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Old 25.08.2017, 02:37
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Säule 3a Investments - what to do... ?

Hiya, I've been living in CH for a couple of years now. So far I've put the CHF6k p.a. which are tax-deductible on a savings account. However, given the low interest rate I'm now thinking about opening a funds account. But there is far too much choice... Would anyone here be happy to share his/her opinion on the UBS, CS, ZKB etc. funds that are available for this type of investment? I'm only looking for some inspiring ideas (or maybe even recommendations), so will still do thorough due diligence before I invest the money. I'm rather risk-averse but given the range of funds that all banks seem to offer there should hopefully be something that fits me...

Many thanks to you & Have a good weekend !
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Old 25.08.2017, 04:07
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Re: Säule 3a Investments - what to do... ?

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But there is far too much choice...
Actully there's little choice and I for one would welcome some more competition in this space. The only choice at the moment is to get ripped off big time by big banks. Tax savings don't even offset it in the long run.

We just discussed this in another thread

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Old 25.08.2017, 09:45
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Re: Säule 3a Investments - what to do... ?

My view, and it's only my view not advice.

- don't waste your time on a 3a savings account with effectively zero interest, transfer that to a funds account

- the funds are all conservative and the costs high - but as part of an overall plan, using the 3a tax allowance to invest as the conservative part of a portfolio may make sense

- I'd put more in a regular custody account, general purpose fund (accumulator, not income); it has more flexibility and almost certainly lower fees and better growth prospects

It really depends on your saving capacity - if you're young, and only saving the 3a amount, you're probably better off putting it straight into better performing funds - in the long term the tax saving will quickly be overtaken.
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Old 25.08.2017, 11:43
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Re: Säule 3a Investments - what to do... ?

It depends on your age and what alternatives you see, and on tax due on the final payout (not necessarily low-tax if you emigrate). Compared to cash at zero interest and assuming low tax at payout, 3a may become attractive in your late fourties, later if you assume at least minimal positive return on the alternative you pick.
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Old 25.08.2017, 11:48
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Re: Säule 3a Investments - what to do... ?

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It depends on your age and what alternatives you see, and on tax due on the final payout (not necessarily low-tax if you emigrate). Compared to cash at zero interest and assuming low tax at payout, 3a may become attractive in your late fourties, later if you assume at least minimal positive return on the alternative you pick.
They're also commonly used in mortgages, rather than repaying directly.

Since you save up front tax on the 3a, and tax on not having paid off the mortgage and thus gained capital, it works very nicely as long as the 3a return is > mortgage interest rate.

Even the crappy 3a funds tend to manage that.

But of course it isn't actually a pension (for income), you'll have to use it to pay off the mortgage later. So you still need to invest somewhere else, preferably in a better fund.
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Old 25.08.2017, 11:51
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Re: Säule 3a Investments - what to do... ?

Unless you have to pay in to 3a (eg. for mortgage if want to amortise indirectly), then it's better to put the cash into other funds. The BVG-approved funds generally have higher than needed fees, and hugely underperform funds on the 'open market'

IMO
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Old 25.08.2017, 12:23
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Re: Säule 3a Investments - what to do... ?

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They're also commonly used in mortgages, rather than repaying directly.
Indeed, but if that was the case here the original question wouldn't have arisen.
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Old 25.08.2017, 12:32
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Re: Säule 3a Investments - what to do... ?

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Indeed, but if that was the case here the original question wouldn't have arisen.
Almost certainly true, but not definite.

My bank doesn't really give a monkey's what the 3a is invested in, as long as it's in a 3a with them such that they can see the investment happening and it can't be removed.

They may think I was an idiot if I decided to do a cash tranche, but they probably wouldn't stop me. I'm not even sure they could stop me, the mortgage terms don't specify the underlying "investment", and they'd probably be very careful about anything that looks like investment advice.
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Old 25.08.2017, 12:41
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Re: Säule 3a Investments - what to do... ?

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, and they'd probably be very careful about anything that looks like investment advice.
No they would just send you a bill for said advise, if they were qualified to give any advise in the first place
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Old 25.08.2017, 12:56
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Re: Säule 3a Investments - what to do... ?

Generally the advise I have been given is to split the 6.7K over at least 2 locations and later as the pot grows maybe more. The reason is on withdrawal it helps to break the tax if you take it out in stages rather than one lump sum. Also if its in a bank, they will only protect 100K of it. So having another 100K somewhere else protects your money, but if you go for funds not really an issue.

I have one in a bank account. CIC Suisse. Yes interest rates are bad, but they have some of the best of a bad lot, and consistantly some of the best, for a number of years, they tend to remain in the top 5.

Experience with UBS is everything costs and very little return. I do day to day bank with them but always question myself why.

