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Old 16.12.2016, 12:02
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Choosing between 3a (Savings) and 3a Fonds

Hi
I have had a 3a savings account since a while - the returns (0.5%) are not spectacular but that doesn't bother me very much.

My bank advisor keeps nudging me to move from the savings to the investment funds ("Fonds") version which somehow makes me unsure and uncomfortable - inspite (or because of?) his promise of "big profits".

I am not planning to touch this pot till around retirement age (25-30 yrs from now). However, using this cash to restructure my housing loan could be an option...not my preferred option though.

Positives
+ high returns in the long run - potentially 150 KCHF more than what my savings account could yield at retirement

Negatives
- Costs involved in buying in and selling
- No flexibility, I can't move my account anywhere else
- Uncertainty if the promised returns will indeed be realized at retirement.

I am not able to make up my mind whether the positives are really worth it - would appreciate your inputs.
- How do you manage your 3a?
- Any flexible and inexpensive fund available on the market?

Thanks for your help and inputs
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Old 16.12.2016, 12:18
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Re: Choosing between 3a (Savings) and 3a Fonds

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Hi
I have had a 3a savings account since a while - the returns (0.5%) are not spectacular but that doesn't bother me very much.

My bank advisor keeps nudging me to move from the savings to the investment funds ("Fonds") version which somehow makes me unsure and uncomfortable - inspite (or because of?) his promise of "big profits".

I am not planning to touch this pot till around retirement age (25-30 yrs from now). However, using this cash to restructure my housing loan could be an option...not my preferred option though.

Positives
+ high returns in the long run - potentially 150 KCHF more than what my savings account could yield at retirement

Negatives
- Costs involved in buying in and selling
- No flexibility, I can't move my account anywhere else
- Uncertainty if the promised returns will indeed be realized at retirement.

I am not able to make up my mind whether the positives are really worth it - would appreciate your inputs.
- How do you manage your 3a?
- Any flexible and inexpensive fund available on the market?

Thanks for your help and inputs
Over time equities makes sense, upside not limited to 150k either.

You would make more money after tax by not investing via a pillar 3 for the long term as charges will eat up any up front tax benefits whilst the payout is still taxable.
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Old 16.12.2016, 12:22
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Re: Choosing between 3a (Savings) and 3a Fonds

holding cash for 30 years seems like a bad idea to me.
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Old 16.12.2016, 12:45
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Re: Choosing between 3a (Savings) and 3a Fonds

We were just recently discussing 3a finds in this very forum
3rd Pillar Pension Fund

My suggestion: buy a property with it.
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Old 16.12.2016, 15:33
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Re: Choosing between 3a (Savings) and 3a Fonds

This thread should just be merged with the other thread...

Seems the banks here are really pushing the customers to get on these silly funds.

When I have time I might gather some further info about all the funds available in Switzerland under 3a Pillar hopefully we can then have an informed comparison. If anyone has a comprehensive list please comment in. So if anyone decides to get buy these at least they have something as a reference.
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Old 17.12.2016, 01:13
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Re: Choosing between 3a (Savings) and 3a Fonds

Best choice is not to pay into a 3a at all IMO unless you choose to for mortgage amortisation....I amortise my mortgage this way, so pay into a 3a fund, as over time it will be better returns than purely 3a cash account. But if it wasnt for this, I wouldn't pay into a 3a at all.

There are far better uses of capital, with more flexibility and less fees than a 3a fund. Over time the tax savings aren't worth it in what you'll give up in less-performing returns and fees.

The 'high risk' funds are not really high risk as they're governed by BVG to be 'swiss safe' (= no stellar performance).

Here's my 3a fund compared to another equity fund I pay into:

equity fund = 25% 1yr return (similar for last 4 years), 1% mgmt fee, no fees to pay in / take out. Can take out what I want, when I want

3a fund = 1% return in the last year (was more the few years before), 1% fee every time I pay in (think the same to withdraw), c0.7% annual fees. Can't freely take out of a 3a wrapper.

