- An EPL withdrawal can be used to finance the purchase or renovation of a principal residence.
- An EPL withdrawal can also be used to repay a mortgage.
- Anyone affiliated to a pension fund can make an EPL withdrawal.
- EPL withdrawal can be requested up to 3 years before retirement age
- An EPL withdrawal can only be requested once every 5 years.
Introduction
The Swiss pension system allows insured individuals to use their 2nd pillar savings to become owners of their primary residence. This mechanism, known as the EPL withdrawal, can be used to purchase, build, repay a mortgage, or fund renovations that would increase the property's value. This withdrawal, whether made in advance or as a pledge, is subject to legal criteria and can have tax implications as well as impacts on retirement benefits.
Legal Basis
The EPL withdrawal is governed by several federal laws and regulations. First, Articles 30a to 30g of the Occupational Pension Act (LPP) define the permissible uses of pension funds for the acquisition or construction of housing, mortgage repayment, and renovation work.
Next, the Ordinance on the Promotion of Home Ownership (OEPL) provides detailed regulations for EPL withdrawals. It defines the minimum amounts, the eligible forms of ownership, and the limitations based on age and type of request.
Conditions for EPL withdrawal
To benefit from the EPL withdrawal, certain conditions must be met, particularly regarding the profile of the insured, the type of property, and the use of the withdrawn funds.
1. Membership of a pension fund
Naturally, the EPL withdrawal is reserved for people affiliated with an occupational pension fund, whether they are salaried employees contributing to the 2nd pillar or self-employed people who have opted for voluntary affiliation.
2. Meet age requirements
Withdrawals can be made up to 3 years before the legal retirement age. Men can therefore withdraw this money until they are 62, and women until they are 61.
After age 50, the maximum amount withdrawn is limited to half the vested termination benefit available at the time of the request, or the full vested termination benefit acquired at age 50, whichever is greater.
3. Obtain spouse's consent
Policyholders who are married or in a registered partnership must provide written authorization, with legalized signature, from their spouse or partner to claim an EPL withdrawal.
4. Meet the criteria for the type of accommodation
Housing financed through an EPL withdrawal must be used as a main residence by the policyholder and his/her family. This means that it is not possible to make a withdrawal for the acquisition of a second home or an investment property. This includes homes located in Switzerland or, in some cases, abroad (particularly for cross-border commuters).
The property in question can be an apartment or a house, and the accepted forms of ownership are as follows:
- Individual property
- Co-ownership (e.g. condominiums)
- Joint ownership with spouse or partner.
- Separate and permanent surface right
5. Respect criteria for use of funds
Funds withdrawn must be used exclusively for one of the following purposes:
- Buying or building a home: Buying or building a house or apartment.
- Paying off a mortgage The withdrawal can be used to reduce or pay off an existing mortgage debt.
- Carry out work that adds value: Financing of renovation or improvement work, provided it increases the value of the property (maintenance work or external improvements such as swimming pools or garages are excluded).
- Shareholdings : Acquisition of shares in a housing cooperative or shares in a tenants' real estate company.
6. Respect frequency and minimum amounts
An advance withdrawal can only be requested once every 5 years, and the minimum amount for a withdrawal is set at CHF 20,000, except for certain participations (e.g., shares in a cooperative).
If redemptions have been made, it should be noted that the entire capital will be blocked for a period of 3 years. It will therefore be impossible to make an EPL withdrawal. If a withdrawal is nevertheless made, no tax deduction can be granted, and any tax savings made at a later date will be reclaimed by the tax authorities.
Impact of EPL withdrawal
An EPL withdrawal enables you to use all or part of your 2nd pillar capital to finance a primary residence. However, this withdrawal has major implications for your tax and pension benefits, which need to be carefully assessed before applying.
Taxation of an EPL withdrawal
The EPL withdrawal is treated as a capital benefit and is subject to separate taxation. The withdrawn amount is taxed as a pension capital benefit. This taxation is applied separately from other income, at a reduced rate that varies depending on the canton and the amount withdrawn.
If the insured resides abroad, or if the account to which the withdrawal is paid is abroad, a withholding tax is applied to the amount withdrawn. This rate depends on the country of residence and double-taxation agreements. If the withdrawal is subsequently repaid to the pension fund (e.g. after the sale of the property), the taxes paid can be reclaimed within a period of 3 years by applying to the relevant tax authorities.
Reduced pension benefits
The EPL withdrawal directly reduces the savings accumulated in the 2nd pillar, resulting in a reduction in future benefits.
First, a portion of the funds earmarked for retirement is used for the withdrawal, which reduces retirement savings and, consequently, the pensions received on retirement.
In accordance with the pension fund regulations, the death and disability benefits can also be reduced. Some institutions offer supplementary insurance to compensate for these losses, but this entails additional costs.
Obligation to repay in certain cases
If the property financed with EPL funds is sold, the withdrawal must be repaid to the pension fund, unless the proceeds are reinvested in another principal residence within a period of 2 years. If the property is transferred to a beneficiary (for example, a spouse or child), repayment is not required.
Insured individuals can repay all or part of the withdrawal to their pension fund at any time before reaching retirement age. The minimum amount for a repayment is CHF 10,000, unless the remaining balance is lower.
Restriction of the right to alienate
When an EPL withdrawal is made, a restriction on the right to dispose is registered in the land registry to ensure the funds are used in accordance with pension objectives. This restriction is lifted upon full repayment of the funds, at retirement age, or in the event of another pension contingency (disability or death).
Frequently Asked Questions
What is an EPL withdrawal?
A EPL (Encouragement à la Propriété du Logement) withdrawal enables you to use all or part of your 2nd pillar savings to finance a main home, whether for its acquisition, construction, repayment of a mortgage or renovation work increasing the property's value.
Who can request an EPL withdrawal?
Anyone affiliated to a pension fund (2nd pillar) can apply for an EPL withdrawal.
What uses are authorized for the funds?
2nd pillar funds can be used for :
- Buying or building a house or apartment.
- Refund an existing mortgage.
- Financing renovations or improvements that increase the value of the property.
- Buying shares in a housing cooperative or shares in tenant real estate companies.
What is the age limit for an EPL withdrawal?
- EPL withdrawal can be requested up to 3 years before retirement age.
- After 50 years, the maximum amount is limited to the greater of half the vested termination benefit or the amount vested at age 50.
What are the minimum and maximum amounts?
- Minimum amount : CHF 20,000 (except for certain participations such as housing cooperatives).
- Maximum amount :
- Before age 50: The entire available vested termination benefit.
- After age 50: The greater of half the current benefit or the benefit earned at age 50.
Is it possible to repay an EPL withdrawal?
Yes, all or part of the amount withdrawn can be refunded up to :
- Entitlement to retirement benefits.
- The occurrence of an insured event (disability or death).
- Cash payment of the termination benefit (e.g. in the event of permanent departure from Switzerland).
The minimum amount for a refund is CHF 10,000, unless the remaining balance is less.
