My third pillar is invested at PostFinance in the PostFinance Pension 75 fund. This is a fund that invests mostly in Switzerland, with 75% of stocks. It is not a bad fund at all. However, a few things made me want to reconsider this third pillar.
First, the TER is a bit high. You pay 0.98% for holding this fund. It is not really bad since TER for retirement funds in Switzerland is quite high. This is already one of the best funds. But it is always better to reduce that TER even further when possible.
Secondly, PostFinance recently increased its account fees. Before, I was not paying anything for all my accounts at PostFinance. However, I will now have to pay 60 CHF per year to keep my money at PostFinance. Therefore, it is time to change. I am in the process of switching to Migros bank for my bank accounts. But I need to find a new third pillar provider to replace the one from PostFinance.
And also, it has been a while I wanted to study in details VIAC. This is a new provider of third pillars. It has some very interesting advantages.
In this post, I am going to try to find a new third pillar for me in Switzerland. Let’s see what Switzerland has to offer :)
The ideal third pillar
First of all, we have to think about what makes an ideal third pillar. It is important to decide which factors will drive the choice.
A good third pillar has a large allocation to stocks. This will depend on your age of course. You need to decide for yourself the allocation to bonds that you need. Moreover, Swiss bonds are in the negative territory now. So you may be better off with cash actually. For me, I want as much as possible of my third pillar into stocks. I already have bonds in my second pillar. This is more than enough. Ideally, a third pillar will have 100% allocation to stocks.
A good third pillar has a diversified stock allocation. Switzerland is too small a country to only invest in it. I would like to have global stocks in my third pillar. Ideally, the allocation should be the same as a world stocks fund. 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 stocks.
And last but not least, a good third pillar has as little fees as possible. I want my third pillar to have zero load fees. I do not want to pay to get money inside the fund. Moreover, the yearly fees must be low as well. The TER must be as little as possible.
With this in mind, let’s compare a few of the possibilities out there.
Third pillar providers
There are many third pillars providers in Switzerland. Almost every bank offer a third pillar option. However, a lot of them do not run their own funds. Some of them offer funds from bigger banks. For instance, many Swiss banks offer third pillar funds from Swisscanto or UBS.
Unfortunately, it is quite difficult to get a list of all the third pillar funds. In practice, you would have to go to the website of all the banks in Switzerland to find their offers. And some of these are only in German and some of these offers are really not well documented. Fortunately, moneyland provides a PDF list of most of the Swiss retirement funds (here). This has not been updated for a few months. But it has a pretty nice list. This saved me quite some time. And I also knew about a few options that I wanted to mention in this post.
I am only going to compare the good options. There is no point in discussing funds such as UBS Vitainvest 75 World that has a TER of 1.72%! Nobody should consider such funds for their third pillar. The fees will eat most of your returns. But you would be surprised by how many people do not know about TER. In fact, I did not know about TER a few years ago. For comparison, I selected only the third pillar funds that had more than 60% allocation to stocks and only the ones that had reasonable TER.
PostFinance Pension 75
The first fund that I am considering is the one I currently own, the PostFinance Pension 75 fund. This fund invests in 75% of stocks and 21% of bonds. The fund contains about 4% of real estate as well. This is not as much allocation to stocks as I would like, but this is already quite good. In total, it is more than 50% invested in Switzerland.
The fund has a TER of 0.98% and no other fees. This is not great. But, this is not too bad compared to some other funds in Switzerland. Ideally, I would like a fund with a higher allocation of stocks and lower TER.
Migros Bank Fund 45
Since my new bank is Migros, I wanted to check their offer. I am a bit disappointed by it. First of all, the information on their website is really not great. It took me quite a while to find the information I needed. They have very few retirement funds. The most interesting fund is the Migros Bank Fund 45. It has 45% in stocks and a TER of 1.16% (1.09% according to Morningstar).
I do not think it is a great offer. Only 45% of stocks is not acceptable for me now. And the TER is higher than my current third pillar. So there is really no point at all changing to this fund.
