Finpension 3a Review: An excellent new third pillar

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Finpension 3a Review: Is it the new best third pillar?

Finpension just started their third pillar offer: Finpension 3a. And it is extremely interesting.

Finpension is already behind valuepension, the best vested benefits (second pillar) account available in Switzerland. So, it is great that they now start to offer a third pillar account.

So, let’s review Finpension 3a in detail.

In this article, I will look at many things about Finpension 3a: their fees, their investment strategy, and their security. Finally, I am also going to compare it against other third pillar providers.

And if you use my code, you will have a chance to win 6883 CHF in your third pillar!

Finpension 3a

Best Third Pillar!
Finpension 3a

Finpension 3a is the best third pillar in Switzerland.

Use the FEYKV5 code to get a chance to win 6883 CHF in your third pillar*!

*(if you deposit 1000 CHF in the first 12 months)

Finpension 3a is a pension foundation that is 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 yourpension collective foundation that is a pension solution for the extra-mandatory part of the second pillar. Customers liked it so much they wanted to keep their account after they stopped working. So, finpension started their vested benefits offering (valuepension). And now, they have started their third pillar offering: finpension 3a, in 2020.

It is important to note the foundation itself is separated from the management company itself. Doing so allows for having a clear separation of books for the assets.

The third pillar account can be accessed via the mobile application available on the App Store and the Google Play Store. But they have plans to offer a web interface as well in the coming months.

If you want more information, I interviewed finpension’s CEO.

Investment Strategies

Finpension 3a is heavily focused 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 rest of the portfolio is allocated to bonds and 9% to real estate. But each strategy has 1% allocated to cash. For instance, Finpension Equity 100 is 99% of stocks, and 1% of cash. Finpension Equity 60 has 60% of stocks, 30% of bonds, 9% of 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 on mostly Swiss equities.
  • Sustainable: A portfolio investing only in sustainable companies, mostly with ESG principles.

So, together, you can choose between 18 strategies. There should be enough for everybody! If you are not satisfied with the strategies proposed, you can create your own individual strategy. For this, you will be able to pick in their large range of 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 normally reserved for institutional investors.

To be precise, they invest in Credit Suisse institutional funds, which are big, efficient, and cheap.

All the strategies are very well detailed on the website. You can see in which index funds each strategy is investing in. For instance, here is the finpension equity 100 strategy:

Finpension 3a: Equity 100 Investing Strategy Global
Finpension 3a: Equity 100 Investing Strategy Global

This strategy has a good mix of Swiss Stocks and Global Stocks. And it also has a good diversification between small caps and large caps. If I were doing it myself, I would use fewer funds, but this strategy should be a good fit for most people.

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 will have to invest in bonds. The problem is that currently, Swiss and European bonds have negative yields. As such, they are a poorer investment than cash. This may change in the future, but this is the case. So, strategies that invest in bonds are not that good.

Creating your custom strategy can be done from the mobile application. It is straightforward, and you have very few limits on what you are doing. 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! One of the limits you have is that you cannot have too much invested in a single stock. You will have limits on Swiss Stock Market Indexes that are heavily weighted in three huge companies.

It is interesting to note that all of their strategies have only 1% cash. You cannot have a cash third pillar account.  However, if you choose a custom strategy, you can use a money market fund. So, you will be able to invest mainly in stocks, bonds, real estate, and alternatives (currently only gold).

The cash in your account (after a deposit) is used to buy shares of the funds on the first banking day of the month. And if you want to change strategy (free of charge!), the change will be done on the first banking day.

Your portfolio will be rebalanced once a month, on the first banking day of the month. Rebalancing happens if the allocated deviates for more than one percentage point.

Overall, the investing strategies of the finpension 3a accounts are great! I do not have much to say about it. They offer a great allocation to stocks, a 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 great thing.

However, if you do not want to invest 99% in stocks, you will be forced to invest in negative-yielding bonds. So, these accounts are great for 99% in stocks, but not that great for people with a smaller allocation to stocks.

Fees

Now that we have seen their investing strategies let’s look at the fees of investing with finpension 3a.

Finpension is using a flat rate for their fees. This flat rate is set at 0.39%, without VAT. With a VAT of 7.7%, this flat rate is 0.42%. Therefore, we will use 0.42% as the base fee. The 0.39% fee is the marketing number.

