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En Suisse, cotiser à votre troisième pilier est l’un des meilleurs moyens d’économiser des impôts. Je recommande à tout le monde de contribuer à leur troisième pilier.
Mais contribuer à votre troisième pilier n’est pas suffisant. Vous devriez investir l’argent dans votre troisième pilier. Cela signifie que vous devez choisir le meilleur troisième pilier pour votre argent. Comme il existe de nombreuses options, il peut être difficile de choisir le meilleur troisième pilier pour vos besoins.
Cet article est donc là pour vous aider ! Nous allons voir comment choisir le meilleur troisième pilier !
What makes the best third pillar?
First of all, we have to think about what makes the best third pillar. It is essential to decide which factors will drive the choice.
I am going to assume you already know about the third pillar and are contributing to it. If you do not, you should learn why you should contribute to the third pillar.
We are only going to consider bank third pillars, not insurance third pillars. Indeed, in almost every case, a bank third pillar is much better than an insurance third pillar.
The goal of your third pillar is to provide you with enough money to retire comfortably. Therefore, you want your invested money to grow as much as possible while not taking too much risk. So, the best third pillar must support this goal!
There are three critical factors to choose the best third pillar:
- A large allocation to stocks to increase your returns in the long-term.
- A diversified stock allocation to reduce the volatility of your portfolio.
- Low management fees to avoid wasting your returns in fees.
Since we are counting on the long-term, there are also some things we can ignore:
- How good the app looks does not matter. You are going to spend less than an hour every year.
- The interest on the cash part is irrelevant unless you do not want to invest.
Let’s delve more into details in the three critical factors.
Allocation to stocks
The best third pillar has a significant allocation to stocks.
It will depend on your situation, of course. You need to decide for yourself the allocation to stocks that you need. Moreover, Swiss bonds are in the negative territory now. Therefore, what is not invested in cash should be invested in cash.
For me, I want as much as possible of my third pillar into stocks. I already have bonds in my second pillar. My current allocation to bonds is more than enough. Ideally, a third pillar will have a 100% allocation to stocks.
The best third pillar has a diversified stock allocation.
Switzerland is too small a country to only invest in it. We need to have global stocks (stocks outside of Switzerland). Ideally, the allocation should be the same as a world stocks fund. Since the Swiss stock market represents about 3% of the entire stock market, we should avoid investing much more than that.
Unfortunately, this is not possible in Switzerland. The law states that the third pillar must have at least 40% allocated to Swiss stocks. So an ideal third pillar should have 60% of international stocks and 40% of high-quality Swiss shares.
As we will see later, there is a way against this limit, making some third pillar providers significantly better than others.
And last but not least, the best third pillar has fees as low as possible.
I want my third pillar to have zero load fees. I do not want to pay to get money inside the fund. The absence of load fees is essential. You should never use any fund with load fees.
Moreover, the yearly fees must be low as well. The TER must be as little as possible. Most third pillar accounts in Switzerland have high TER, higher than 1%.
When you are investing for the long-term, it is essential to minimize investing fees. The difference in returns in the long-term is really significant.
Third Pillar from a Bank
Most people in Switzerland will invest in a third pillar provided by their banks. And they have a ton of options. Historically, they have been the only option available for third pillars.
I am not going to go over all the possible offers here. Indeed, there are too many of them. And most of them are terrible options. But I am going to go over some interesting options from some popular Swiss banks.
We will use the third pillar accounts from banks as examples. These are not the best third pillars.
Migros Bank Fund 45 V
My current bank is Migros, so I wanted to check their offer. And to be honest, it is quite disappointing.
They only have three retirement funds for their third pillar offer. The most interesting fund is the Migros Bank Fund 45 V. It has 45% in stocks, 40% in bonds, and the rest in cash. The TER is 0.89% per year.
This fund is not a great offer. The allocation of only 45% to stocks is too low. And the fact that they have a large allocation to bonds does not help. Cash would be better. The TER is actually not that bad for a Swiss bank. But I would not recommend this fund.
LUKB Expert Fund 75
Many people are recommending the LUKB funds from the Luzerner Kantonal Bank. So, we can take a look at their LUKB Expert Fund 75.
This fund has 75% of stocks, which is alright, but not great. 40% is invested in Swiss stocks, 35% in global stocks, 15% in Swiss bonds, 4% in international bonds, and the rest in liquidities and real estate. The diversification is not too bad when comparing with other options.
It has a TER of 0.8%. For third pillar accounts in Switzerland, this is a good TER. However, it has a load fee of 0.4%. The TER is okay, but the load fee makes it highly undesirable.
PostFinance Pension 100
Many people are using the retirement funds from PostFinance. So, we can take a look at the PostFinance Pension 100 fund.
This fund invests 100% in stocks. 72% is invested in Swiss companies while 28% is invited globally. And the TER is 1.01% per year.
