxed separately. If you hold several pillar 3a accounts, you can stagger the withdrawals over time and thus break the tax progression.
Which option suits you
An advance withdrawal can make sense if you would otherwise not meet the affordability requirement or if you want to keep interest costs as low as possible. A pledge is more suitable if your affordability is sufficient and you want to preserve your pension cover. In any case, ask your pension fund to calculate how the options affect your retirement, disability and survivors’ benefits, and clarify the tax consequences with the cantonal tax office.
Voltavia Capital’s free affordability calculator shows you how different equity options affect your financing. We would be happy to discuss which approach suits your situation in a personal consultation.