On top of that, you will pay the product costs. These costs depend on which strategy you are using. Fortunately, finpension is an institutional client of  Credit Suisse. And institutional clients can get zero-fees on some of the index funds. So most of the funds will have zero fees. There are a few exceptions like Real Estate funds and Emerging Funds. But even these exceptions have very low fees.

For instance, the finpension Equity 100 strategy has 0.02% product costs. And even better, if you do a custom strategy, you can reach 0.00% product costs!

Zero TER for a custom strategy with Finpension 3a
Zero TER for a custom strategy with Finpension 3a

So, with the Equity 100 strategy (the best strategy for the long-term), you will have total costs of 0.44% per year! This fee is incredibly low, 10% cheaper than the cheapest alternative! And if you use a custom strategy, you can reach 0.42%!

And it is really it! Finpension does not charge any margin on foreign currency exchanges. But the bank they are using has a spread of 0.05% on currency conversion. Importantly, most of their funds are in CHF. They do not have any load or redemption fees. But some funds have small load and redemption fees (below 0.10%).

Finally, you can even save on fees! If you recommend Finpension 3a to somebody that actively uses it, you will receive a fee credit of 25 CHF. This 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 can even win one year of third pillar contribution.

Overall, the fees of the Finpension 3a account are excellent! All of their fees are at least as good as the cheapest third pillar in Switzerland, and often better. Finpension 3a account is the cheapest third pillar account for people wanting to invest heavily in stocks!

Open a Finpension 3a account

If you use my code FEYKV5, during the process, you will have a chance to win 6’883 CHF (if you transfer or deposit CHF 1’000 within the first 12 months).

Opening a Finpension 3a account is very 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 as you go.

They will start by asking for your phone number and a password for your account. Then, they will compute your investment horizon based on your age.

My investment horizon with Finpension 3a
My investment horizon with Finpension 3a

After that, you will have to answer the common questions about your 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.

My risk tolerance by Finpension 3a
My risk tolerance by Finpension 3a

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.

A great thing is also 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.

Security

If you want this money to last for a long time, it is important to consider the security of each institution.

Let’s start with the technical security of the Finpension 3a application. All the communications between the application and the servers are encrypted. And you will connect with a phone number and a password.

My main complaint here is that the application is not bound to your phone. It means that you can connect from any phone. I would have preferred a second-factor authentication. Now, it is not critical since you cannot withdraw money directly from the application. But you can access a lot of information and numbers on it. So extra security would be good.

Also, I would actually prefer having a proper identification check when creating an account.

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.

As for your securities, they are invested in Credit Suisse’s institutional funds. Credit Suisse is managing more than 100 billion CHF in pension assets. It is a good point to have a large manager, not a small unknown bank.

All the funds are set on the balance sheet of the foundation. 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 the Finpension 3a is sufficient but could be better. The fact that the foundation is separated from the asset management company is a great thing for safety. I wish for extra authentication and identification on the app. But it should not put your assets at risk.

Finpension 3a vs VIAC

Until now, I have always recommended VIAC as the best third pillar in Switzerland. So, let’s see how Finpension 3a compares to VIAC. Is it the new best third pillar account of Switzerland?

Let’s start with the fees. Finpension 3a is very slightly cheaper, with 0.44% (0.42% with custom strategy) than VIAC at 0.45%. This is not a very significant difference.

On top of that, Finpension has a very low spread (0.05%) for currency conversion, while VIAC has a large one (0.75%). Now, it is true that VIAC is using netting to reduce that fee. In practice, it cost less than 0.25% with netting. Also, a lot of funds are in CHF, which makes it cheaper. And it is a one-time cost. But it is still cheaper at Finpension 3a.

With Finpension 3a, you can invest up to 99% in stocks while you are limited to 97% with VIAC. Again, it is not a huge difference, but it will add up in the long-term.

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!

If you do not want to have 99% invested in stocks, VIAC may be better than Finpension 3a. Indeed, they let you invest in cash. With finpension 3a, you will have to invest in negative-yielding bonds which may not be great. So, for low allocation to stocks, VIAC may be better.

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. And they both have a good level of security and safety for your assets. They both have a great reputation as well.