Obviously the 3a gives a tax liability reduction, but I'd take the flexibility and better returns of managing my own money (or paying into funds of my choosing) any day
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Old 17.12.2016, 14:14
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Re: Choosing between 3a (Savings) and 3a Fonds

As I mentioned in the other thread..
There are a few Pillar 3A investments that are better than the one you mentioned regarding fees. I pay 0.75% per year without any other costs. Including depot, investing and taking out, management of the ETF.
For now, mine is just 50% in Stocks, the rest in bonds and other assets.. But it's only a small portion of my investment (the least aggressive one).
I think a bonus is that I dont have to pay taxes on dividends and gains from bonds while in pillar 3a (not sure if correct).
And there are a few pillar 3 a etf which are invested up to 75% in stocks, if thats what you want.
I think added up with tax benefits, and also tax benefits for dividends and interest, it might not be a worse investment than a mutual fund with 1% fee/year.
Sure if you are lucky and the managed fund does very well it might be better, but you never know if its going to be better than the market.
And you will have to pay taxes on dividens and interest for bonds.
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Old 17.12.2016, 19:53
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Re: Choosing between 3a (Savings) and 3a Fonds

Allow me to add another angle to the decision:

before /after purchase of 1st residential property. If you are planning to acquire such in the coming 5 years, it makes sense to shelter all savings in all possible "baskets" - higher 2eme pillier, 3a in any shape/form just to relieve the tax side.

If you are planning to buy property later than 5 years or not intending to buy one at all, the 3a fund fees are daylight robbery and (as any other actively managed vehicle, bar few) always underperforming the market.

My wife and I are 2-3 years away from our home and at time of purchase I will use all 2eme+3eme to get out of the fees. I have already started investing outside the swiss banking expensive funds and am very happy with my returns. My highest fund fee is 1% but it is averaging 15%pa return. The rest are ETFs averaging 0,1% TER.

Best of luck whatever you pick
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Old 19.12.2016, 11:49
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Re: Choosing between 3a (Savings) and 3a Fonds

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Negatives
a) Costs involved in buying in and selling
b) No flexibility, I can't move my account anywhere else
c) Uncertainty if the promised returns will indeed be realized at retirement.
a) Usually there are no transaction costs within 3rd pillar funds (at least UBS), you pay only for the p.a. management fee.
b) Why not? Turn the fund money into cash by selling and move to anywhere else.
c) For 25-30 years I would say you are better off with stocks/bonds than keeping cash.

But if you go for investment, there are other better options outside of the 3rd pillar, as other have been pointing out.

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As I mentioned in the other thread..
There are a few Pillar 3A investments that are better than the one you mentioned regarding fees. I pay 0.75% per year without any other costs.
Would you mind sharing where?
I am looking to move from 1.20% ripoff to a lower one.
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Old 19.12.2016, 12:04
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Re: Choosing between 3a (Savings) and 3a Fonds

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Would you mind sharing where?
I am looking to move from 1.20% ripoff to a lower one.
Please read the other thread:
3rd Pillar Pension Fund

Also read this one:
Pillar 3a - when to open new accounts and why

@Mods: We need a pillar 3a mod, which merges all this pillar 3a threads into one big thread. All the discussion starts over and over again.
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Old 19.12.2016, 12:06
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Re: Choosing between 3a (Savings) and 3a Fonds

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Best choice is not to pay into a 3a at all IMO unless you choose to for mortgage amortisation....I amortise my mortgage this way, so pay into a 3a fund, as over time it will be better returns than purely 3a cash account. But if it wasnt for this, I wouldn't pay into a 3a at all.

There are far better uses of capital, with more flexibility and less fees than a 3a fund. Over time the tax savings aren't worth it in what you'll give up in less-performing returns and fees.

The 'high risk' funds are not really high risk as they're governed by BVG to be 'swiss safe' (= no stellar performance).

Here's my 3a fund compared to another equity fund I pay into:

equity fund = 25% 1yr return (similar for last 4 years), 1% mgmt fee, no fees to pay in / take out. Can take out what I want, when I want

3a fund = 1% return in the last year (was more the few years before), 1% fee every time I pay in (think the same to withdraw), c0.7% annual fees. Can't freely take out of a 3a wrapper.

