What Is the 2nd Pillar?
The 2nd pillar is mandatory for employees whose annual income exceeds the minimum threshold (CHF 22,680 in 2026). Contributions are split between the employee and the employer, then paid into a pension institution (pension fund).
This savings system is based on the funded principle: the contributions paid in are invested and build up personal assets.
Situations That Give You the Right to Withdraw
1. Standard Withdrawal at Retirement
The most common situation is withdrawing your assets when you retire. At the legal retirement age (65), you can receive your assets as a lifelong annuity, a single lump sum, or a combination of the two if your fund's regulations allow it. You are legally entitled to request the withdrawal of at least 25% of your mandatory assets as a lump sum.
The choice to take all or part of your assets as a lump sum instead of an annuity must be made in writing within a period set by the fund (often 1 to 6 months before retirement). Once made, this choice is irrevocable.
2. Early Withdrawal for Early Retirement
Most pension funds allow early retirement from age 58. In this case, you can request an early annuity or a lump-sum payment according to the terms of your fund's regulations. Taking benefits early generally reduces the annuity amount because an adjusted conversion rate is applied.
3. Withdrawal to Buy a Primary Residence
The Vested Benefits Act (FZG) permits the use of 2nd pillar capital as part of the home ownership encouragement scheme: to buy, build, renovate, or pay off the mortgage on a primary residence. There are two options:
- Early withdrawal: Part or all of your assets are paid out to finance the property.
- Pledging: The capital stays in the pension fund but serves as collateral with the bank to increase your borrowing capacity.
- The property must be used as your primary residence (not a second home or a rental investment).
4. Permanent Departure from Switzerland
If you leave Switzerland permanently for a country that isn't a member of the EU/EFTA, you can request a lump-sum payment of your entire BVG assets.
However, if you move to an EU or EFTA member country, only the extra-mandatory portion can be withdrawn as a lump sum; the mandatory portion is transferred to a vested benefits account. Formal proof of deregistration from your municipality and of your new residence abroad is required.
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5. Starting a Self-Employed Activity
In What Form Should You Receive Your Assets at Retirement?
At retirement, the choice between a lifelong annuity and a lump-sum payment (or a combination of the two) has major consequences:
- How much can I withdraw as a lump sum? The law guarantees a lump-sum withdrawal of at least a quarter (25%) of your mandatory assets. Many funds allow you to withdraw more, or even all of it (100%), if their regulations provide for it.
- Advantages of the lump sum: It offers greater flexibility with your wealth, lets you pay down a mortgage or plan your estate (the remaining capital passes to your heirs, unlike an annuity, which ends or only pays part of it to a surviving spouse).
- Drawbacks of the lump sum: You have to manage your savings yourself over time and bear the longevity risk, unlike the security of an annuity paid for life.
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Tax Treatment of Lump-Sum Withdrawals (Swiss Residents)
- Place of taxation: For a Swiss resident, the tax is levied by your canton of residence at the time of payment.
- Cantonal disparities: The amount varies significantly depending on your canton and municipality of residence. The higher the capital, the higher the effective rate, due to the progressive nature of the tax schedule.
- The 3-year rule on buy-ins: Buy-ins made to fill gaps are deductible from taxable income. However, to keep this tax advantage, you must avoid any lump-sum withdrawal (EPL, retirement, etc.) within the 3 years following the buy-in.
- Optimization: Spreading withdrawals across different calendar years (for example, by separating your 2nd pillar withdrawal from a 3rd pillar account withdrawal) helps smooth out the progressive tax.
How Do You Submit the Request?
- Notify the fund: The request for a lump-sum payment generally has to be made in writing at least 6 months before the effective date, depending on the institution's regulations.
- Spousal consent: If you're married or in a registered partnership, your spouse's signature — certified (by a notary or before a civil registrar) — is mandatorily required by the BVG for any lump-sum withdrawal.
- Vested benefits case: For assets held in vested benefits accounts or policies, the request is made directly to the foundations involved, along with the required supporting documents.
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Frequently Asked Questions
What are the general conditions for withdrawing your 2nd pillar?
Is it possible to combine an annuity with a lump-sum withdrawal?
Yes. For example, you can choose to withdraw 50% of your assets as a lump sum to fund a project or pay down debt on your home, and receive the remainder as a monthly lifelong annuity. Check the options offered in your fund's regulations.
What is the deadline for notifying my fund of my choice to withdraw a lump sum?
The deadlines vary depending on the pension institution, generally ranging from 1 to 6 months before your effective retirement date.
Some funds even require notice up to 3 years in advance. It's essential to check your fund's regulations early enough: if the deadline passes, the lump-sum option may be permanently lost in favor of an annuity.
Is my spouse's consent required to withdraw the capital?
Yes, absolutely. If you're married or in a registered partnership, the law (BVG) requires your spouse's written consent for any lump-sum withdrawal (whether for retirement, home ownership, or departure). The signature must be certified (by a notary or at the civil registry office) to avoid any dispute.
What happens to my 2nd pillar if I die before retiring?
If you die before retirement, your capital is permanently transferred to the pension fund, which will pay out survivor's benefits (spouse's/partner's pension, orphan's pensions).
Can I use my 2nd pillar to finance a second home or a rental property?
No. Withdrawing or pledging your assets under the Home Ownership Promotion scheme (EPL) is strictly reserved for buying, building, or renovating your primary residence (the home you occupy yourself day-to-day). Second homes, vacation properties, and income-generating buildings are strictly excluded.
How is a 2nd pillar withdrawal taxed for a Swiss resident?
The capital withdrawn is subject to a tax on capital benefits. This tax is separate from the rest of your income and calculated at a reduced, preferential rate. It's levied at the federal, cantonal, and municipal levels based on your place of residence at the time of payment. Since the tax schedules are highly progressive and vary from one canton to another, staggering your withdrawals is often recommended.