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  #361  
Old 08.12.2016, 16:09
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Re: 3rd Pillar Pension Fund

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Still better than leaving it just under savings account
Depends. At least interest is guaranteed to some extent. But stocks have a higher risk to go down if you intend to withdraw in near future. And swiss economy where most of the money is invested in is kind of shrinking lately

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don't want to (also can't) buy property at the moment.
If you didn't intend to buy or leave switzerland in medium term, it wasn't a wise idea to put your money into pillar 3a without any plan for it in the first place. There are better alteenatives. Enjoy being ***** by the banksters now, take it as a lesson
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  #362  
Old 08.12.2016, 16:14
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Re: 3rd Pillar Pension Fund

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If you didn't intend to buy or leave switzerland in medium term
I didn't state the opposite.
In the meantime (while I benefit from tax refund and invest that outside of the 3rd pillar) I want to invest this amount too.
Now let the others give me a constructive answer.
Cheers
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  #363  
Old 08.12.2016, 16:21
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Re: 3rd Pillar Pension Fund

You're not gonna get much out of the money you already put into your pillar 3 either way. Just face the facts, accept it, and focus your energy elsewhere. If you have no way to withdraw it mid term, sure buy some stock fund with it, long term it should give some better return. IMHO doesn't matter much which, it's the banks who'll eat most of your pie anyway, take any passive fund with low TER. It's also not a significant amount of money anyway, and the additional returns you can get by going out of your way to find the best fund there is also aren't going to be that significant and don't justify the efforts IMHO.
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  #364  
Old 08.12.2016, 16:23
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Re: 3rd Pillar Pension Fund

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take any passive fund with low TER
That's exactly what I am looking for to do, listed some of the options I found so far and asked the others to point me if there are better ones.

I also consider the tax refund as part of its return too - yes I know in the end at withdrawal, e.g. by leaving CH, part of taxes is due - but short/mid-term is not too bad.

Thanks for the input.
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  #365  
Old 08.12.2016, 16:57
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Re: 3rd Pillar Pension Fund

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I also consider the tax refund as part of its return too
Exactly. But I actually view it as *the* main prize, and tax-free savings interests and funds are just a small icing on the cake.

Buying/selling/remortgaging property will actually allow you to realize the full potential of it. Unlike pillar 2, pillar 3 withdrawals come with no strings attached: withdraw, pay a little tax - and it's money at your disposal. But you should probably make some plan on how exactly you're going to go about it, as it all takes many years to complete - I'd rather invest time into this than research which fund robs you off the least.
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  #366  
Old 08.12.2016, 17:02
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Re: 3rd Pillar Pension Fund

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Exactly. But I actually view it as *the* main prize, and tax-free savings interests and funds are just a small icing on the cake.

Buying/selling/remortgaging property will actually allow you to realize the full potential of it. Unlike pillar 2, pillar 3 withdrawals come with no strings attached: withdraw, pay a little tax - and it's money at your disposal. But you should probably make some plan on how exactly you're going to go about it, as it all takes year - I'd rather invest time into this than research which fund robs you off the least.
As the capital gains are not free of tax in a pension, for a long term investment it's a bad deal, especially as you loose flexibility. The idea is for the fund to grow 5 to 10 times (hopefully more), the net tax will be higher as there is no CGT in CH.
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  #367  
Old 08.12.2016, 17:06
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Re: 3rd Pillar Pension Fund

Ok, yeah, you should be careful with selling due to capital gains taxes on property, but you don't really have to sell if you can afford to keep it. Just buy a new home and rent out the old. Isn't this some sort of swiss dream after all - buy a ton of property and live off the rental income?
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  #368  
Old 08.12.2016, 17:16
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Re: 3rd Pillar Pension Fund

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Ok, yeah, you should be careful with selling due to capital gains taxes on property, but you don't really have to sell if you can afford to keep it. Just buy a new home and rent out the old. Isn't this some sort of swiss dream after all - buy a ton of property and live off the rental income?
I am talking about a pension being taxable, when there is no CGT on investments other than Swiss Real estate.
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  #369  
Old 08.12.2016, 17:22
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Re: 3rd Pillar Pension Fund

Capital gains on pension? First time I'm hearing about this.

