Using your 3rd pillar to buy property
Home ownership promotion (EPL) allows you to use your pillar 3a capital to finance the acquisition of your primary residence in Switzerland. It is a valuable option for supplementing your equity and accessing home ownership, but it has tax and pension implications that should be well understood.
The legal framework: home ownership promotion (EPL)
EPL is provided for by the Federal Act on Occupational Pensions (LPP) and applies to both the 2nd pillar and the 3rd pillar. It allows you to use your pension savings for:
- Buying or building a home for your own use
- Amortizing a mortgage on your primary residence
- Acquiring shares in a housing cooperative
- Financing value-adding renovations on your home
Conditions for EPL withdrawal from the 3rd pillar
| Condition | Detail |
|---|---|
| Property type | Primary residence only (not secondary or rental property) |
| Location | In Switzerland only |
| Minimum amount | CHF 20,000 (generally) |
| Frequency | One withdrawal every 5 years |
| Spousal consent | Written consent mandatory if married/registered partnership |
| Age | No age requirement (possible at any time) |
How the 3rd pillar fits into equity requirements
To obtain a mortgage in Switzerland, you must provide at least 20% of the purchase price as equity. Here is how the 3rd pillar can contribute:
The 10% rule: At least 10% of the purchase price must come from equity outside the 2nd pillar. The 3rd pillar counts toward this 10%, along with bank savings, donations or advances on inheritance.
Concrete example: For a property at CHF 800,000, you must provide CHF 160,000 in equity, of which at least CHF 80,000 from outside the 2nd pillar.
- 3rd pillar: CHF 60,000
- Personal savings: CHF 30,000
- 2nd pillar: CHF 70,000
- Total equity: CHF 160,000 (20%)
- Mortgage: CHF 640,000 (80%)
EPL withdrawal procedure step by step
- Sign the purchase agreement or deed of sale
You must have an official document proving your acquisition project.
- Contact your 3a pension institution
Request the EPL withdrawal form and the list of required documents. Allow 2 to 3 months before the purchase date.
- Gather the necessary documents
- Signed EPL withdrawal application form
- Copy of the purchase agreement or sales contract
- Land registry extract or property plan
- Identity document
- Written and signed spousal consent (if applicable)
- Certificate from the mortgage lender
- Submit your application
Send the complete file to your 3a bank or insurance company.
- Receive the payment
The capital is paid directly to the notary or to your account, depending on cantonal practices. Allow 2 to 4 weeks processing time.
Advantages of EPL withdrawal
- Access to home ownership: The 3rd pillar can represent a significant portion of the required equity, making the purchase possible sooner.
- No age requirement: Unlike retirement withdrawal, EPL withdrawal is possible at any age.
- Mortgage reduction: More equity = lower mortgage = less interest to pay.
- Reimbursement option: The tax paid at withdrawal can be recovered if you reimburse the amount to pillar 3a.
Disadvantages and risks
- Withdrawal tax: The withdrawn capital is subject to capital benefits tax, even for EPL withdrawals.
- Pension gap: The withdrawn capital will no longer be available for your retirement. Consider rebuilding your 3rd pillar after the purchase.
- Loss of tax deduction: If you close your only 3a account, you will no longer be able to deduct contributions until you open a new one.
- Resale restriction: If you sell the property in the following years, reimbursement obligations may apply.
Tip: If you have multiple 3a accounts, only withdraw the number of accounts necessary and keep at least one active account to continue benefiting from the annual tax deduction. See our guide on the optimal number of 3a accounts.
EPL withdrawal vs indirect amortization
Rather than withdrawing your 3rd pillar, you can opt for pledging (indirect amortization). Here is a quick comparison:
| Criterion | EPL withdrawal | Indirect amortization |
|---|---|---|
| 3a capital | Withdrawn and used | Pledged, remains invested |
| Tax deduction | Lost (account closed) | Preserved |
| Mortgage | Reduced | Maintained higher |
| Deductible interest | Lower | Higher (tax advantage) |
| Ideal for | Insufficient equity | Tax optimization |
Concrete examples by property price
The role of the 3rd pillar in financing varies considerably depending on the property price. Here are three typical scenarios illustrating this dynamic:
Scenario 1: apartment at CHF 500,000
For a 3-room apartment in a medium-sized city. The minimum equity is CHF 100,000 (20%), of which CHF 50,000 from outside the 2nd pillar. A 3rd pillar funded for 8 years at the maximum (approximately CHF 55,000 to CHF 60,000 depending on returns) is sufficient to cover this requirement. The mortgage of CHF 400,000 at 2% generates annual interest of CHF 8,000, which is fully tax-deductible.
Scenario 2: house at CHF 800,000
For a detached house in a suburban area. The minimum equity is CHF 160,000 (20%), of which CHF 80,000 from outside the 2nd pillar. A couple with two 3a accounts totaling CHF 85,000 can cover most of this requirement. An additional CHF 75,000 can come from personal savings or, for the remaining 10%, from the 2nd pillar. The mortgage of CHF 640,000 at 2% generates CHF 12,800 in annual deductible interest.
Scenario 3: villa at CHF 1,000,000
For a more spacious property in an attractive canton. The minimum equity is CHF 200,000 (20%), of which CHF 100,000 from outside the 2nd pillar. The 3rd pillar alone is generally not sufficient. The couple will need to combine the 3rd pillar (e.g. CHF 90,000), bank savings (CHF 60,000) and possibly the 2nd pillar (CHF 50,000) for the remaining 10%. Note: at this price level, the affordability ratio (housing costs/income) often becomes the limiting factor.
Affordability rule: Housing costs (mortgage interest, amortization, maintenance costs) must not exceed one-third of the household's gross income. For a property at CHF 1,000,000 with 80% mortgage, the minimum required gross income is approximately CHF 180,000 per year.
Impact of EPL withdrawal on your retirement
Withdrawing the 3rd pillar for a property purchase has direct consequences on your retirement pension that are crucial to evaluate before making your decision.
Loss of compound returns
The withdrawn capital no longer benefits from compound interest. For example, a withdrawal of CHF 60,000 at age 35 represents a potentially much larger loss at age 65. With an average return of 3% per year over 30 years, this CHF 60,000 would have reached approximately CHF 145,000 at retirement. The difference of CHF 85,000 represents the real cost of the withdrawal in terms of pension provision.
Strategies to compensate the gap
- Open a new 3a account immediately: as soon as the withdrawal is made, open a new pillar 3a and start contributing the maximum each year again
- Consider LPP buy-back: if your pension fund allows it, a buy-back into the 2nd pillar partially compensates the gap while offering a tax deduction
- Build 3b savings: in addition to 3a, free savings (3b) offer more flexibility without withdrawal constraints
- Plan EPL reimbursement: when your financial situation allows, reimburse the withdrawn amount to your pillar 3a to recover the tax paid
To better understand the tax levied upon withdrawal and its financial impact, see our dedicated page on 3rd pillar withdrawal tax.