Obviously the 3a gives a tax liability reduction, but I'd take the flexibility and better returns of managing my own money (or paying into funds of my choosing) any day
equity fund = 25% 1yr return

Where did you get that return? (Hopefully not 25% in GBP)
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Old 19.12.2016, 12:07
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Re: Choosing between 3a (Savings) and 3a Fonds

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Allow me to add another angle to the decision:

before /after purchase of 1st residential property. If you are planning to acquire such in the coming 5 years, it makes sense to shelter all savings in all possible "baskets" - higher 2eme pillier, 3a in any shape/form just to relieve the tax side.
Just be aware: You must stop topping up 2nd pillar 3 years before you buy the property.Or there will be no tax savings. No such restriction with 3rd pillar.
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Old 19.12.2016, 12:09
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Re: Choosing between 3a (Savings) and 3a Fonds

I should not read this thread. People reporting 15% or 25% return on equity investments with management fee as low as 1% or less. ...i'm doing a bad job when I reach 3% to 5% return (fees included)
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Old 19.12.2016, 12:19
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Re: Choosing between 3a (Savings) and 3a Fonds

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Please read the other thread:
3rd Pillar Pension Fund

Also read this one:
Pillar 3a - when to open new accounts and why

@Mods: We need a pillar 3a mod, which merges all this pillar 3a threads into one big thread. All the discussion starts over and over again.
I did, and I participated in discussions there.
I still don't know where that 0.75% cost fund is.
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Old 19.12.2016, 12:28
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Re: Choosing between 3a (Savings) and 3a Fonds

ZKB's "Swisscanto Vorsorge Fonds 45 Passiv V" (ISIN CH0133721081) promises 0.42% TER + 0.30% for keeping it = 0.72%
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Old 19.12.2016, 12:30
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Re: Choosing between 3a (Savings) and 3a Fonds

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ZKB's "Swisscanto Vorsorge Fonds 45 Passiv V" (ISIN CH0133721081) promises 0.42% TER + 0.30% for keeping it = 0.72%
Merci.
Are there any limitations for opening bank accounts in another canton? (I live in Basel)
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Old 19.12.2016, 12:33
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Re: Choosing between 3a (Savings) and 3a Fonds

As others have said, I believe that most 3rd pillar investment funds with banks have pretty high fees for using their services (though I haven't looked at all options in detail), which over time will wipe out the tax gains as opposed to just investing the money without the 3rd pillar wrapper.


But then, it's locked away now and so you're stuck with cash or investment funds... (or leave CH or buy a property).


An example of expensive 3a funds - UBS Vitainvest - the total expense ratio of most of their funds is around 1.5% (e.g. Vitainvest 50 World at 1.63% per year). I don't know if there are any initial fees involved also. For a (very good) actively managed fund, around 1% TER would be normal (including fees by the broker of 0.35-0.45%), but it's necessary to be selective with active funds and I can't imagine the UBS ones being blockbusters. ETF trackers are in the 0.1% - 0.3% range.

I would probably use it for your property if I were in your shoes...
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Old 19.12.2016, 12:42
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Re: Choosing between 3a (Savings) and 3a Fonds

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Merci.
Are there any limitations for opening bank accounts in another canton? (I live in Basel)
No.

Another one is Raiffeisen Index Fonds - Pension Growth I ISIN, CH018932233 with 0.45%

Also LibertyInvest let you choose over many other funds which are not directly available to the public. They charge you 0.4% for the privilege.
http://www.compare-invest.ch/de/anla...pid///194.html
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Old 19.12.2016, 13:39
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Re: Choosing between 3a (Savings) and 3a Fonds

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Merci.
Are there any limitations for opening bank accounts in another canton? (I live in Basel)
Ask at your local cantonal bank. I think many of them are offering ZKB's swisscanto funds.
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Old 19.12.2016, 15:03
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Re: Choosing between 3a (Savings) and 3a Fonds

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a)


Would you mind sharing where?
I am looking to move from 1.20% ripoff to a lower one.

As I said in the other thread, look into Liberty Invest. They offer a depot for 0,4%, no other payments. And you can choose from many Fonds and ETFs, mine is 50% stock and has a TER of 0.35 %
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