Are you talking about withdrawal taxes? They would of course grow with the amount of money you're withdrawing that grows as your pension grows, but it's a relatively minor non-profit-threatening amount

Or income taxes on pillar 2 money being paid out in form of regular pension after retirement? Wrong thread then, we're talking about pillar 3 here. And actually rather more about your options in case when you're far from retirement.
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  #370  
Old 08.12.2016, 20:36
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Re: 3rd Pillar Pension Fund

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Capital gains on pension? First time I'm hearing about this.

Are you talking about withdrawal taxes? They would of course grow with the amount of money you're withdrawing that grows as your pension grows, but it's a relatively minor non-profit-threatening amount

Or income taxes on pillar 2 money being paid out in form of regular pension after retirement? Wrong thread then, we're talking about pillar 3 here. And actually rather more about your options in case when you're far from retirement.
If you had 25% tax relief on 100k of investment, your tax burden on cashing in 1,000,000 will be considerably higher than your tax relief, so yes all the capital gains are being taxed.

I retired at 52....... Swiss pension could only be obtained in full by leaving CH which I did. I can start taking my UK pension next year, the paperwork says from age 50 however the government changed the rules in retrospect.

So more fact from experience rather than just opinion. Of course my normal investments turned out more useful, with less tax paid.
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  #371  
Old 08.12.2016, 23:41
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Re: 3rd Pillar Pension Fund

I don't about your canton, but in Zürich the math works out completely differently: income tax relief goes up to around 40%, and you pay only 4-5% tax on withdrawal.

Tax is progressive and skyrockets at certain point. If you withdraw the whole million in one go, you'll pay for that convenience. According to these calculators, 16% for a million, and seems like up to 30% for bigger amounts.

But if you simply plan a bit head and, for example, take out the million not in one go, but in two different years, 500k in one (e.g. to amortize a mortgage) and remaining 500k in another, the tax is a much more manageable 5.6% each time.

And then, again, we're discussing pillar 3a, not pillar 2 in this thread. Nobody's going to have millions in pillar 3, you can only put in 6700 or so per year (more if you run your own business without access to pillar 2, but also to a modest limit). You can and it totally makes sense to take the money out every 5 years, and the tax on 35k is around 4.5%, or even less in low tax communes.
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  #372  
Old 08.12.2016, 23:55
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Re: 3rd Pillar Pension Fund

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I don't about your canton, but in Zürich the math works out completely differently: income tax relief goes up to around 40%, and you pay only 4-5% tax on withdrawal.

Tax is progressive and skyrockets at certain point. If you withdraw the whole million in one go, you'll pay for that convenience. According to these calculators, 16% for a million, and seems like up to 30% for bigger amounts.

But if you simply plan a bit head and, for example, take out the million not in one go, but in two different years, 500k in one (e.g. to amortize a mortgage) and remaining 500k in another, the tax is a much more manageable 5.6% each time.

And then, again, we're discussing pillar 3a, not pillar 2 in this thread. Nobody's going to have millions in pillar 3, you can only put in 6700 or so per year (more if you run your own business without access to pillar 2, but also to a modest limit). You can and it totally makes sense to take the money out every 5 years, and the tax on 35k is around 4.5%, or even less in low tax communes.
5.6% of total is likely to be higher than the tax relief obtained assuming you invest mainly in equities. I lived in ZH, this had no bearing as I no longer lived in CH when I cashed it in.

Annual limit for self employed is 33840, so sizeable funds could be in a pillar 3 fund.

The biggest issue is the investment restrictions & the poor return of pension funds. I believe investing outside a pension in the S&P500 index will trump the returns over 10/20/30 years.
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  #373  
Old 09.12.2016, 00:02
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Re: 3rd Pillar Pension Fund

You're calculating it wrong I think

40% / 5 years minus 4.5% tax => 7.6% return per year, post taxes and *guaranteed*, assuming you'll have a property to amortize to, stable high paying job and legislation doesn't change. Better than stocks on average.

