Pension fund assets can be withdrawn from the age of 58. In certain cases, such as when leaving Switzerland, you can also have your pension fund paid out early. We will now look at these cases and what needs to be considered for early pension fund payouts.
Table of contents
| When can I withdraw my pension fund? |
| When is an early pension fund payout possible? |
| Consequences of the early pension fund payout |
| Repayment of WEF advance withdrawal |
When can I withdraw my pension fund?
You save for your retirement with the pension fund and the money is tied up until you retire. You can draw your savings as early as 58 and as late as 70, either as a capital withdrawal, in several partial pension payments or as a regular pension. If you have deposited pension fund assets with a vested benefits foundation, you can draw the balance as early as five years before the ordinary retirement age.
There are additional options for an early withdrawal of your pension fund assets. You can access an early pension fund payout in the following cases:
Consent of the spouse
If you are married or in a registered partnership, you need your partner’s consent for the early withdrawal. The law requires written consent. The Swiss Pension Fund Association ASIP recommends having the signature notarised.
When is an early pension fund payout possible?
Early withdrawal to finance home ownership
Housing is scarce, and having a roof over your head is a basic need. It is therefore not surprising that many people want to own their own home and see this as a good way to provide for their old age. Legislation also recognises the widespread need for a home of one’s own. By allowing early withdrawal from pension funds and free movement assets before retirement (or pledging them), it promotes:
- the acquisition of home ownership
- the building of a house
- participation in housing co-operatives
- the repayment of mortgage loans
Early withdrawal from pension funds can provide up to 10% of the collateral value of the own funds required. The condition is that the housing must be occupied by the owner himself (at least in part, if it is a multi-family house). Early withdrawal from pension funds for homeownership (WEF) has various conditions and consequences.
Early withdrawal when starting a self-employed business
In addition to home ownership, the government also promotes the start of a self-employed business. Self-employed is anyone who – usually as a sole proprietorship – operates on their own account (a GmbH or AG does not count, as these are legal entities and you would be employed by them).
The main source of income must be the self-employed business. An early withdrawal from the pension fund is granted within one year of starting a self-employed business.
Unlike the early withdrawal for homeownership, partial withdrawals are not possible when taking early withdrawal for self-employment. However, there is a way around this: when leaving the pension fund, you can arrange for the withdrawal payment to be paid to two different vested benefits institutions. This way, you can later withdraw one account balance for self-employment and leave the other account untouched.
Withdraw pension fund when emigrating
When moving abroad and leaving Switzerland, you can withdraw the pension fund money. However, if the destination country is in the EU/EFTA, the withdrawal is limited to the supplementary part, the mandatory part cannot usually be withdrawn. Only if you are not subject to an insurance obligation for the risks of old age, death and invalidity at your new place of residence can you withdraw the money from the mandatory fund. Otherwise, it must be deposited in a vested benefits account, or you can invest it in securities through a vested benefits foundation.
Note:
Since you give up your residence in Switzerland when you emigrate, there is no tax domicile for offsetting the capital withdrawal tax. For this reason, tax is levied at source, in other words at the domicile of the pension fund. The vested benefits institution must deduct the tax from the vested benefits credit before payment and deliver it to the state.
«Geringfügigkeit» or receipt of a full disability pension
Furthermore, you can withdraw pension fund money if it is lower than a full annual contribution at the time of withdrawal (Geringfügigkeit) or if you are receiving a full invalidity pension.
Consequences of the early pension fund payout
When you withdraw your 2nd pillar in Switzerland, the capital must be taxed. The reduced capital withdrawal tax applies. If you have emigrated and are living abroad at the time of withdrawal, the tax will be withheld at source.
The advance withdrawal may also reduce the benefits in the event of death or disability. If you want to maintain the level of your current pension protection even after an early pension fund payout, you can take out supplementary insurance. Ask your pension fund if it offers such supplementary cover. If not, it may be able to arrange it for you.
Repayment of WEF advance withdrawal
WEF advance withdrawals from the pension fund can be repaid until retirement. The capital withdrawal tax paid can then be reclaimed. However, the refund must be claimed within three years. It is no longer possible to reclaim it after that.
This is not possible with funds from the 3rd pillar. Since 3a funds cannot be repaid, the question arises as to whether it is better to withdraw the pension fund or the 3rd pillar.