When I bought my home, I knew I wanted to repay the mortgage one day — but not at any cost. So I started looking for a smarter way to do it, one that would let me keep more of what I earn.
That’s when I realized my pension fund could actually help me — not just in retirement, but right now. Here’s the simple loop I’m using to make my home roughly 28 % cheaper.
If you’re a homeowner, your 2nd pillar can be a surprisingly smart mortgage tool.
Instead of simply repaying your mortgage with after-tax money, it can make more sense taxwise to first buy in to your occupational pension fund and then withdraw the funds later via WEF (the home-ownership scheme) to repay the mortgage.
Why? Because the buy-in gives you an immediate tax deduction—and that tax saving can cover a big part of the eventual withdrawal tax.
Here’s a simple example:
You buy in CHF 100 000 into your Pillar 2.
Your marginal tax rate (federal + canton + commune) is 35 % → you save CHF 35 000 in income tax that year.
A few years later you withdraw that CHF 100 000 via WEF to repay your mortgage and pay roughly 7 % withdrawal tax (varies by canton).
That’s CHF 7 000 tax on the way out.
Net effect: You turned CHF 100 000 of after-tax money into CHF 100 000 – 7 000 + 35 000 = CHF 128 000 worth of mortgage repayment power.
Your home effectively cost you about 4/5 of your marginal tax rate less—you saved roughly 28 % of the capital you needed to repay the loan.
It’s not magic, it’s just good sequencing: buy in → deduct → withdraw later.
Just remember:
- The three-year blocking rule applies between buy-in and withdrawal. It’s usually a rule from tax office, not from your Pension Fund
- You’ll pay withdrawal tax (lower than income tax). However law is changing. More about it in my next post.
- If you sell the home, the withdrawn capital usually must go back into a pension fund. You will however get back the tax you paid. You have to apply to your Steueramt to get it back within 3 years from repayment.
New to WEF withdrawals?
I explain the details, numbers, and timing considerations in my post: Using Your Pension Fund to Buy a Home (WEF Withdrawal Explained)
Smart Mortgage Loop flowchart showing how pension buy-ins can make a home 28 % cheaper in Switzerland
Net effect:
You saved CHF 35 000 in income tax and only paid CHF 7 000 later →
≈ CHF 28 000 benefit (your home effectively costs ~28% less than paying the mortgage directly).
Key notes
- The 3-year blocking period applies between buy-in and WEF withdrawal.
- WEF withdrawals are taxed separately at a reduced rate, not added to your income.
- Works best for homeowners in higher tax brackets who plan to stay in the property long term.
- If you sell the property, withdrawn pension funds must be repaid to a pension plan.
Like many homeowners, I want the peace of mind of being mortgage-free one day. But as an actuary, I also can’t ignore the numbers — and there’s a smarter, more tax-efficient way to get there.
Your 2nd pillar pension isn’t just for retirement. Used strategically, it can help you repay your mortgage faster and at a lower overall cost — a small shift in sequence that can make a big difference over time.
If you found this post helpful, please leave a comment or share it with someone who’s also navigating the Swiss pension and mortgage maze. I’d love to hear how you’re approaching your own “smart mortgage” strategy.