If you make a voluntary purchase, you activate a 3-year blocking period for lump-sum withdrawals from the pension fund and vested benefits. This article provides you with the most important information on this vesting period.

Contents

Why is there a blocking period?
What is meant by 3 years?
Which capital withdrawals are affected by the blocking period?
Are there any exceptions?
What happens if the vesting period is breached?

Why is there a blocking period?

If purchases have been made, the resulting benefits may not be withdrawn from the pension scheme in the form of a lump sum within the next three years – this is the translated wording of Art. 79b BVG (not available in English).

Put simply, this means that anyone who buys into the pension fund activates a vesting period for capital withdrawals. The vesting period lasts three years. During this time, you may not withdraw any pension assets from the 2nd pillar in the form of a lump sum.

The blocking period is intended to prevent purchases into the pension fund from being misused for tax arbitrage transactions. The reason: the purchase amount can be deducted from taxable income. And the tax savings realised in this way are higher than the tax you have to pay when withdrawing the capital (capital withdrawal tax).

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What is meant by 3 years?

The vesting period of three years begins on the day of purchase into the pension fund and ends exactly three years later. This means that in most cases only two full tax years are affected by the three-year blocking period.

Here is an example: you buy in voluntarily on 11 March 2025, then the lock-up period expires on 11 March 2028. This means that two full tax periods are affected by the restriction.

3-year blocking period after a voluntary purchase

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Which capital withdrawals are affected by the blocking period?

All lump-sum withdrawals from the 2nd pillar, i.e. withdrawals from the pension fund and vested benefits, are affected by the blocking period after the purchase. This applies in particular to:

  • Lump-sum withdrawal on retirement
  • WEF advance withdrawal
  • Advance withdrawal on emigration
  • Advance withdrawal for self-employment

As an alternative to a WEF advance withdrawal, pledging the pension assets is generally possible, especially during the vesting period. Pledging is also possible without restriction during the vesting period.

In its ruling of 12 March 2010, the Federal Supreme Court defined which pension assets are affected by the vesting period. This clarification was necessary because reading the legal text(Art. 79b para. 3 BVG) one might think that only the purchased amount would be affected by the blocking period. However, this is not the case: The entire 2nd pillar pension capital is blocked for three years. It does not matter which pension fund holds it.

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Are there any exceptions?

There are exceptions to the vesting period. For example, if you only draw a pension on retirement instead of making a lump-sum withdrawal. This means you do not have to wait 3 years to draw a pension. There are other exceptions:

  • Purchases into the pension fund to finance an AHV bridging pension
  • Repurchase to close a divorce gap

However, following the Federal Supreme Court ruling of 18 July 2016, the right to review a tax environment remains reserved in the event of a repurchase to close a divorce gap.

A specific case as an example: 14 years after the divorce, an insured person made a purchase to cover a divorce gap. He financed the purchase by taking out a loan from his mother. Two years later, he withdrew the capital and presumably repaid the loan. In this specific case, the repurchase to close the divorce gap was not accepted. It is obvious that the insured person only wanted to make a tax trade with the purchase and later withdrawal.

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What happens if the blocking period is violated?

If you do not observe the blocking period and make a lump-sum withdrawal during this period, the tax authorities will reverse the earlier tax deduction for the purchase. If the purchase has already been legally accepted in the tax return, the correction will be made retrospectively in a subsequent tax procedure. If the tax return has not yet been finalised, the purchase will no longer be allowed as a deduction.

In certain cases, a tax authority may refrain from levying additional tax on the purchase. For example, if the lump-sum withdrawal was not foreseeable at the time of purchase (e.g. if the employer unexpectedly terminates the contract and the pension assets must therefore be withdrawn in full or in part as a lump sum).

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