Definition of a pension fund for your Swiss mortgage

In Switzerland, the term pension fund refers to an occupational pension institution that manages the second pillar. It does not refer to pillar 3a or to a simple personal investment that is freely available.

Pension fund: what you actually own

Your pension fund receives the contributions paid by you and your employer and then invests this capital collectively. You therefore do not own a specific share of the properties, equities or bonds held by the fund: you have pension entitlements calculated in accordance with the law and the institution’s regulations.

Part of the contributions is credited to your retirement savings and earns interest. Other amounts finance benefits in the event of disability or death, as well as administration costs. The total amount deducted from your salary and paid by your employer therefore does not necessarily increase your retirement capital in full.

Pension fund and financing your home

Your pension certificate generally states your retirement savings, projected benefits and the cover provided in the event of retirement, disability or death. It may also distinguish between the mandatory portion subject to the minimum requirements of the BVG/LPP and the extra-mandatory portion, whose rules depend more heavily on your pension fund’s regulations.

Subject to certain conditions, your second-pillar assets may contribute to financing your owner-occupied home. You may request an advance withdrawal or pledge the assets in favour of the lender. However, these options do not have the same effect: the withdrawal immediately reduces your pension capital, whereas property pledging keeps it in the pension fund until the collateral is enforced.