With some insurance companies, you can choose to have 100% of your funds going into more dynamic or "higher risk" funds.
i.e. your insurance is linked to funds.

The problem with the 3rd pillar type A is that, as you have tax benefits and it is also sometimes used to offset mortgages etc., the banks, especially, prefer to have a "guaranteed" amount on maturity.
This is obviously more difficult to do if you're choosing to invest in more "risky" funds.

Not all companies have policies that are linked to funds - some do, some don't.

With a 3rd pillar type B policy linked to funds, you can put the whole lot into more dynamic and risky funds.
You won't be able to deduct it from your taxes (in the majority of cantons) but if you keep it for 10 years or more, there's no tax to pay on the payout (whereas with the 3A there is).

(was interrupted 5 times while I was writing that so if it doesn't make sense, just let me know!)

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Inswift Sàrl

Thanks Jenny -- That is actually very helpful indeed - Very interesting re tax and 3B. Didn't know that.

However none are that 'dynamic' unfortunately, there is nothing withh 100% equaties & nothing with 75% foreign exposure, which is rather dissapointing as I would rather not invest in CHF assets at this stage of the economic cycle.

The highest risk is about 45-50% equaties however the CHF exposure is about 75%, as the majority of those equaties are CHF with large CHF Bond & property exposure.

As there is no capital gains tax in CH, I see little point in a 3A arrangement, you have no tax to pay on the income in the fund however the management charges will cost more than the tax saved, which is usually the case with an 'insurance' 'investment product'.

The obvious problem of investing in other currencies is the exchange rate. No-one can predict what might happen.

e.g. if you started investing in USD funds a couple of years ago, your funds may have made, say 10%, but because of the exchange rate when you convert it back into CHF, you may actually only be breaking even.

(saw this exact case recently)

I think it depends on your mid-long-term plans too.
If you're likely to stay in Switzerland for the next 40-50 years or have no particular plans of ever leaving, then you're probably better off investing in CHF.
If you're likely to leave, then you may be better off investing in GBP, Euro, USD or your preferred investment currency.

There are some 3rd pillar policies which can be transferred into a new policy in Euros which means you can continue your investment even if you're living in another country once you leave Switzerland

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Inswift Sàrl

Most of my investments are traded on Nasdaq, over the last 4 years the investments are roughly doubled in USD terms, which is way up in CHF terms. My Frozen pension with Swiss Life has lost over 10% of it's value over the same period.

I don't see huge value except in USD investments, I have a UK passport so cant even live in the US. However I can trade US equaties for $7.95 (unlimited trade) rather than a minimium of 35 CHF in Switzerland for 3,000 CHF of stock. Hardly surprising that I make more money on US markets.

Cool

I'm not saying that people shouldn't invest in USD or any other currency. What I meant was that, say you invested 1'000CHF 3 years ago when the exchange rate was around 1.2CHF for 1USD.
That means that you bought 1'200USD

Let's say that your 1'200USD performed well enough and is now worth 1'600USD.

When converting the 1'600USD back to CHF at todays rate - which is around 1.09USD for 1CHF - then your 1'600USD is now worth around 1'467CHF.

If you could convert that back with the same exchange rate you bought them for, then you would actually receive 1'882.35CHF. (as the exchange rate was then 0.85USD for 1CHF).

In effect, you've "lost" around 400CHF because of the changes in the exchange rate.

Does that make sense?

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Inswift Sàrl

USD rates I see are:-

27 March 2012 0.904
27 March 2011 0.919
27 March 2009 1.14


Buying something 'cheap' & selling it when it's expensive is what I like to do, which seems to be against what the public & fund managers do. They like to 'feel good', the market does not pay you to feel good.

The best example today is of course gold, nobody wanted it sub $300 however they want to buy it today at over $1700, just as you think it's 'safeer' to hold expensive CHF cash & investments.
Now of course if the cap gets raised to 1.40, you will say it was unlucky & unforseen, however anybody can see that the CHF is overvalued V USD/GBP, if the Euro has any real value at all we will have to wait & see.

Edit,

Your US investment returns sound very poor over the last 3 years, but quite possible with a high charging insurance fund.

