Can I withdraw my 2nd pillar (LPP) for a property purchase in Switzerland?

What is allowed under the EPL and what is not

Early withdrawal or pledge: the difference that “changes everything”

• Early withdrawal (2nd pillar withdrawal) : you increase your equity, generally reduce your mortgage… but you reduce your future pension benefits (retirement, and often also death/disability).
• Pledge : you keep your LPP assets in the pension fund (so benefits remain intact as long as the pledge is not realized), but you often carry a higher mortgage (higher interest and sometimes heavier amortization).

What is considered a “property purchase” for LPP purposes?

The EPL scheme is not aimed at “real estate in general”, but at your owner-occupied home (primary residence). Early withdrawal can be used in particular to:

• buy or build an owner-occupied home;
• repay a mortgage loan;
• acquire certain participations (cooperative, tenants’ association, etc.);
• finance renovations or major works that add value.

By contrast, it typically excludes a secondary residence/holiday home/rental investment (logic: the EPL is designed to promote ownership of your main home).

Important personal conditions to know

• One property at a time : in principle, you can only use your pension assets for one property at a time.
• Spouse/registered partner consent : the withdrawal (and generally the pledge) requires written consent.
• Underfunding (shortfall) of the pension fund : if your pension institution is underfunded, its regulations may limit, reduce or temporarily refuse certain EPL transactions.

How much can I withdraw from my LPP (2nd pillar)?

The rule is federal: it applies in the same way in all cantons (what mainly changes from one canton to another is taxation and certain practical/administrative aspects).

Before age 50: you can generally withdraw up to 100% of your vested benefits

Up to age 50, the maximum withdrawal corresponds in practice to the vested benefits available (the amount shown on your pension certificate / vested benefits statement).

From age 50: a limitation applies (“the higher of the two” cap)

From age 50, the maximum withdrawal is limited to the higher amount between:

• the vested benefits you were entitled to at age 50, or
• half of the vested benefits available at the time of the request.

Minimum amount, frequency and last possible date

• Minimum amount (early withdrawal): CHF 20’000.– (with usual exceptions for certain participations, depending on the regulations).
• Frequency : an early withdrawal can be requested at most every 5 years.
• Last possible date : in principle, the request is possible no later than 3 years before entitlement to old-age benefits begins (subject to more favorable provisions in your pension fund).

Numerical examples (concrete and typical)

Example 1 — 45 years old, buying an apartment

• Vested benefits (LPP certificate): CHF 185’000.–
• Project: property purchase CHF 750’000.–, available equity (cash + 3a): CHF 90’000.–
• You want to strengthen your equity :
  • Possible LPP withdrawal (max.) : up to CHF 185’000.– (before age 50).
• Bank discussion: you will not necessarily want to withdraw “the maximum”; the goal is often to reach a comfortable level of equity and borrowing capacity, without overly weakening your pension provisions.

Example 2 — 55 years old, property purchase with the 2nd pillar

• Vested benefits at age 50: CHF 260’000.–
• Vested benefits today: CHF 420’000.–
• EPL cap (from age 50) = max(260’000 ; 50% of 420’000) = max(260’000 ; 210’000) = CHF 260’000.–.

Example 3 — you hesitate between an LPP withdrawal and a pledge

• LPP balance: CHF 300’000.–, age 44
• Option A (withdrawal): you withdraw CHF 120’000.– → lower mortgage, but lower pension benefits.
• Option B (pledge): you pledge CHF 120’000.– → you keep your benefits as long as the pledge is not realized, but you carry higher debt (and therefore more interest).

Is it useful to withdraw your LPP capital for a property purchase?

The right answer is not “yes” or “no”, but: it depends on your banking objective, your retirement horizon and the level of security you want.

Common advantages of an LPP withdrawal (early withdrawal)

1. Reach the required equity without tying up too much liquidity.
2. Reduce mortgage debt → less interest, sometimes better borrowing capacity.
3. Avoid (or reduce) a 2nd mortgage and therefore reduce amortization pressure.
4. Facilitate a transaction where the bank is strict (variable income, atypical property, etc.).

Disadvantages / risks to present clearly

1. Lower future benefits from your pension plan; and often lower death/disability coverage, even if insurance solutions may exist.
2. “Concentration” risk : you convert a diversified pension capital (often invested) into residential real estate (less liquid, more concentrated).
3. Immediate tax cost : the withdrawal is taxed as a lump-sum pension benefit (see taxation section).
4. Rigidity : the financed property is subject to a restriction on disposal recorded in the land register (and you must repay in several cases).

