Finpension 3a Review 2024: Pros & Cons
| Updated: |(Disclosure: Some of the links below may be affiliate links)
If you want to retire in good financial health, you need a good third pillar. You want some good returns, and you especially do not want your money wasted on fees. Many banks provide very poor or very expensive 3a.
Fortunately, there are some excellent 3a providers. Finpension 3a is extremely interesting—so much so that I started using it almost as soon as it opened!
So, we will review Finpension 3a in detail.
In this article, I look at many things about Finpension 3a: its fees, its investment strategy, and its security. Finally, I compare it against other third pillar providers.
| Total Fee | 0.39% per year |
|---|---|
| Maximum portfolios | 5 |
| Stock allocation | Up to 99% |
| Maximum foreign exposure | 99% |
| Maximum investment in cash | 1% |
| Investment Strategy | Index funds |
| Fund providers | Credit Suisse, Swisscanto, and UBS |
| Languages | English, French, German, and Italian |
| Sustainable option | Yes |
| Mobile Application | Yes |
| Web Application | Yes |
| Custodian Bank | Credit Suisse |
| Established | 2017 |
| Foundation’s domicile | Schwyz |
Finpension 3a
Finpension 3a is the best third pillar in Switzerland.
Use the FEYKV5 code to get a fee credit of 25 CHF*!
*(if you deposit 1000 CHF in the first 12 months)
- Invest 99% in stocks
Finpension 3a is a pension foundation managed by finpension AG. Finpension 3a is related to the third pillar offer. But finpension has managed other kinds of pension assets, such as vested benefits, with their valuepension offering since 2017.
Finpension started with the finpension collective foundation, a 1e pension plan. Customers liked it so much that they wanted to keep their account after they stopped working. So, finpension started its vested benefits offering (Finpension Vested Benefits). And now, they have begun their third pillar offering: Finpension 3a, in 2020.
It is important to note that the foundation is separated from the management company. Doing so allows for a clear separation of books for the assets.
There are two ways to access the third pillar account:
- A mobile application is available on the App Store and the Google Play Store.
- A web application on all browsers.
I greatly appreciate the fact that they have a web application as well. Most platforms only have mobile applications these days.
If you want more information, I interviewed finpension’s CEO.
Investment Strategies
Finpension 3a heavily focuses on investing in the stock market. For this goal, they offer access to 6 different strategies:
- Finpension Equity 0
- Finpension Equity 20
- Finpension Equity 40
- Finpension Equity 60
- Finpension Equity 80
- Finpension Equity 100
The number in the strategy is the allocation to stocks in the portfolio. The remaining portfolio is allocated to bonds and 9% to real estate. However, each strategy has 1% allocated to cash. For instance, Finpension Equity 100 is 99% stocks and 1% cash. Finpension Equity 60 has 60% stocks, 30% bonds, 9% real estate, and 1% cash. Finpension Equity 0 has 99% allocated to bonds and 1% in cash.
And on top of these strategies, you can choose three different investment focuses:
- Global: A globally diversified portfolio.
- Switzerland: A portfolio with a focus primarily on Swiss equities.
- Sustainable: A portfolio investing only in sustainable companies, mainly with ESG principles.
So, together, you can choose between 18 strategies. There should be enough for everybody! If unsatisfied with the proposed strategy, you can create your own strategy. For this, you can pick from their extensive range of index funds.
Index Funds
finpension 3a does not invest in Exchange Traded Funds (ETFs) but in index funds. There are several advantages to doing that from a pension foundation perspective:
- They can reclaim the withholding taxes on dividends on foreign stocks.
- There is no stamp duty to pay for these funds compared to ETFs.
- They access extremely cheap funds that are usually reserved for institutional investors.
By default, finpension invests in Credit Suisse institutional funds, which are large, efficient, and affordable. Interestingly, we can choose UBS and Swisscanto funds instead of Credit Suisse funds. These funds are a great choice if you do not want to have all your funds with Credit Suisse.
Many ask: how do you choose between the three fund providers? I think it makes very little difference, and people worry too much about this. The three sets of funds are pretty good. They all have low fees.
The Credit Suisse funds are the largest, giving them more volume and possibly stability. The UBS funds have the lowest issuance and redemption fees. Finally, the only advantage of Swisscanto funds is that they do not come from UBS and CS, which matters for some people.
If I were to start now, I would use UBS funds. But I am pretty happy with the CS funds so far.
