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What you should know about the property based annuity

By Nicolas Pivin , June 7, 2023

Vendre ou acheter en viager en Suisse présente des avantages et des inconvénients. Découvrez tout ce qui entoure ce type de contrat.

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What is a life annuity? 

 A life annuity as a special form of property sale and lifelong monthly pension payment to the seller is also called a real estate annuity and provides a guaranteed income.


How does a life annuity work?

While selling on a property through life annuity, an owner  does not receive the purchase price of a property from the buyer in one sum, but as a monthly pension payment (real estate annuity) that provides a lifelong payment to the seller. It is common for a life annuity sale, to have a one-off down payment at the beginning of the term, that reduces the monthly annuity.


By agreeing on an annuity guarantee period, it is possible for the parties to agree on a certain minimum term for the annuity. If the seller dies earlier, his heirs receive the agreed instalments of the real estate annuity. As a rule, the parties to the sale of a house by annuity also agree on a lifelong right of residence or usufruct for the seller in the property.


Is it really interesting to sell a life annuity ?

Life annuities can thus guarantee a fixed income until old age and, under certain circumstances, pay out a higher amount than was paid in. 

This is because the offer is very precisely calculated and the seller would have to live to a very old age so that more can be paid out with the annuity than was paid in with the property. In addition, the life annuity is not optimal from a tax point of view. Owners usually make more when selling their property directly.

Unlike AHV or pension fund annuities, only 40% of the annuity is taxed as income, but this is only a tax break in appearance. For this 40 % also includes the capital reduction that takes place in the course of pension payments. However, the property, i.e. the original capital amount, has already been financed by the taxed income, which is why the renewed levying of a tax means a double tax

In contrast, income from savings is not taxed. In this case, it is more worthwhile to use up capital from the sale of real estate in a targeted manner.

The only advantage is the delayed transfer of the right to remain in one’s known house or apartment, but this can also be regulated with appropriate contracts. In practice, it often happens that sellers want to wait a few more months - rarely even longer - before handing over their property to the new owners. A foreseeable period of time usually allows both parties to plan a regulated transition and a stress-free move.

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As real estate brokers, we do not recommend the sale of a property on an annuity basis due to substantial financial loss for the owner.

However, we are happy to discuss your specific situation and, as a basis for your decision, we always offer a non-binding valuation of your property by our Neho estate agents. Neho is the first Real Estate Agency without commission, allowing owners to sell their property for CHF 12'000.-, saving tens of thousands of francs of real estate commission.

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Quick links:

  1. What is a life annuity? 
  2. How does a life annuity work?
  3. Is it really interesting to sell a life annuity ?
  4. As real estate brokers, we do not recommend the sale of a property on an annuity basis due to substantial financial loss for the owner.

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