LUKB Expert Fund 75
This fund is only available at the Luzerner Kantonalbank which is the bank of the state of Luzern. It has 75% of stocks which is quite good. It has a TER of 0.8%. For third pillars in Switzerland, this is good TER. However, it has a load fee of 0.4%. The TER is quite good, but the load fee makes it highly undesirable. Once again, I do not have any advantage of transferring to this fund.
Raiffeisen Index Fund Pension Growth I
This fund is available at the Raiffeisen Bank. I did not know about this fund before I read about it while researching for this post. It has around 67% of stocks, this is quite good. It has a TER of 0.8% which is very good. But it has a second management fee of 0.45% per year. Which makes a total fee of 1.25%. This is way too high. This shows that it is very important to read all the details when comparing different funds. This is the most expensive of the funds I checked today. However, this is not the most expensive third pillar in Switzerland.
Swisscanto Fund 75 Passiv V
This fund is quite interesting. It is available at the Zurcher Kantonal which is the bank of the state of Zurich. It has 75% of stocks. At first sight, it is really good with a TER of 0.43%. It is the lowest TER I have seen for a third pillar in Switzerland. However, you need to read more information because there are more fees. They also have a 0.38% management fee. And it is not over, they have a 0.15% fee when you buy shares of the fund. And finally, they have a 0.08% fee when you sell shares of the fund. It is the most complicated fee system I have seen during my research. They do several small fees to not scare customers away. But when you put all the fees together, this does not make them very attractive.
VIAC is the newest actor in the third pillar game in Switzerland. It is really new compared to other big banks. However, it is not a bank. The money that you have invested with them is stored in the WIR bank. As such, you will have full protection up to 100’000 CHF like the other banks. This is very important. Without that, I would not consider this provider at all.
VIAC is quite different from the other providers. You will only have access through a mobile application. This is probably what makes them offer very low fees. They offer three sets of strategies: Global, Switzerland and Global Sustainable. The first one is investing in the entire world. The second one is focusing on Swiss stocks. And the third one also invests in the entire world but omit some stocks such as pornography, tobacco or weapons stocks. For each of these strategies, they have five variants: 20, 40, 60, 80 and 100. These variants are specifying the allocation to stocks. You can also define your own strategy by composing it with the different underlying funds that they are using. But that is a bit outside the scope of this article. You can also have several portfolios, up to five.
VIAC Global 100 Fund
The most interesting strategy for me is the Global 100. This fund invests 97% in stocks. Out of these stocks, 40% are Swiss stocks. This is a legal limit that we cannot cross. The rest is invested in the entire world based on market-cap weight. The three remaining percents are allocated to cash. They do not use bonds since Swiss bonds have a negative yield. Swiss cash is currently much better than Swiss bonds. And the TER is o.53%. And there are no other fees!
Here is the allocation by region of the Global 100 fund:
And there is the exact allocation of each sub-fund (as of September 2018):
- SMI (Swiss): 27.75%
- SPI Extra (Swiss): 9.25%
- Europe ex-CH: 10.60%
- S&P 500: 31.51%
- Canada: 1.93%
- Pacific ex-Japan: 2.54%
- Japan: 4.46%
- Emerging Markets: 8.96
- Cash: 3.00%
This offer is really great. It is much better than all the other candidates. You can have much more stocks. And you have the maximum legal allocation to international stocks.
Conclusion – Transferring to VIAC
The conclusion is pretty simple! VIAC is undeniably the best third pillar provider in Switzerland. It has almost only advantages. The fees are the lowest in Switzerland. And the allocation to stocks is the best, by far. The only disadvantage is that it is mobile-only. But since I am now using Revolut who is also mobile-only, I need to evolve. I do not like smartphones. But it seems the world is not agreeing with me!
There is something else I like about VIAC. It is their transparency. They communicate really well and they share as much information as possible. This the best third pillar provider for the information they share. The information is also very clean and modern. They do not try to hide fees.
Given that conclusion, I will soon start to transfer my third pillar to VIAC. I will have to sell my current PostFinance fund and then transfer the cash. Since I have never done that, I will probably write an article about creating a VIAC account and transferring money from PostFinance to VIAC.
To learn more about VIAC, you can read my Interview of Daniel Peter, CEO of VIAC.
Which third pillar do you use? What do you think of VIAC?