Voluntary Pension Fund Purchases: How They Work
How purchase potential arises in the pension fund, what the three-year blocking period means, and why the purchased capital stays tied up until the insured event.
A voluntary purchase increases the retirement assets in a pension fund beyond the ongoing contributions, with an immediate effect on the tax bill, on the availability of the capital and on the benefits paid on death. This article sets out the mechanics: how purchase potential arises, what the three-year blocking period means and what ties up the purchased capital.
Anyone who buys into their own pension fund pays a voluntary amount on top of the ongoing regulatory contributions. The purchase closes a gap between the actual retirement assets and the maximum possible regulatory benefits. This gap, the purchase potential, differs in size for every insured person and changes over the course of their working life.
The most important facts in brief
- Purchase potential: the difference between a pension fund’s regulatory benefits and the actual retirement assets (Art. 79b para. 1 BVG).
- Causes: salary increases, a later start to working life, career breaks, a divorce with a division of pension assets, and a past WEF early withdrawal.
- Blocking period: after a purchase, the resulting benefits may not be withdrawn as a lump sum for three years (Art. 79b para. 3 BVG).
- WEF interaction: an outstanding advance withdrawal for residential property rules out further purchases until it has been repaid (Art. 79b para. 3 BVG, second sentence).
- Tax-deductible: the purchase reduces taxable income in the year of payment (Art. 33 para. 1 let. d DBG); the later benefit is taxed on withdrawal.
- Tied up: the capital stays in the pension fund until the insured event occurs. The statutory minimum rate applies to the mandatory portion; on the extra-mandatory portion the fund’s own regulations set the interest and the death benefits.
What is purchase potential and how does it arise?
Every pension fund sets out in its regulations what retirement assets an insured person would normally reach given their entry age, salary and level of employment. A pension institution may enable a purchase only up to the level of these regulatory benefits (Art. 79b para. 1 BVG). If the assets actually on hand fall short, a gap opens up: the purchase potential. The pension certificate shows this gap every year and states the amount up to which a purchase is possible.
Several situations typically lead to purchase potential:
- Salary increases: The insured salary rises while the assets saved so far are based on the earlier, lower salaries. This mathematically creates a new gap to the higher regulatory maximum.
- A later start to working life: Anyone who only began saving late, for example after an extended course of study or after moving to Switzerland from abroad, has not built up retirement capital for the early years in which contributions would have been possible. For people who move to Switzerland from abroad and have never previously belonged to a Swiss pension institution, a separate statutory limit applies, independent of the regulatory cap: in the first five years after joining, the annual purchase may not exceed 20 percent of the insured salary set out in the regulations (Art. 60b para. 1 BVV2).
- Career break or part-time work: Periods with a reduced or missing insured salary, for example during time off with children, further education or unemployment, lead to lower retirement credits than the regulations provide for.
- Divorce: In a divorce, the pension institution transfers part of the termination benefit from the obligated spouse to the entitled spouse (Art. 22c FZG). This creates purchase potential for the spouse whose assets are debited. A subsequent repurchase is exempt from the usual cap at the regulatory benefits (Art. 79b para. 4 BVG).
- WEF early withdrawal: An earlier advance withdrawal for the purchase of owner-occupied residential property immediately reduces the retirement assets and thereby creates purchase potential of its own. This gap, however, can only be closed again once the advance withdrawal has been repaid in full, see the next section.
The three-year blocking period and the WEF purchase lock
A statutory blocking period applies after a purchase: the resulting benefits may not be withdrawn from the pension scheme as a lump sum for three years (Art. 79b para. 3 BVG). The period starts on the day of the purchase and runs independently of when the tax return is filed.
The provision also works in the opposite direction: anyone who has made advance withdrawals for residential property promotion may only make further purchases once these have been repaid in full (Art. 79b para. 3 BVG, second sentence). The two locks have different triggers: the three-year period follows from the purchase itself, while the purchase lock follows from a still-outstanding advance withdrawal. They sit in the same paragraph but apply independently of each other.
If the blocking period is breached, for example because a lump-sum payout follows shortly after a purchase, the tax authorities treat this as tax avoidance under Federal Supreme Court case law. The original purchase is reassessed through the back-tax procedure, which retroactively cancels the original tax deduction. The capital benefit actually withdrawn remains taxable at the reduced pension rate, less the purchase amount.
How does a purchase affect your taxes?
Purchase contributions paid in accordance with the regulations to occupational pension institutions are deductible from taxable income, for direct federal tax as well as for cantonal and communal taxes (Art. 33 para. 1 let. d DBG, Art. 9 para. 2 let. d StHG). The deduction applies in the tax year of payment and reduces the taxable income for that year.