Given that higher allocation to stocks and the lower fees, Finpension 3a is a better third pillar than VIAC. This makes Finpension 3a the new best third pillar in Switzerland! However, VIAC is only very slightly worse and is still

For people that do not want to be fully invested in stocks, VIAC is probably still better. It does not make much sense currently to invest in negatively-yielding bonds. But if you have a long investing horizon in front of you, you should consider investing fully in stocks.

If you want more details, I have an entire article about VIAC vs Finpension 3a.

Finpension 3a Pros

Let’s quickly summarize the advantages of Finpension 3a:

  • Extremely low fees!
  • 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

Finpension 3a Cons

Let’s quickly summarize the disadvantages of Finpension 3a:

  • Finpension is a really young product
  • The identity is not verified during account creation
  • Invest in negative-yielding bonds.
  • No second-factor authentication on the mobile application.

To be honest, these cons are quite minor.

Conclusion

Best Third Pillar!
Finpension 3a

Finpension 3a is the best third pillar in Switzerland.

Use the FEYKV5 code to get a chance to win 6883 CHF in your third pillar*!

*(if you deposit 1000 CHF in the first 12 months)

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 even actually the new best third pillar in Switzerland (for people investing fully in stocks).

The fees are very low, with a minimum of 0.44% with the proposed strategies. And you can even go to 0.42% with a custom strategy. The overall pricing system is very advantageous, as well.

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 do not plan on moving my funds directly, but it is something I am going to consider in the future. We will see if VIAC makes any changes in reaction to this announcement or not. But if you do not have one already, Finpension 3a is a great third pillar to get started!

Now, there is one area where Finpension 3a is worse than VIAC. If you do not invest fully in stocks, VIAC may be cheaper. Indeed, with Finpension you will have to invest in negative-yielding bonds. At VIAC, you will be able to invest in cash (with a 0.1% return), which is currently better than bonds. And at VIAC, you will only pay the fees on the invested part.

But for aggressive investors like me, Finpension 3a is currently better than VIAC.

If you open a Finpension 3a account, please use my code FEYKV5, this will give you a chance to win 6883 CHF!

If you liked this review, you will like my review of finpension vested benefits offer – valuepension.

What do you think of this new Finpension 3a account?

Mr. The Poor Swiss

Mr. The Poor Swiss is the author behind thepoorswiss.com. In 2017, he realized that he was falling into the trap of lifestyle inflation. He decided to cut on his expenses and increase his income. This blog is relating his story and findings. In 2019, he is saving more than 50% of his income. He made it a goal to reach Financial Independence. You can send Mr. The Poor Swiss a message here.

84 thoughts on “Finpension 3a Review: An excellent new third pillar”

  1. Bonjour,

    Merci beaucoup M. The Poor Swiss pour vos conseils. Le problème dans tout ca, c’est que c’est toujours un investissement qu’on ne pourra jamais utiliser avant la retraite s’il y a un besoin urgent en dehors d’un achat immobilier.

    Question : y a t’il des codes parrainages comme sur VIAC lorsqu’on ouvre un compte ?

    Cordialement

    1. Bonjour,

      Pour la prochaine fois, merci de commenter en anglais sur les articles en anglais.

      Pour les personnes qui veulent investir sérieusement, le troisième pilier ne sera qu’une petite partie de leur portfolio et ils auront donc une partie non-négligeable utilisable. Mais en théorie, les investissements ne devraient jamais être utilisé en cas d’urgence, un fonds d’urgence est là pour ça.

      Non, pas de code de parrainage pour l’instant.

  2. Pity they don’t offer a NASDAQ fund – that’s pretty much the only index I’d like to track long term.

    That said the world ex CH Quality is interesting. Sort of like a poor mans Fundsmith. I don’t like index investing as I don’t like investing in low quality “value” companies, and in highly cyclical businesses like airlines and financials – this would remove most of that. It’s not as good as Fundsmith but it’s on the right track.

  3. Hi Mr. The Poor Swiss,

    I discovered your website recently, and I found it so useful. Thank you so much for what you are doing!