The website details all the strategies very well. You can see in which index funds each strategy is investing. For instance, here is the finpension equity 100 strategy:
This strategy has a good mix of Swiss Stocks and Global Stocks. And the strategy also has a good diversification between small and large caps. I would use fewer funds if I did it myself, but this strategy should be a good fit for most people.
Custom strategies
Your custom strategy can be created using the application.
It is straightforward, and you have very few limits on your actions. You can invest 99% in a World index fund (minus CH), and you will have an extremely simple and well-diversified portfolio. And it will be an extremely cheap portfolio!
There is no foreign exposure limit with Finpension 3a. So, you can create a portfolio with 99% in USD stocks (1% must remain in cash). Finpension 3a is the only third pillar doing this!
Finpension justifies it by saying that the exposure limit of the third pillar regulations should only be applied to the total assets of Finpension 3a foundation. Therefore, if many people invest more in CHF than foreign currency, other investors can invest more in USD.
Having no foreign exposure limit is a great feature. This means that you can invest heavily in foreign countries without hedging. And it is essential because hedging in the long term will reduce your returns.
One of your limits is that you cannot invest too much in a single stock. You will have limits on Swiss Stock Market Indexes heavily weighted in three giant companies. This limitation comes directly from the regulations of the third pillar to avoid taking too much risk.
Crypto in the third pillar
Interestingly, Finpension 3a is the first third pillar to allow investments in cryptocurrencies as an alternative investment, next to gold.
In December 2021, they started allowing investors to invest up to 5% of their third pillar in a crypto market fund. This fund is quite expensive (like all crypto funds) but is an index fund of cryptocurrencies.
I would not recommend investing in that fund, but many people will be happy! 5% of a portfolio is what I would consider fun money, so it is fine to have a small portion of your wealth in alternative investments. However, be careful about the extreme volatility.
Cash in portfolio
Keep in mind that you cannot be uninvested with Finpension 3a.
You cannot have an account with 100% in cash. If you do not want to invest 99% in stocks, you must invest in bonds.
Some people prefer cash because bonds can sometimes underperform cash. However, there are also many times in history when bonds outperformed cash. On average and in the long term, bonds perform significantly better than cash, even in Europe.
If you choose a custom strategy, you can use a money market fund. A money market fund is very similar to cash. So, you can invest mainly in stocks, bonds, real estate, and alternatives.
Finpension 3a uses the cash in your account (after a deposit) to buy shares of the funds on the second banking day of the week. And if you want to change strategy (free of charge!), Finpension 3a will make the change on the second banking day of each week.
Investing summary
Finpension will rebalance your portfolio weekly on the second banking day of the week. Rebalancing happens if the current allocation deviates for more than one percentage point.
It is interesting to note that you can disable rebalancing for each of your portfolios. I recommend rebalancing by default for most people, but some appreciate that it is optional.
Overall, the investing strategies of the finpension 3a accounts are great! They offer a great allocation to stocks, great diversification, and an excellent ability to customize the portfolio. And on top of that, they do not force currency hedging on you, which is another excellent thing.
If you do not want to invest 99% in stocks, you will invest in bonds. This is fine for most people. However, if you prefer cash over bonds, you will not be able to keep more than 1% cash in your account. On the other hand, you could opt for a money market fund.
Finpension 3a Fees
Now that we have seen their investing strategies, we look at investing fees with finpension 3a.
Finpension uses a flat rate for its fees. This flat rate is set at 0.39%, an incredibly low fee!
What is remarkable is that this low fee of 0.39% includes the following:
- VAT
- Product costs (except for crypto fund)
So, with the Equity 100 strategy (the best strategy for the long-term), you will have total costs of 0.39% per year! This fee is incredibly low, 10% cheaper than the cheapest alternative! If you use the crypto fund, you will bear the product costs yourself.
And it is! Finpension does not charge a margin on foreign currency exchanges. However, the bank they use has a spread of 0.05% on currency conversion. Many of their funds are in CHF.
However, we must remember that most of the funds used by Finpension have small loads and redemption fees. They seem to have 0.02% to 0.1% fees on load and redemption. You can look at the fact sheet of each fund to see the details. However, this is not Finpension getting that money. It is Credit Suisse.
