Characteristics of pledging in Pillar 3a
- The pledge uses your 3rd pillar A as bank guarantee without withdrawing capital
- Your assets remain invested and continue to grow with the effect of compound interest
- To obtain a mortgage up to 90% of the value of the property instead of 80%
- No payable taxes at the time of pledging, unlike early withdrawal
- The death and disability benefits are maintained in full
- The higher mortgage generates higher interest expenses to be planned
- Reserved for principal residence occupied by the owner
What is a 3rd pillar pledge?
Pledging means using the assets in your Pillar 3a as collateral with the bank, without actually withdrawing anything. Unlike an early withdrawal, where the capital is paid out to the homeowner, the money stays in the retirement account and keeps growing. The bank simply obtains a lien on these funds, which allows it to grant a larger mortgage.
This option falls under the Swiss legal framework for promoting home ownership (EPL). It can only be used to finance the purchase of a property for your own use, carry out major renovations, or amortize an existing mortgage on your primary residence.
The pledge mechanism
When you choose pledging, your 3rd-pillar capital serves as additional collateral for the lender. This stronger security usually makes it possible to obtain a larger mortgage, often up to 90% of the property’s value instead of the usual 80%.
The pledged capital remains blocked as long as the mortgage has not been repaid in full. The bank retains a right of access to these funds if the borrower fails to meet his or her obligations, notably in the event of default on mortgage interest payments. In practice, the pledged capital is intended to gradually amortize the mortgage until retirement age.
The advantages of pledging Pillar 3a
Preservation of pension capital
The main benefit of pledging is that it preserves your retirement assets. The capital stays invested in your 3a account or in the pension funds, allowing it to keep earning interest or market gains. Compound growth continues to work over the long term, helping you build a larger retirement pot.
This continuity of capital accumulation is particularly advantageous for people who have invested their 3rd Pillar A in investment solutions offering attractive potential returns. Positive market fluctuations thus directly benefit future retirement capital.
Immediate and deferred tax benefits
Pledging provides significant tax benefits. At the time of purchase, no capital gains tax is levied, since the capital is not withdrawn from the pension fund. This immediate saving takes a considerable burden off the budget when the property is purchased.
In addition, the higher mortgage debt results in higher interest charges, which are tax-deductible from your taxable income (at least until 2028 due to the abolition of the imputed rental value). This annual tax deduction partially offsets the cost of the interest paid to the bank. Your taxable wealth is also reduced because of the higher mortgage debt.
Maintaining insured benefits
In a Pillar 3a insurance policy, pledging preserves the full insurance coverage. This ongoing protection acts as a vital safety net for the owner and their family.
The disadvantages of pledging Pillar 3a
Higher indebtedness
Pledging means taking on a larger mortgage, which increases the interest burden. This added financial weight has to remain manageable over time and fit within the borrower’s repayment capacity.
The mortgage linked to the pledge must be amortized before retirement, within a maximum of 15 years according to common banking practice. This mandatory repayment creates an additional yearly expense that needs to be planned for in your budget.
Necessary profitability calculation
The appropriateness of pledging depends on a complex financial equation. The return generated by the 3rd pillar assets must be weighed against the additional interest cost of the higher mortgage, taking into account any tax implications. If the return on pension assets does not sufficiently offset the mortgage interest, pledging may be less advantageous than an early withdrawal.
This becomes even more relevant knowing that the reform abolishing the imputed rental value will remove the possibility of deducting mortgage interest (earliest 2028).
Pledge VS early withdrawal: comparison table
- Criteria
- Collateral
- Early withdrawal
- Pension capital
- Shareholders' equity
- Unchanged
- Increased
- Mortgage amount
- Higher
- Lower
- Interest expense
- Superior
- Lower
- Immediate taxation
- No tax at time of purchase
- Capital gains tax (reduced rate)
- Annual tax deductions
- Larger amounts (mortgage interest)
- Less important
- Death/disability benefits
- Maintained
- Reduced
- Future retirement capital
- Preserved growth potential
- Decreased
Conditions for using 3rd Pillar A collateral
Pledging can be used only to finance the purchase of a property for your own use (a house or privately owned apartment), fund major renovation or transformation work, or amortize an existing mortgage on your primary residence.