The allocation to stocks of this fund is actually quite good. 100% allocated to stocks is the best you can do in your third pillar. However, more than 1% fee per year is already a significant fee. And this fund is not well globally diversified since only 28% of the stocks are international stocks. This is significantly lower than we would like.
Raiffeisen Pension Invest Futura Equity
Since there are many Raiffeisen banks and they have a good reputation, it is a good idea to look at their retirement funds, and more specifically, the Pension Invest Futura Equity fund, a mouthful.
This fund has between 80% and 100% in stocks. I do not know why it is not fixed. But the last invested value I have seen was 95% in stocks, which is really good. 47% is invested in Switzerland, which is not great but not the worst either.
The TER of the fund is 1.42%, which is very bad. While it is not the most expensive fund in Switzerland, it is definitely the most expensive that I am going to mention today. And it is way too expensive for people to consider.
Swisscanto Fund 95 Passiv VT
Swisscanto is the provider of many funds in Switzerland, and many banks are using their funds. We can take a look at the Swisscanto Fund 95 Passiv VT.
This fund invests 95% in stocks, which is great. The diversification is also good, with 65% invested in foreign equities. However, they hedge most of the equities, with 72% in CHF for the entire fund. This is not great for currency diversification.
On the fee side, this is an excellent example of how banks are trying to make it complicated for people to know how expensive it is. The flat fee for the fund is only 0.38% per year. At first sight, it sounds great. But if you look in detail, we can see that this is a fund of other funds, so there is an extra 0.33% in fees for the sub-funds. But they never show the full fee of 0.71%. On top of that, they are adding a 0.1% issuance fee and a 0.09% redemption.
It is the most complicated fee system I have seen during my research. They use several small fees not to scare customers away. But when you put all the fees together, this does not make them very attractive. And just for this lack of transparency, I would not invest in their funds.
As we saw, offers from banks are not that great. Fortunately, recently, many independent providers have started in this market. And they are offering much better conditions than banks.
We have seen that banks have high fees, sub-par diversification, and not aggressive enough portfolios. Independent providers are fixing all these issues. So, to find the best third pillar, we need to look at these independent providers. Note that they are not all good, they are also some bad options out there.
There is no disadvantage at having your money in a third pillar from these companies instead of doing it at a bank. In fact, they only have advantages.
There are many of them, but I am only going to mention two main providers in this article: Switzerland’s two best third pillar providers.
Finpension 3a – Best Third Pillar
For most long-term investors, Finpension 3a will be the best third pillar available in Switzerland.
Indeed, they have some powerful advantages going for them:
- You can invest up to 99% in stocks
- The fees are extremely low, at 0.44% per year for an aggressive portfolio.
- They have a mobile application and a web application.
- You can make custom portfolios with a lot of liberty.
Finpension 3a is the best third pillar for your long-term returns, with a high allocation to stocks and very low fees. This is a great way to ensure that your money is well invested until you retire.
Interestingly, Finpension is also running an excellent vested benefits account. They are experienced in the pension industry and are providing great products.
I strongly believe Finpension 3a is the best third pillar available for aggressive long-term investors. So, in 2021, I started investing my third pillar in Finpension 3a.
For more information, you can read my review of Finpension 3a.
VIAC – Best Conservative Third Pillar
If you do not want to invest heavily in stocks, VIAC will be a better option than Finpension 3a.
VIAC is a little more mature than Finpension 3a. They also offer an excellent third pillar. In general, they have several disadvantages over Finpension:
- You can only invest 97% in stocks instead of 99%.
- The fees are higher (0.50%).
- Their custom strategies for investing are more limited.
However, they have some advantages for conservative investors that would not invest fully in stocks:
- They invest in cash and not in bonds. And since bonds are currently in negative territory, having cash may be better.
- The fees are lower if you do not invest 100% in stocks. Indeed, you only pay fees on the invested part.
Therefore, for an investor with a lower allocation to stocks, the fees will be significantly lower, and the returns will be potentially better.
So, I would recommend VIAC over Finpension 3a only if you were to invest 80% or less in stocks. It is still an excellent third pillar. But if you want the best third pillar for your money, you will have to change. VIAC used to be the best third pillar until Finpension 3a came along.
For more information, you can read my complete review of VIAC.
Overall, the best third pillar available in Switzerland is Finpension 3a. They offer the highest allocation to stocks and the lowest fees. On top of that, you can create custom portfolios with a high degree of liberty. This makes them an excellent option!
For these reasons, in 2021, I have invested in Finpension 3a instead of investing in VIAC. And I recommend all aggressive investors to do the same.
Now, there is one case where VIAC is better than Finpension. If you do not want to invest the maximum in stocks, you can get better results at VIAC. This makes VIAC the best third pillar for conservative investors.
If you open a Finpension 3a account, please use my code FEYKV5, this will give you a chance to win 6883 CHF!
If you need more information on these two third pillars, I have an article on VIAC vs Finpension. This article goes more in-depth into the comparison.
What about you? Which is your favorite third pillar?