Finally, you can even save on fees! If you recommend Finpension 3a to somebody who actively uses it, you will receive a fee credit of 25 CHF. This recommendation means you will save 25 CHF for each user you invite, and there is no limit to how many users you can invite. And if you use my code (in the next section), you will also win 25 CHF in fee credit.
Overall, the fees of the Finpension 3a account are excellent! Their fees are at least as good as the cheapest third pillar in Switzerland and often better. The Finpension 3a account is the cheapest third pillar for people wanting to invest heavily in stocks!
Extra fees
There are a few extra fees if you withdraw early from the third pillar.
If you make an early withdrawal for a house, you must pay 250 CHF. And if you pledge your third pillar for a real estate property, Finpension charges 200 CHF.
If you transfer your Finpension 3a assets less than one year after creating your account, you must pay 150 CHF.
Finally, if you withdraw your assets while abroad, you will have to pay 750 CHF if that happens during your first year at Finpension and 250 CHF after that.
Since these fees are exceptional and unrelated to investments, they are less significant. However, you should still consider them if you fall into one of these categories.
Open a Finpension 3a account
If you use my code FEYKV5, during the process, you will get 25 CHF in fee credit (if you transfer or deposit CHF 1’000 within the first 12 months).
Opening a Finpension 3a account is easy and can be done in a few minutes. Open your phone, download the finpension app on your favorite app store, and follow the process.
They will ask for your phone number and account password. Then, they will compute your investment horizon based on your age.
After that, you must answer the common questions about risk tolerance. And they will use that to choose an investment strategy for you. But if you do not like the suggested strategy, you can choose your own. And do not worry, you can change it later too.
After you have chosen the strategy, you will have to fill in your personal information, and that is it! Your account is ready to welcome a deposit already. It is very smooth.
The great thing is that you can create up to five portfolios per person. It means that you can make staggered withdrawals to optimize your taxes. For more information on this optimization, read my article on the third pillar.
Once your account is created, you can verify your identity. For this, they validate that you are opening the account with your identity documents. It is not a huge difference since they would do that once you withdraw the money. But this is still better to do it now rather than later.
Security
If you want this money to last for a long time, it is essential to consider the security of each institution.
We start with the technical security of the Finpension 3a application. All the communications between the application and the servers are encrypted. You will connect with a phone number and a password.
You can choose to activate the second factor of authentication for your account. A second authentication factor will bind your account to your phone number with SMS authentication. This second factor adds a good layer of security to your account.
You can also use a proper authenticator second factor, by using an app to generate a code, which is much better than an SMS. It is essential to mention that because most Swiss services do not offer this function.
You will be able to identify your account with ID-now. This slightly improves the security of your account. I would recommend doing it now. In any case, you will need to do it when you withdraw the money.
Your cash will be held in the custodian bank of the finpension 3a foundation. The current custodian bank is Credit Suisse. This cash is protected by Swiss law up to 100’000 CHF. Since strategies at Finpension 3a have very little cash, this should not be an issue.
Your securities are invested in Credit Suisse’s institutional funds (or another if you choose so), and Credit Suisse manages more than 100 billion CHF in pension assets. Having a large fund manager, not a small unknown bank, is an excellent point.
All the funds are set on the foundation’s balance sheet. And this foundation only has client assets on its balance sheet. So, even if finpension (the asset managers) goes bankrupt, the funds are safe in the foundation. And the foundation will have to find a new manager.
Overall, I think that the security of Finpension 3a is good. The fact that the foundation is separated from the asset management company is excellent for safety.
Sustainability
Sustainable investing is something more and more investors are after. Finpension 3a lets you invest sustainably with an option. Is investing with Finpension 3a sustainable?
When you choose the sustainable option, Finpension 3a will invest in different index funds. Instead of investing in standard index funds, Finpension 3a will invest in ESG funds.
ESG stands for Environmental Social Governance. And it is the name of the three factors used to select companies in a fund. They will only invest in companies that do relatively well in these three factors. They will avoid companies that invest in fossil fuels or exploit children, for instance, and favor companies that work for renewable energies.
In theory, this sounds great. But in practice, there are some issues:
- These funds are not very selective, most companies are present in them.
- There is still some exposure to fossil fuel companies, among others.
- The criteria are not transparent.
So, simply investing in ESG funds is more sustainable than investing in standard funds. However, investing in ESG funds is not very sustainable. This is a very basic level of sustainability, the easy way in.
So, sustainable investing with Finpension 3a is not very sustainable, but it is better than nothing.
