Amortisation / Life insurance

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Author : Kristen

Indirect amortisation

The basic principle of indirect amortisation is to maintain a constant level of mortgage debt throughout the entire loan term. Instalments are not paid directly to the mortgage account, but rather to a private 3rd pillar linked pension plan A and/or private 3rd pillar linked insurance A or B. These amounts are only payable to the financial institution at the expiration of the 3rd pillar, either at your retirement (64 years for women and 65 years for me) or a maximum of 5 years before. Except in the cases of an extraordinary amortisation (anticipated withdrawal of the 3rd pillar, 2nd pillar, cash, etc.) the debt remains constant with indirect amortisation.

To be clear, in order to link the amortisation to a 3rd pillar product, the policyholder has to be the owner of real estate property. For the private 3rd pillar linked pension plan, the property must also be the place of primary residence.

The amounts paid to the 3rd pillar A (or linked) pension plan are deductible from your yearly income up to:

  • For employees who make contributions to the second pillar: CHF 6,826 from 1 January 2019 (with potential annual adjustments)
  • For the self-employed, 20% of net income: CHF 34,128 from 1 January 2019
  • For employees who do not make contributions to the 2nd pillar: 20% of their net annual income

In the cantons of Geneva and Fribourg, it is also possible to deduct additional 3rd pillar linked pension insurance (private 3rd pillar pension plan) from taxable income. This refers to the 3rd pillar B.

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Articles on amortisation / life insurance