    I read your post and all the comments with your answers, and I wanted to have your mind on how to set up 99% Equities with FinPension given ~35k CHF or try to replicate VT. Knowing that I will be using also IBKR for 10-20k CHF for now, I’m hesitating between two strategies:

    99% CSIF (CH) III Equity World ex CH Blue – Pension Fund ZB
    So that 0.00% TER and have only one fund (simplicity is better)

    Or

    78% CSIF (CH) III Equity World ex CH Blue – Pension Fund ZB
    11% CSIF (CH) Equity Emerging Markets Blue DB TER 0.09%
    10% CSIF (CH) III Equity World ex CH Small Cap Blue – Pension Fund DB TER 0.09%
    (I have removed the 1% and 2% of Swiss shares because of rebalancing).

    Of course, there would be other investments on IBKR to also take into account the Swiss shares, VT, etc., hence my question.

    What would be your recommendation?

    Thank you, and I wish you a relaxing weekend!

    1. Hi Matteo,

      I would persnally use the second portfolio to have some emerging markets and some CHF. But it will not a huge a difference in the long-term I believe. The important thing is to consider your entire net worth allocation as you mentioned, not only the third pillar.

      Thanks for stopping by!

  4. Hello there!
    I just opened a Finpension account and I tried to do my best to modify the equity 100 portfolio.
    This should be a mix between VT and what they proposed:

    CSIF (CH) III Equity World ex CH Blue – Pension Fund ZB – 49%

    CSIF (CH) Equity Switzerland Large Cap Blue ZB – 20%

    CSIF (CH) Equity Emerging Markets Blue DB – 11%

    CSIF (CH) Equity Switzerland Small & Mid Cap ZB – 10%

    CSIF (CH) III Equity World ex CH Blue – Pension Fund ZBH – 9%

    Cash – 1%

    Do you think it’s something that can work?
    Thanks!

    1. Hi wavemotion,

      This seems reasonable. Questions:
      * What would be the advantage for you compared to the default portfolio?
      * Are you sure you want to hedge in CHF? I would actually use only one world fund at 58 instead of 49+9. Since your third pillar is not your entire assets, I would either hedge everything or nothing here.

      Thanks for stopping by!

      1. Hey!
        The default portfolio (Equity 100) is:

        CSIF (CH) Equity Switzerland Large Cap Blue ZB – 29%

        CSIF (CH) III Equity World ex CH Blue – Pension Fund ZB – 20%

        CSIF (CH) III Equity World ex CH Blue – Pension Fund ZBH – 20%

        CSIF (CH) Equity Emerging Markets Blue DB – 10%

        CSIF (CH) Equity Switzerland Small & Mid Cap ZB – 10%

        CSIF (CH) III Equity world ex CH Small Cap Blue – Pension Fund DB – 10%

        Cash – 1%

        So I was trying to create something in the middle.

        Another option (additionally to the one you proposed above):

        CSIF (CH) III Equity World ex CH Blue – Pension Fund ZB – 84%

        CSIF (CH) Equity Emerging Markets Blue DB – 12%

        CSIF (CH) Equity Switzerland Large Cap Blue ZB – 2%

        CSIF (CH) Equity Switzerland Small & Mid Cap ZB – 1%

        Cash – 1%

        That I guess it’s more similar to what you wrote in a past comment.

        If I invest already in US stocks and VT, do you think that also the 3rd pillar should be “exposed” to foreign currencies?

        Thanks!

        1. Again, why are you trying to create something in the middle? Without any goal, it’s difficult to know if your portfolio make sense.

          In your second proposal, it does not make any sense to have 1% and 2% investments, just get rid of them. They will not matter in the long-term.

          Personally, I try to diversify in each of my accounts. But you could consider the bigger picture. If your third pillar is 20% of your investments, you could invest 100% in CH stocks and not invest in CH stocks in your main portfolio. It depends on many factors.

          Thanks for stopping by!

  5. Someone just informed me of the existence of finpension; I was with VIAC so far. I like that there are no limits on equities. For instance I wanted to have a 100% US Pension strategy on VIAC but that is not possible. I will create one on Finpension and max it out for 2021. But for now I will keep what I have in VIAC without transferring it; perhaps they will introduce some changes as you write. Also I personally find that the Finpension app looks worse from a design perspective. It doesn’t matter too much but a clean design always inspires more confidence.

    1. Hi Yora,

      Yes, the VIAC app is more polished and feels more well-designed. But since we do not use the app a lot, I do not think it is a big deal.
      I also may invest in Finpension in 2021. But I will also keep my VIAC account for the time being.

      Thanks for stopping by!

