Pensions and home ownership Home ownership for a family with teenagers

You’ve saved up capital as a family and your kids are no longer small. Is it time to buy your own home?

by UBS Insights 15 Jul 2020

Illustration: Stephan Liechti

After working for a good 20 years, your financial position as a family is strong. In other words, you’ve been able to save a considerable amount in pillar 2 and pillar 3. Your household income and personal savings have also grown significantly. Would you now like to buy a family home for yourself and your teenage children? We answer six key questions.

1. What are the tax benefits of buying a house?

Your financial situation gives you a certain amount of freedom in deciding how much money to borrow and how much capital to withdraw early from your pension fund. Tip: By withdrawing as little as possible from the pension fund, you’ll be able to continue saving on taxes. For individuals with a high risk tolerance and a stable and secure income or a high level of capital, taking out a large mortgage and pledging your pension fund assets can be an attractive option in terms of taxation.

2. Is buying cheaper than renting?

Over a period of several years, buying a house is likely to be cheaper than renting. However, as family homes are not usually offered for rent, any comparison needs to be interpreted carefully. The major advantage is that a detached house offers a higher quality of living and more freedom than a rental apartment.

3. What is the impact on our pension fund?

If you have a gap in your pension fund, you can make up the difference over a longer period. But to do so, you’ll have to be strict about using all of the money you save on living costs, depending on the interest rate. This way you’ll be able to maintain your pension level. Unless you make up the gap, your pension level will likely be lower than if you don’t purchase your own home.

4. What are the risks?

Don’t underestimate the risk of losing your job. If you are 45 or older, you’ll need to consider future job security and your own attractiveness on the job market. If, for example, you expect to earn less between the ages of 50 and 65, at this point in time you probably won’t have a pension gap any more. This means that you won’t be able to make any voluntary contributions with the associated tax advantages.

5. Should we really use our pension or pillar 3a capital?

This depends on the financial health of your retirement fund and on your occupational pension in general. If your retirement fund is financially unstable you can expect conversion losses in the form of lower yields and a lower conversion rate in the future. Tip: In this case – and unlike a healthy retirement fund – you should withdraw your retirement fund capital earlier.

6. Do we need multiple 3a accounts?

Multiple 3a accounts or 3a deposits per partner offer greater flexibility when it comes to financing and paying for your own home. Because you can only withdraw capital from the same account once every five years, different accounts allow more frequent withdrawals of smaller amounts, allowing you to avoid higher tax rates.

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