Advance withdrawal or pledging of a pension fund?

If pension fund assets are used for home ownership, you can choose between an advance withdrawal or a pledge.

In the case of an early withdrawal from the pension fund, pension assets are used for higher equity and lower mortgages. Mortgage interest rates are lower, but there are pension gaps at retirement age. The amount drawn in advance from the pension fund is taxed at a reduced rate and separately from other income. These taxes may not be paid with the withdrawn capital. If you pay the money back to the pension fund at a later date, you can reclaim the taxes – but without interest.

It is usually more advantageous to pledge the pension fund assets. In this way, the money remains in the pension fund and would only be seized if the debtor becomes insolvent. The disadvantage is that the pledged capital is blocked and no cash payment is possible.

Advance withdrawals and pledges are generally permitted up to three years before normal retirement. However, pension funds may stipulate otherwise in their regulations.