  6. Hi Mr. Poor Swiss

    Thanks for this great article! finpension equity 100 strategy best fits to my needs. Nevertheless, I would like to customize this strategy a bit. 39% Swiss Stocks looks not optimal to me in terms of diversification (home bias, SMI heavily weighted in three huge companies).

    I prefer to invest 99% in a World index fund which also includes Swiss Stocks. But this seems not to be possible. Did I get it right that finpension only offers World (minus CH!) index funds? If yes, how cut I achieve a max geographical diversification by lowest costs?

    You wrote that you would use fewer funds. Which funds would you choose and why (reduce costs, diversification, …)?

    Thanks in advance for answering all my questions ;-)

    1. Hi Chris,

      I think that the simplest way to replicate VT would be to get 84% World Ex CH shares, 10% Emerging Markets shares and then 5% (slight overweight) Swiss shares. That would be only three funds and would get the entire world coverage.
      They have many index funds.

      Does that answer your questions?

  7. Hello Mr. The Poor Swiss

    Thanks for the article.

    I am ready to open a third pillar account; what I am slightly worried about tho is the security of my funds with this “start-up” company that could disappear at one point of a time within next 20-30 years. Am I protected somehow?

    In addition, I was quite surprised when registering with Finpension that you’re allowed to open an account so easily without being asked an ID document. Is it normal for Switzerland?

    Regards
    Leo

    1. Hi Leo,

      Regarding security, you should be fine. The assets will not be held by Finpension but by Credit Suisse. So, the risk is more if Credit Suisse bankrupts, which is more unlikely than Finpension’s bankruptcy.
      For the second point, this is indeed surprising. It’s not the norm, no. Most systems will ask you for your ID before you register. Now, as long as you enter the correct information, you should be fine. When you will want to withdraw the money, you will need to provide an ID document. They have taken the choice of making the sign up easier and delay the authentication to when you really need it. I would also have preferred it the other way around.

      Thanks for stopping by!

  8. Thanks for the review!

    One note, in the last paragraph you might have a mistake:
    “Now, there is one area where Finpension is better than VIAC. If you do not invest fully in stocks, VIAC may be cheaper.”
    – I believe you meant “where VIAC is better than FP”?

    Cheers,
    D

  9. Hi there,

    as I am planning on setting up my first 3a account, but at the same time, I am going to start off on some investments in the market, I have been wondering: Do you consider 3a as part of your total portfolio or as a completely separate asset?
    I mean, if you are investing 30k in the market (strategy is to have 70% stocks), where 7k is the 3a (99% in stocks), do you consider this for your further investments via DEGIRO or Robo-advisor (0.7*30k – 0.99*7k = stocks investment over a broker/robo)?

    Additionally, what would be your take on the 3a for a beginner?
    I was thinking on opening 3 accounts with exact same strategy (99%) and transferring 1/3 to each.
    I do not want to open too many, so that I have flexibility in the future when there will be some more competitive solutions (like this one appeared for VIAC).

    Thanks for your help!

    1. Hi Xanoso,

      I consider my third pillar into my overall net worth and asset allocation. So, if my goal is to have 20% in bonds, I will consider the stocks in my third pillar as counting towards the stocks in my overall allocation.
      Now, I have a portfolio allocation of 80% VT and 20% CHSPI for my actual broker portfolio.

      Your strategy makes sense. It’s good to start with several accounts. Another idea would be to open one account each year for the first five years and then rotate over them.
      Keeping the number at 3 makes sense for now, but keep in mind that you can never split a third pillar account. You can merge them, but not split them.

      Thanks for stopping by!

  10. Thank you for the very interesting article. At the moment I have already two accounts with VIAC but have only deposited half of the allowed amount for 2020. I will deposit the other half before the end of the year. Now I am considering opening an account at Finpension since the fees are significantly cheaper than with VIAC. I only hesitate a little bit because I have already two accounts at VIAC and I probably cannot open a new account every time there is a better 3a provider. Do you know what the cost are to close an account at VIAC or at Finpension (in order to switch to another provider)?

    1. Hi Chnobli,

      You can switch 3a accounts for free, at least for VIAC and Finpension 3a. So, you should not worry about that.
      You can keep several providers. So for now, it is also fine to have accounts at both VIAC and Finpension!

      Thanks for stopping by!

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