LPP buy-backs: how does the art. 79b tax deduction work ?

A buy-back into your occupational pension fund (2nd pillar) is fully deductible from taxable income in the year of payment (art. 79b para. 1 LPP), up to the buy-back capacity calculated by your pension institution. In return, art. 79b para. 3 imposes a lock-up period: no 2nd-pillar capital may be withdrawn within the three years following a buy-back, on pain of having the deduction reversed retroactively. A pension drawn as an annuity is not affected.

Buy-back capacity reflects a gap: the difference between the savings you would have accumulated had your current insured salary been contributed without interruption since age 25, and what you have actually built up. Career breaks, years abroad, salary increases or a change of plan widen that gap. The fund calculates this maximum and deducts certain assets from it — vested-benefit holdings, pillar 3a savings above a threshold. The balance is what can be bought back, and deducted.

The three-year period is the most misunderstood point, and the most costly when overlooked. The Federal Supreme Court reads it strictly, on a consolidated basis: it is not only the bought-back funds that are locked, but all of your 2nd-pillar assets. It does not matter that there is no link between the account funded and the one drawn down — the test is purely chronological. Any capital withdrawal within thirty-six months, including an advance withdrawal for home ownership, cancels the deduction retroactively and triggers a back-tax assessment. Two rulings in 2026 confirmed this severity again.

Two conditions govern access to a buy-back. First, any advance withdrawal already taken for your home must, as a rule, have been repaid before a buy-back becomes deductible. Second, people arriving from abroad who have never been affiliated to a Swiss pension institution may not buy back, during their first five years, more than 20% of their insured salary per year.

A buy-back is therefore never an isolated tax decision. Its value materialises only if the exit is planned at the same time: the form of withdrawal — annuity or capital —, its staggering, the timing of any property plans, the order relative to early retirement. A buy-back made for its deduction alone, uncoordinated with these deadlines, can be undone by the three-year period: the deduction granted one day, clawed back the next.

The question is not whether to buy back. It is in what order to buy back and to withdraw. On its own, a buy-back is merely a deferral. Sometimes a trap.

Is a buy-back still deductible if I withdraw my capital at retirement ?

Yes — provided the withdrawal occurs more than three years after the buy-back. A capital withdrawal, full or partial, within thirty-six months cancels the deduction and triggers a back-tax assessment. If you draw an annuity rather than capital, the period does not apply.

Can I buy back if I have already withdrawn funds for my home ?

As a rule, no — not until that advance withdrawal has been repaid: repaying withdrawals made for home ownership precedes any deductible buy-back. Exceptions exist close to retirement, when repayment is no longer possible.

Is there a cap on how much I can buy back ?

Yes. It is limited to the capacity calculated by your fund, based on your insured salary and years of contribution. People arriving from abroad who have never been affiliated in Switzerland are further limited to 20% of insured salary per year for five years.