And that's solely from tax play alone, no matter what the pension fund does with your money as long as they don't lose it.
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  #374  
Old 09.12.2016, 00:06
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Re: 3rd Pillar Pension Fund

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You're calculating it wrong I think

40% / 5 years minus 4.5% tax => 7.6% return per year, post taxes and *guaranteed*, assuming you'll have a property to amortize to, stable high paying job and legislation doesn't change.

And that's solely from tax play alone, no matter what the pension fund earns it.
Your assumption of 40% marginal tax rate seems off. I would assume 15-20%, the final figure is taxable so guaranteed gain is completely wiped out.

Oh & the fund is not guaranteed so they could loose some of it.....
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  #375  
Old 09.12.2016, 00:12
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Re: 3rd Pillar Pension Fund

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Your assumption of 40% marginal tax rate seems off.
No it isn't. A single earner with 200k+ income (doable on a normal good-paying job) in the city of Zürich, no church, no kids, no wife pays around 39%! Even in low tax suburbs around Zürich it's still around 35%. Less only if you'd move to a low tax canton, like, SZ or at least ZG

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Oh & the fund is not guaranteed so they could loose some of it.....
Only if you buy stock funds with your pillar 3 money, or there would be a war or something similarly devastating happening to the economy.

Cash accounts are protected up to 100'000 by government guarantee. And if you keep the money at cantonal banks, for many of them the corresponding canton even guarantees it without limits. And what are the chances that the whole canton of ZH will go bankrupt? There's countless money in here.
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  #376  
Old 09.12.2016, 01:00
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Re: 3rd Pillar Pension Fund

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No it isn't. A single earner with 200k+ income (doable on a normal good-paying job) in the city of Zürich, no church, no kids, no wife pays around 39%! Even in low tax suburbs around Zürich it's still around 35%. Less only if you'd move to a low tax canton, like, SZ or at least ZG


Only if you buy stock funds with your pillar 3 money, or there would be a war or something similarly devastating happening to the economy.

Cash accounts are protected up to 100'000 by government guarantee. And if you keep the money at cantonal banks, for many of them the corresponding canton even guarantees it without limits. And what are the chances that the whole canton of ZH will go bankrupt? There's countless money in here.
The percentage of people earning 200k plus is perhaps 5% of members here, so to justify your argument seems pretty weak, average earnings here probably about 90k or less, taxable income will be 75k marginal rate nearer 15-20% .......
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  #377  
Old 09.12.2016, 01:19
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Re: 3rd Pillar Pension Fund

Still, even for lower incomes the progression grows quick and fast. Just a bit above 100k taxable income and you're already paying over 30%. In french cantons the progression is much more severe as far as I know.

Here's my plot of the progression in ZH:
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  #378  
Old 09.12.2016, 16:26
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Re: 3rd Pillar Pension Fund

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Only if you buy stock funds with your pillar 3 money
The funds they offer do have a (significant) portion of stocks (up to 75%); that is unless you leave it only under the savings account (0.5% p.a.).
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  #379  
Old 09.12.2016, 16:49
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Re: 3rd Pillar Pension Fund

If you buy the funds, you're taking on full risk that those stocks can go down and you won't get as much cash as you invested.

If you keep the cash, the bank probably will still invest your money somewhere. If those stocks drop in value or fund goes belly up and can't pay their obligations to you, the government guarantees you'll get your money up to at least 100k of it, or more in case of cantonal banks.
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  #380  
Old 09.12.2016, 16:58
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Re: 3rd Pillar Pension Fund

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If you buy the funds, you're taking on full risk that those stocks can go down and you won't get as much cash as you invested.
As with all stock investment instruments, no?
Nothing new here...

Long term it should fare better than what the guaranteed interest rate is, but short/mid-term is another story.


Back to my original query - If someone knows of a cheaper passive index fund as part of 3rd pillar than what PostFinance and Raiffeisen offer, I would be happy to read about it.


p.s. I might have wrongly assumed that the "fund" in the title stands for investment fund instead of just the "3rd pillar account", my bad.
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