Withdrawal vs pledge: a simple decision framework

• If your priority is to pay less interest and reduce debt: the withdrawal is often consistent.
• If your priority is to protect your pension coverage (retirement/risks) and your debt capacity allows it: the pledge is often a more prudent alternative.

Tax implications: what happens when you withdraw from the 2nd pillar?

General tax principle (to know before you sign)

• An EPL early withdrawal is taxed as a lump-sum benefit from the pension scheme.
• It is in general taxed separately from your other income (separate taxation), and progressively according to specific rates or cantonal methods.
• In several cantons, lump-sum pension benefits due in the same year are added together (this is crucial if you also withdraw from pillar 3a or another lump sum in the same year).

Very useful point: the tax can be reclaimed if you repay the EPL withdrawal

If you repay the early withdrawal later on, the tax paid on this capital can in principle be refunded (upon request, with supporting documents), because the withdrawal is “canceled” from an EPL perspective.

Tax planning: what you can do without “aggressive optimization”

• Avoid combining several lump-sum benefits in the same year (EPL + 3a, or EPL + retirement capital from another institution), because progression can increase the tax bill.
• If you consider a voluntary LPP buy-in: be mindful of the 3-year blocking period before a lump-sum withdrawal, otherwise the tax benefit of the buy-in may be challenged.

Differences between cantons

The EPL rule is the same everywhere in Switzerland

Regarding the right to withdraw (conditions, amounts, age limits, frequency), cantons do not have a “veto right”: the framework is federal (LPP/OEPL) and applies uniformly.

However, cantons mainly differ on:

1. tax on lump-sum pension benefits (rates/methods);
2. certain implementation details (formalities, land register practices, required documents, etc.), even if the restriction on disposal is a general principle.

Canton of Vaud (VD): tax point to watch and official sources

• For planning, remember above all: you will find official tax scales (tax periods) published by the canton.
• The taxation of pension capital has undergone adjustments in recent years; therefore, it is relevant to rely on up-to-date cantonal sources.

Practical tip : if your property purchase depends on a large LPP withdrawal (e.g., CHF 200’000.–), calculate the tax impact before choosing the payment date.

Canton of Geneva (GE): cantonal and communal scale, and adding the direct federal tax

Geneva publishes specific documents for cantonal and communal tax on lump-sum benefits, and specifies that the direct federal tax must be added to obtain the total.

Practical tip : for an LPP withdrawal, think “total = cantonal/communal + federal”, and avoid combining other lump sums in the same year if you can spread them out.

Canton of Bern (BE): useful official calculator

Bern provides an official tool to calculate tax on lump-sum pension benefits (logic of “special taxation”).

Practical tip : for your content, this is a good “example canton” because you can explain the approach: withdrawal amount → simulation → integration into the overall acquisition budget.

Canton of Zurich (ZH): separate annual taxation and pooling lump sums in the same year

Zurich provides for separate annual taxation of lump-sum pension benefits, and indicates that benefits due in the same year are added together and taxed jointly.
The canton has also changed its taxation on these withdrawals in recent years, which reinforces the value of simulating based on current sources.

Often-forgotten obligations to know (repayment, sale, rental)

Repayment: when is it mandatory?

Repayment of the early withdrawal is mandatory in particular in the event of:

• sale/disposal of the home;
• creation of rights economically equivalent to a disposal (e.g., usufruct);
• with nuances in the event of a transfer to certain beneficiaries (spouse/child, etc.).

If you sell to buy another home, there is a transfer and reinvestment mechanism within a deadline (logic: not to “permanently exit” the pension scheme if you remain an owner-occupier).

Land register restriction: the “notary / land register” point that impacts your freedom

The home financed with the 2nd pillar is subject to a restriction on disposal recorded in the land register. This explains why a sale, gift, or ownership restructuring can require additional steps (and sometimes a partial/total repayment).

Operational checklist: how to buy your home thanks to the 2nd pillar

1) Before requesting an LPP withdrawal

• Identify the need: fill the equity gap? reduce debt? improve bank approval?
• Check your age and your cap (the 50-year rule).
• Check the frequency (5 years) and the minimum (CHF 20’000.–).
• Anticipate the tax and your cash flow (it can happen that the tax must be paid quickly).

2) During mortgage financing

• Compare withdrawal vs pledge across 3 variables: debt, interest, pension security.
• Document the use of funds (purchase, construction, value-adding renovation, amortization): your pension fund will usually ask for this.

3) After the property purchase

• Understand the consequences of the restriction on disposal.
• Keep a clear record of the withdrawn amount and documents: useful for a possible repayment and the refund of the tax.

Disclaimer : all information provided in this article is subject to change and must be verified with the Confederation. The examples presented cannot be interpreted as a commitment on our part; they are examples for information purposes only.