Dow Jones 27 March 2009 7776
Dow Jones 26 March 2012 13183

I calculate in excess of 69.5% rise over 3 years, of course the general public have not started buying in yet ! Had you bought US Equaties 3 years ago you should have made a good return in CHF terms if you had just followed the market.

The 1000 chf would have bought $1140 x 1.695 = $1932 which is a great return from 1000 chf!

My rule of thumb is AVOID any insurance investment product, you will do better on your own with out it!

CHF > USD in 2009 = average of 1.15

USD > CHF in 2009 = average of 0.86

USD > CHF March 2012 = 1.09

This wasn't my investment. I was just using it as an example to show how varying exchange rates can affect your investment!

I was speaking to someone a few weeks ago who had invested quite a bit in funds and he had lost out due to the exchange rate situation. He'd still made a bit of money but had the exchange rates stayed the same, he would have made a lot more.

That's all I was saying!

Wrt insurance products v's pure investment, of course you're going to make a lot more by investing on your own.
100% of your investment will be invested.
With an insurance product, only part of it will be invested into the fund as part of the premium will go towards your death and disability benefits, premium waiver etc.

It's all about the risks people are willing to take (or not).

Personally, most of the people I've spoken to over the last few years are more interested in having something secure and stable whereas 6 or 7 years ago, it seemed to be the opposite. People seemed to be happier to take more risks.

You have to remember that there are actual benefits to having an insurance policy of this type that you don't get with pure investments (the saving you make on your taxes is your first, net guaranteed return if you like ; then you have the death benefits and more importantly the premium waiver).

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Inswift Sàrl

As I said people like to 'feel good' if the risks they took payed off they will be happy, if they lost out they may take less risks, buy an insurance product & be skinned alive, due to costs, poor porformance & insurance they don't want or need.

Risk is reduced over time when invested in equaties, where holding cash & bonds the risk increases due to inflation. There will always be risks & guarantees come at a hugh overall cost due to lower investment returns.

Hi all, I've never had a 3rd pillar. I have read *every* thread on this topic and feel up to speed, except which bank to open it with in 2012 ?

All my money is in a ZKB current account (over the 100k guaranteed limit so I think best to start using another institution.)

According to Comparis https://en.comparis.ch/banken/vorsor...toverview.aspx
the best offer is
Banque CIC (SUISSE) retirement account 3a paying 2.150%

They have an office in Zurich. Would anyone have any reason not to go with this firm or propose another? I can imagine that the interest may change once they sign up a lot of customers.


Thanks.

Is interest your main concern? I agree ZKB doesn't pay much in the way of interest, but has a staatsgarantie from the Kanton.

In any case whichever you choose, it's completely portable as the cash variant, and after selling the investment in the investment version.

Personally I'm also fed up with the low interest rates and have started investing again as I'm looking for real growth over an 8 yr timeframe.

I work for an insurance company and my similar opinion on this is not popular with our in house sale steam. I'm curious Jenny why given your comments, you wouldn't just advise the risk- adverse investor to take out a term insurance for the life risks and just invest the rest themselves?

Or do you just want to sell a savings plan? I agree there's a market for this....

I have a question as a newbie to pillar 3 pensions. For a married couple, does each couple have to have their own Pillar account in order to maximize the contributions. If one partner has an account, can he contribute 6682*2 to it ; or do two accounts have to be established.... one for each spouse?

Yes but to be deductible an individual must be employed. The deduction is reduced prorata the "pensum/taux d'occupation" (ie you work one day a week, you only get 20% of the 6k allowed)

Both people are employed (full time) but only one has an account. So that means that the person with this account can put in 13,364 CHF and the couple can deduct this amount when filing their taxes?

No two accounts are needed. You have enough time left if you get moving.

Each partner has to have a separate account, you can not link it/ combine it with your partner. You can not contribute more than 6682 or the revised maximum limit allowed in the account.

However for your combined tax return you can deduct 6682x2 provided you have contributed that twice to an account each in 2012.

That is interesting. A few years ago I deregistered and left the country. At the tax office when I handed over my tax forms there were a lot of deductions which were prorataed, i.e. my lunch deductions at work. But the 3rd Pillar I was told is a maximum deduction and therefore I was able to deduct the whole amount from my taxes.