Alternatives
There are many third-pillar providers in Switzerland. However, most of them are not nearly as good as Finpension 3a.
The one that is worth mentioning is VIAC. So, we compare both in detail.
Finpension 3a vs VIAC
I have recommended VIAC as the best third pillar account in Switzerland in the past. So, we see how Finpension 3a compares to VIAC. Is it the new best third pillar account in Switzerland?
We must start with the fees. Finpension 3a is cheaper (0.39%) than VIAC (0.45%). While this difference does not sound like much, it is significant. Finpension 3a is more than 10% cheaper than VIAC.
In addition, Finpension has a very low spread (0.05%) for currency conversion, while VIAC has a large one (0.75%). VIAC is indeed using netting to reduce that fee. In practice, it costs less than 0.25% with netting. Also, a lot of funds are in CHF, which makes it cheaper. It is a one-time cost, but it is still cheaper at Finpension 3a.
Both services let you invest 99% in stocks.
You also have more freedom when creating a custom strategy with finpension 3a than with VIAC. For instance, you can create a portfolio with a 99% foreign currency exposure with Finpension 3a, while VIAC limits you to 60%! This feature is great for investors with particular needs!
While Finpension is better than VIAC for aggressive investors, VIAC has an advantage for conservative investors. Indeed, with VIAC, you can keep cash instead of bonds. And you do not pay fees on the uninvested part of your portfolio. So, if you only want to invest 20%, you can keep 80% in cash, and your fees will be lower.
Both VIAC and Finpension have a mobile application and a web application. So, they are both very practical.
Both services are quite transparent and look very honest. They both have a good level of security and safety for your assets. Finally, they both have an excellent reputation as well.
Given the higher allocation to stocks and the lower fees, Finpension 3a is a better third pillar than VIAC. Finpension 3a is the new best third pillar in Switzerland! However, VIAC is only slightly worse and is still a great option.
For conservative investors that do not want bonds, VIAC is slightly better since it lets you invest in cash.
If you want more details, I have an entire article about VIAC vs Finpension 3a.
Finpension 3a vs Frankly 3a
Frankly 3a is a popular third pillar from ZKB.
Again, we start with the fees. Finpension 3a is cheaper (0.39%) than Frankly 3a (0.45%). Finpension 3a is more than 10% cheaper than Frankly 3a.
Frankly 3a only lets you invest 95% in stocks, compared to the 99% of Finpension 3a. In the long term, this will make a significant difference.
Both services are mobile-only. The main difference is that a large bank (the Zurcher Kantonal Bank) is behind Frankly, while Finpension 3a is independent.
Frankly 3a forces you to have at least 70% of your portfolio in CHF, with currency hedging. This will diminish the returns in the long term.
Overall, Finpension 3a is significantly better than Frankly 3a. The fees are lower, and the allocation to stocks is higher. And Finpension 3a does not force you into a lot of hedging.
If you want more information, I have a review of Frankly 3a.
Finpension 3a FAQ
What is the maximum allocation to stocks with Finpension 3a?
You can invest up to 99% in stocks!
Can you invest in cash with Finpension 3a?
No, but you have access to money market funds, which are very similar.
Is Finpension 3a regulated?
Yes, Finpension 3a is regulated as a third pillar foundation, in Switzerland.
How many Finpension 3a portfolios can you have?
You can have up to 5 portfolios with Finpension 3a.
What is Finpension 3a's custodian bank?
Their custodian bank is Credit Suisse.
What is Finpension 3a great for?
Finpension 3a is great for long-term investors that want to invest their third pillar. You can invest either aggressively or conservatively, but this service is better if you keep your funds invested for a while.
What is Finpension 3a not great for?
Finpension 3a is not great if you do not want to invest your third pillar. If you prefer a cash third pillar, there are better options. Also, if you do not plan to keep your third pillar for long, Finpension 3a may not be the best option.
Finpension 3a Summary
Finpension 3a is the best third pillar available in Switzerland. They offer very high allocation to stocks, awesome customization and all this at a very low price!
Product Brand: Finpension
5
Finpension 3a Pros
Let's summarize the main advantages of Finpension 3a:
- Extremely low fees, only 0.39%!
- You can invest up to 99% in stocks.
- No currency hedging is forced on the investors.
- Straightforward registration process.
- You can create a custom investing strategy with a lot of freedom.
- No foreign equity limit
- No foreign currency limit
- Excellent transparency on all the funds and fees on their website.