How strongly the deduction takes effect depends on the individual’s marginal tax rate. Because income tax is structured progressively, the relative effect of the deduction increases with the level of taxable income.
For the duration, the purchased capital, like the rest of the pension fund assets, remains exempt from wealth tax, and the interest earned is tax-free. On later payout, the capital is then taxed: as a pension in full at the ordinary income tax rate, or as a lump-sum withdrawal once and separately from other income at a reduced rate, the capital withdrawal tax.
What ties up the purchased capital?
Set against the tax effect are three characteristics of the purchased capital that carry just as much weight for assessing it.
Tying up of capital: Money paid in leaves your freely available liquidity and becomes part of the pension fund assets. It is available again only once an insured event occurs, meaning old age, disability or death, or under the statutory exceptions for an early withdrawal such as emigration, taking up self-employment or the purchase of residential property. Until then, the capital stays tied up, regardless of whether your personal liquidity situation changes.
Interest under the law and the regulations: The statutory BVG minimum interest rate applies to the mandatory portion of the retirement assets; it stands at 1.25 percent in 2026. A purchase, however, often flows into the extra-mandatory portion, for which each pension fund sets the interest independently in its own regulations. It can lie above or below the minimum interest rate and can change from year to year.
Benefits on death: If the insured person dies before retirement, the BVG provides statutory minimum benefits on the mandatory portion: a widow’s or widower’s pension (Art. 19 BVG), a partner’s pension for registered partners by analogy (Art. 19a BVG), and an orphan’s pension for children entitled to maintenance (Art. 20 BVG). For the extra-mandatory portion and for any other beneficiaries, the individual fund’s regulations set the type and amount of benefits. Whether and to what extent the purchased capital flows to the survivors is likewise determined by the regulations. There is no automatic entitlement to repayment of the purchase amount.
Where can I find my purchase potential?
The pension fund’s pension certificate shows the possible purchase potential every year. It shows what assets would be possible under the regulations, what assets are actually on hand, and whether an outstanding advance withdrawal for residential property limits the possibility to purchase. Once the ordinary reference age has been reached, a purchase is generally no longer possible.
Frequently asked questions about buying into the pension fund
What is purchase potential in a pension fund?
Purchase potential is the difference between the maximum regulatory benefits a pension fund provides for and the retirement assets actually on hand. It arises from salary increases, a later start to working life, career breaks such as part-time work or time off, a divorce with a division of pension assets, and a past WEF early withdrawal. The pension institution may enable the purchase only up to the level of the regulatory benefits.
How long does the blocking period last after a pension fund purchase?
After a purchase, the resulting benefits may not be withdrawn from the pension scheme as a lump sum for three years (Art. 79b para. 3 BVG). If the period is breached, the tax authorities reassess the purchase through the back-tax procedure under Federal Supreme Court case law, which retroactively cancels the original tax deduction. The withdrawal itself remains taxable at the reduced pension rate, less the purchase amount.
Can I make a purchase if I have made a WEF early withdrawal for residential property?
Only if the advance withdrawal has been repaid in full. As long as an advance withdrawal for residential property promotion is outstanding, voluntary purchases are excluded by law (Art. 79b para. 3 BVG). The advance withdrawal simultaneously reduces the retirement assets and thereby creates purchase potential of its own, but this can only be refilled once repayment to the pension fund has taken place.
Is a pension fund purchase tax-deductible?
Yes. Purchase contributions paid in accordance with the regulations to occupational pension institutions are deductible from taxable income at federal, cantonal and communal level (Art. 33 para. 1 let. d DBG, Art. 9 para. 2 let. d StHG). The later benefit from the pension fund is in turn taxed on withdrawal, in full as a pension or once as a lump-sum withdrawal at a reduced rate.
What happens to the purchased capital on death?
On the mandatory portion, the BVG provides statutory minimum benefits for survivors: a widow’s or widower’s pension (Art. 19 BVG), a partner’s pension for registered partners by analogy (Art. 19a BVG) and an orphan’s pension (Art. 20 BVG). For the extra-mandatory portion and for the amount of purchased capital that flows to the survivors, the individual fund’s regulations apply. There is no automatic entitlement to repayment of the amount purchased.
Who sets the interest rate on the purchased capital?
That depends on which part of the assets the purchase flows into. For the mandatory portion, the Federal Council prescribes a minimum interest rate, which stands at 1.25 percent for 2026. A purchase often lands in the extra-mandatory portion, where the pension fund sets the interest rate in its own regulations. It is not bound to a floor and can be set anew each year.
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This article is for general information purposes only and does not constitute investment advice or an offer to buy or sell financial instruments. Everon AG is a wealth manager licensed by FINMA under FinIA. Past performance is not a reliable indicator of future returns.