Optimization strategy with multiple 3a accounts
To maximize flexibility and optimize taxes, opening multiple 3a accounts or portfolios can be wise. This approach lets you pledge only part of your retirement capital while keeping other assets available for future needs. In this case, comparing the best Pillar 3a options will help you make the right choice.
If you later need liquidity — for example, for renovation work — early withdrawals can be spread over several years by drawing from different accounts. This staggering reduces the impact of progressive taxation in cantons where the tax rate increases with the amount withdrawn.
2nd pillar pledge: a complementary alternative
Pledging the 2nd pillar (pension fund) is another option for financing home ownership. The mechanisms are similar, with some specific features:
Pledging pension fund capital generally makes it possible to obtain a mortgage up to 90% of the property's value.
Retirement capital from the occupational pension fund provides strong collateral for the bank, and the additional mortgage secured by the 2nd pillar is often granted under first-rank conditions, while still having to be amortized within 15 years.
A notable advantage: pledging pension-fund assets does not prevent buy-ins to the 2nd pillar, unlike an early withdrawal. These buy-ins remain tax-deductible, offering an attractive fiscal benefit.
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Conclusion
Pledging Pillar 3a offers a property-financing solution that combines tax benefits, preservation of retirement capital, and continued insurance coverage. It’s especially suitable for borrowers with a strong financial capacity who want to optimize their taxes and grow their retirement assets over the long term.
However, additional debt and financial burdens require an in-depth, personalized analysis. The comparison with early withdrawal must take into account all parameters: expected return on the 3rd pillar, cost of borrowing, tax implications and hedging requirements. Support from real estate financing and pension professionals helps identify the most appropriate solution for each individual situation.
Frequently asked questions
Pledging means using your Pillar 3a assets as collateral with a bank to obtain a higher mortgage, without actually withdrawing the capital. The money stays in the retirement account and keeps growing, while the bank receives a lien on those funds.
In a pledge, the capital stays invested in the 3rd pillar and is used only as collateral. With an early withdrawal, the money is actually paid out to the owner and permanently leaves the pension system. Pledging preserves retirement capital but results in a higher mortgage, while an early withdrawal increases your equity but reduces your retirement assets.
No, pledging is only allowed to finance the purchase of a property for your own use, which you occupy as your primary residence. Secondary residences, holiday homes, and investment properties are excluded from this system.
It is possible to pledge the entire balance of your Pillar 3a. However, the amount the bank actually accepts will depend on its lending criteria and the property’s value. Some banks are willing to finance up to 90% of the property’s value thanks to the pledge.
Yes, it is possible to pledge several 3a accounts to increase the amount of the guarantee. This strategy can also be advantageous for maintaining flexibility and optimizing taxation in the event of a future withdrawal.
That depends on several factors: your financial situation, the performance of your Pillar 3a, mortgage interest rates, and your tax situation. Pledging preserves your retirement capital and offers tax advantages, but it also leads to higher interest costs. A personalized analysis is needed to determine which option fits you best.
Pledging results in a larger mortgage, which means additional interest payments. On top of that, this mortgage has to be amortized within 15 years, creating an annual amortization burden. These costs need to be offset by the return on the capital that remains invested in the 3rd pillar.
Yes, pledging does not prevent you from continuing to make annual contributions to your 3a account, up to the maximum 3a amount allowed by law (CHF 7,258 for 2025 for employees affiliated with the 2nd pillar).
No, no tax on lump-sum benefits is due at the moment of the pledge, since the capital is not taken out of the pension system. This is a major advantage compared with an early withdrawal, which is taxed immediately.
If you lose your job, you must still meet your mortgage obligations. If you can no longer pay the interest, the bank can enforce its claim on the pledged capital. This is why having a financial safety cushion and possibly a loss-of-income insurance is essential to handle this kind of situation.