- You can create up to five portfolios.
- Mobile and web applications.
- You can choose between UBS, Credit Suisse and Swisscanto funds.
- Good second-factor authentication.
Finpension 3a Cons
Let's summarize the main disadvantages of Finpension 3a:
- Finpension is a young product
- The identity is not verified during account creation
Conclusion
Finpension 3a is the best third pillar in Switzerland.
Use the FEYKV5 code to get a fee credit of 25 CHF*!
*(if you deposit 1000 CHF in the first 12 months)
- Invest 99% in stocks
I was expecting a good third pillar account by finpension, and I am not disappointed. The finpension 3a offer is a great third pillar account. It is the best third pillar in Switzerland (for people investing fully in stocks).
The fees are very low, with a minimum of 0.39%% with the proposed strategies. The overall pricing system is also very advantageous.
On top of that, you can invest up to 99% in stocks. And with a custom strategy, you can have an extremely well-diversified portfolio with only one or two funds.
All this makes Finpension 3a better than VIAC! I have moved all my accounts to Finpension 3a now. I have four portfolios with them and will open the fifth in 2023.
If you do not want to fully invest in stocks and do not want to invest in bonds, VIAC can be better. Indeed, you would only pay the fees on the investment part and not the cash part.
However, for aggressive investors, Finpension 3a is currently better than VIAC.
If you open a Finpension 3a account, please use my code FEYKV5. This code will give you a fee credit of 25 CHF (if you deposit 1000 CHF in the first 12 months) and will help my blog as well.
If you liked this review and this company, you would like my review of finpension vested benefits offer.
What do you think of this new Finpension 3a account?
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Hi again Mr. Poor Swiss
I trust you are good.
I have another question for you.
Since the very long term of this kind of investment, would you suggest to max out the the payment as soon as possible to get them all invested quickly, or would you split the payment on all the months to get an average on buy price?
Thanks again for this great blog.
Hi Azz,
Thanks for your kind words.
I would suggest maxing it out as soon as possible at the beginning of the year if you can.
But it won’t make a huge difference since the investments are very limited.
In practical, I recommend avoiding DCA.
Thanks for stopping by!
Hi PS,
Just opened my first 3a account (with Finpension) – yay.
Quick Q: What are the benefits of several portfolios for someone who is just beginning? I am no Diversify investments? Or would I just be losing out by dividing my “investment pot”? I looked into the staggering of withdrawal, but reaching the ripe old age of 64 is more than 25 years away so I don’t really consider it too much as I expect regulations will change until then.
Anyway, I was thinking of opening two (or more) portfolios and topping up the same amount in each (being careful to never go over the yearly limit). Say, one for Sustainable and one for Global (both at 99%) would that seem like a crazy idea? Part of me thinks it is a good way to diversify, but I also think that in the long run, I can make more money with one portfolio with X rather than 2 portfolios with half of X each.
I believe I can readjust the strategy later, so at this point it is more of an experiment, as in 12 months I will be able to compare the two portfolios on equal footing and readjust my strategy as required.
What do you think?
Hi PS,
The only advantage of having several portfolios is for staggered withdrawals. There is no other advantage.
Now, it’s true that regulations can change in the next 25 years. But it’s also true that if they do not change you can save a lot of money (several thousand CHF) by having several portfolios.
And you can have several times the exact same portfolio. The important thing is separation.
I do not think it’s crazy, no if you want some sustainable investing.
Now, having N portfolios with 1/N the money is exactly the same as having 1 portfolio with the entire money. The profits will be the same. Again, the only difference is staggered withdrawals.
You can change the strategy anytime you want, but you can never split the third pillar into parts.
So, for me, having at least two third pillar accounts is important.
Thanks for stopping by!
Thank you for the answer to my question! Gavin asked earlier about the bank behind VIAC and finpension. What are your thoughts about this? How secure do you think will be the money invested with finpension vs VIAC? Many thanks in advance!
Hi Kan,
Finpension uses Credit Suisse while VIAC uses WIR. There should be no difference in risks between these two banks.
Third pillar assets in cash are only privileged, not protected, by esissuise. But securities are protected by segregation in both cases.
Thanks for stopping by!
Hi Poor Swiss
Thank you for a very helpful article.
I looked at the finpension website, and I am not very clear. Their Equity 100 shows allocations to each fund, so there is 29% weight in Equity Switzerland Large Cap Blue. But you are saying that it is possible to put entire 99% into the Equity World ex-CH. So these allocations are only shown as an example, or what?
Is there any chance you could do an interview with the finpension CEO, like the one you did for VIAC?
Thank you for your hard work!
Hi Kan,
The predefined strategies will not let you invest fully in Equity World. But you can do a custom strategy when you are in the app. And this custom strategy has full freedom, so for instance, it’s possible to have 99% in World fund. Does that make sense?
An interview is a good idea, I will try to organize that.
Thanks for stopping by!
Hi Poor Swiss
Great article.
I have been very impressed with VIAC up to now so even with the fee difference, it is not enough for me to switch (personal choice i know)
The biggest worry that I have with VIAC is the small bank they have behind them (WIR bank if im correct)
So a big plus for me would be Credit Suisse being the Custodian here)
Or am i confusing Bank and Custodian? Any thoughts?
Thanks
Hello Mr Poor Swiss,
You are a good man finding all this useful information and sharing it; really fantastic job you are doing.
Would you know the percentage on taxes you pay for your 3rd pillar withdrawal?
Thank you very much.
Your big fan,
Pavla
Hi Pavla,
Thanks for your kind words :)
Unfortunately, this will vary from state to state. And they use a systems with different rates based on how much money you have.
UBS has a calculator for that. You can try the one from PostFinance too.
Thanks for stopping by!
Hi Mr. P.S.
first of all thank you for all the info you are sharing!
I’m thinking about using a 3a pillar account as a start point for my investments. As an expat my employer pays taxes on my behalf and I don’t fill any tax return, anyway I see that it’s possible to send a “tariff correction” form for 3a and 2b pillars, so I think it’s worth to try.
I have few doubts, maybe you could help :)
Are World ZBH and World ZB just the same fund, one with hedging and the other without? If yes, where are the hedging costs hidden? I see both of them priced 0%.
Where did you find the 0.05% spread for currency conversion? I can’t see it anywhere in their website.
If someone is getting closer to the withdrawal age, what should be a go-safe strategy within finpension considering that bonds could be negative?
Since I start from scratch, is splitting the 3a payments equally into 5 account the best strategy? This way I should be “working” on the principal balance only so the sum should be the same as paying all in one account, it’s linear right?
Thanks.
Hi Azz,
Does your employer make you pay back your taxes?
If you do not pay your taxes at all, there is very little incentive in investing in the third pillar. In fact, you would be better off investing directly in a broker account.
Yes, it’s just the same. The main costs of hedging will be shown in the performance of both funds. It’s very difficult to compare hedged and non-hedged investments.
Regarding the spread, I can’t find it on their website either. But this is something that Credit Suisse charges when using a different currency. This is something that Finpension told me, but it should be on the website ideally.
I do not know about a go-safe strategy indeed. It may actually be worth using bonds, they may not be negative forever. And even if negative, the bond funds are not losing much value over time. So, unless you keep them for several years, you should be fine. Otherwise, you could transfer to another company for safe-cash for a few years.
If you start for scratch, the best way is indeed to invest equally into the 5 accounts!
Thanks for stopping by!
Thanks for the answer.
All clear but the first point.
I understand that the 3a incentives are two: the deduction of the paid amount from the total gross used to calculate withholding tax; the amount paid in 3a is not considered when calculating wealth tax.
Only the first point would apply to me (I pay no wealth in this situation). I’m not sure about how the deduction is calculated, I will ask the tax office.
Anyway, what would be the rough amount of tax saving that could make the 3a worth?
Assuming that in the next few years I could reach the 120k salary that would require me to fill the tax return form (and so the 3a could be again a valuable option), would it make sense to start it already?
About moving to another company for safe-cash, does it mean that I can sell just some of the stocks and transfer the cash to any other account? I thought I could only do it if moving 100%.
Hi Azz,
It’s true that there are two tax advantages: the reduction of the taxable income and the reduction of the wealth tax. But the first one is the one that really makes a difference while the second one is a nice small bonus.
Normally, even if you are paying tax at source which seems to be your case, you can fill a simplified tax declaration for some items, like the third pillar. If you can do it in your state, it would be worth doing yes.
In general, how much you are going to save depends on how much you are taxed. If your marginal tax rate is about 20%, you will get about 20% returns. In general, people save between 1000 and 2000 with a full contribution to the third pillar.
No, you can’t sell only some parts, you will have to sell an entire account. If you have several portfolios at the same third pillar company, I think it could be possible to move away only one of these accounts (after selling the shares). But I am not sure about that.
Thanks for stopping by!
Thanks for the article,
You mentioned Viac stocks being hedged, are all of them being hedge or only some options? or options are such that you can only have X% stocks on non-hedged foreign currency?
Hi Hector,
VIAC is offering some currency-hedged funds, but the problem is not really there. The problem is that you are limited to a maximum of 60% in foreign currencies in your portfolio. So, either you use heading or you use a lot of Swiss stocks.
Most of the funds are non-hedged.
Does that make sense?
Hi again Mr Poor Swiss,
Thanks for the great answering my other questions I really appreciate. Just another question which is pretty generic. If I would contribute in 3rd Pillar with Finpension or VIAC to maximum 6826CHF this year. Will I be obliged to invest the same amount in next years or I can invest any amount I want for next years? Thanks in advance for your patient answering my questions.
Best wishes,
Sikarin
Hi Sikarin,
Each year, you can invest any amount you amount. If you invest the maximum this year, you can still invest whatever you want the next year.
There is never any obligation to invest in the third pillar.
Thanks for stopping by!
This is contrast to what I’ve learnt from contribute in 3rd Pillar from insurance company. The contract seems to be fixed and I obliged to pay the same amount every year (or month).Thus, here is one of the good reasons not to sign off 3A with insurance companies. Feel free to fix if my statement is incorrect. Thanks a lot.
Hi Sikarin,
Indeed, if you do an insurance third pillar, you will not have a choice. Only with a bank third pillar, you get the freedom to invest when you want and how much you want.
Thanks for stopping by!
Hi again ,
Thanks a lot for the confirmation. I think this year I will sign off 3rd Pillar from Finnpension. After reading your articles, it confirms that Finnpension is probably the best 3rd pillar in Switzerland.
Best,
Sikarin
HI
Thank you for your help and continuous great content.
Was hoping you could help me with a question I had, I heard that investing in a 3rd pillar cash only, I was able to take it out every… 5 years and use that cash to pay into my mortgage to reduce the loan.
Not as an committed amortisation but as separate activity. I save for 5 years in 3rd pillar, then take it out and pay it in.
Are you able to help clarify this?
Thank you
Tyrone
Hi,
Yes, that’s correct. You can use your third pillar to amortize your mortgage. I do not think it makes much sense these days with very low mortgage rates. But this is something that you can do.
You can also use your third pillar to contribute to your second pillar but it makes even less sense.
You can do that regardless of whether your third pillar is invested or not. But if it’s invested in the stock market, you will have to sell your shares first.
Does that make sense?
Thank you my friend for the continuous feed of knowledge that helped ME (and I think many others) a lot!
Regarding the “multiple 3rd pillar accounts” that you suggest, does the maximum tax-efficient amount count per ‘person’ or per ‘account’? I just joined Finpension (THANK YOU) and I was told that my maximum tax-efficient amount will be around 6800 CHF per year! … IF I have another account (with Finpension or with other providers), will I receive another tax-efficient amount and the total becomes over 14,000 CHF per year?
It may sound stupid question, but I think these pension accounts are tax-efficient BECAUSE the money is locked until retirement! If you have multiple accounts, your money will be locked multiple times :)
Thank you for your time and great effort!
Best!
Hi Mohamed,
The limit of 6826 CHF per year (for 2020, will be increased to 6863 next year) is per person, not per account.
The advantage of having multiple accounts is only for withdrawals. You can start withdrawing the first account 5 years before retirement age. So, having 5 accounts let you spend less in taxes in most states.
The third pillar is tax-efficient because you can deduct your third pillar contributions from your taxable income.
Thanks for stopping by!
Thank you for your explanation!
I think you wrote “per month” rather than “per year” :)
Also, the third pillar is tax-efficient because you can deduct it from your taxable income BECAUSE this amount is locked for a future withdrawal at the retirement age, which “should” reduce the load from the governments to take care of their elder people! That is why governments put incentives for citizens to go that direction :)
Thank you again for your reply and your VALUABLE blog.
Best,
Mohamed
That’s indeed per year! (Unfortunately)
I fixed that in my comment, thanks :)
Yes, this is the reason they make it efficient, but investors are more worried about the what than the why ;)
Thanks for stopping by!