A fund has risk, so depending how risk adverse you are. The best bet is too take some time to visit the banks or institusions offering these funds and get the data that they offer, then take a decision. I think and I am no expert one with low fees is a good bet.
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Old 25.08.2017, 13:15
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Re: Säule 3a Investments - what to do... ?

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No they would just send you a bill for said advise, if they were qualified to give any advise in the first place
They'd send the bill whether qualified or not!

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Generally the advise I have been given is to split the 6.7K over at least 2 locations and later as the pot grows maybe more. The reason is on withdrawal it helps to break the tax if you take it out in stages rather than one lump sum. Also if its in a bank, they will only protect 100K of it. So having another 100K somewhere else protects your money, but if you go for funds not really an issue.

I have one in a bank account. CIC Suisse. Yes interest rates are bad, but they have some of the best of a bad lot, and consistantly some of the best, for a number of years, they tend to remain in the top 5.

Experience with UBS is everything costs and very little return. I do day to day bank with them but always question myself why.

A fund has risk, so depending how risk adverse you are. The best bet is too take some time to visit the banks or institusions offering these funds and get the data that they offer, then take a decision. I think and I am no expert one with low fees is a good bet.
Yes, specifically you can only close the account and take it all, not take part of it. So you don't want to take out a big chunk in year 2037, paying higher rate tax, and nothing in 2038 using none of the tax allowances etc.

But it's easier to split it over time (i.e. when account A is full enough, open account B) rather than having several being paid into in parallel.

It doesn't have to be with a different bank either; you can open another account with the same bank, as I will have to do as having the 3a(s) with my mortgage bank is a condition.
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Old 25.08.2017, 14:29
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Re: Säule 3a Investments - what to do... ?

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My view, and it's only my view not advice.

- don't waste your time on a 3a savings account with effectively zero interest, transfer that to a funds account

- the funds are all conservative and the costs high - but as part of an overall plan, using the 3a tax allowance to invest as the conservative part of a portfolio may make sense

- I'd put more in a regular custody account, general purpose fund (accumulator, not income); it has more flexibility and almost certainly lower fees and better growth prospects

It really depends on your saving capacity - if you're young, and only saving the 3a amount, you're probably better off putting it straight into better performing funds - in the long term the tax saving will quickly be overtaken.
Indeed this is the only scenario which would bring some benefit. But even if you decide for 3a, don't go with the bank but with VermögensZentrum, which lets you pick your own ETFs.
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Old 25.08.2017, 20:49
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Re: Säule 3a Investments - what to do... ?

Great, thanks a lot for your thoughts. Looks like there is still some homework for me to be done. I like the idea of splitting the money across 2 banks - it makes the comparison of their performances over time easier. Thanks again!
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Old 25.08.2017, 21:19
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Re: Säule 3a Investments - what to do... ?

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Indeed this is the only scenario which would bring some benefit. But even if you decide for 3a, don't go with the bank but with VermögensZentrum, which lets you pick your own ETFs.
It's not necessarily cheaper than any other big bank product. The choice is extremely constrained to just a few names, CHF hedging is practically force fed you, management fee is high even compared to banks, and they even dare to charge it on cash balances.
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Old 25.08.2017, 23:10
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Re: Säule 3a Investments - what to do... ?

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It's not necessarily cheaper than any other big bank product. The choice is extremely constrained to just a few names, CHF hedging is practically force fed you, management fee is high even compared to banks, and they even dare to charge it on cash balances.
Why is it not cheaper? Depending on the ETFs/Allocation you choose you will pay a TER alltogether of around 0.6-1%, even with hedged to CHF ETFs (Which are indeed force-fed to you )
Still much cheaper than any other versions I have found (and I looked for 3a with 75+% stocks - a lot).
Postfinance is about the same, but they force you to invest 50% in swiss stocks, which is not what I want. At least VZ has a good selection of worldwide ETFs and you can even choose specialized ETFs and high risk assets if you feel like it. And the costs are not too bad for the ETFs. (for example 0.09% TER for S&P 500 ETF)
All others I looked into around 1 year ago (UBS etc.) where around double the cost with 50% in stocks maximum or 70% in Swiss stocks
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Old 25.08.2017, 23:43
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Re: Säule 3a Investments - what to do... ?

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Still much cheaper than any other versions I have found (and I looked for 3a with 75+% stocks - a lot).
ZKB just launched a couple months ago Swisscanto VT Passiv 75%, spotting 0.33% TER + 0.40% custody fee (maybe would be a bit lower at another cantonal bank). Unfortunately, no financial reports available yet to fully scoop what's inside of it. That's lower than VZ already

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TER alltogether of around 0.6-1%, even with hedged to CHF ETFs (Which are indeed force-fed to you
Hint: hedging costs themselves (difference in interest rates) are not in TER.

Do you really like swiss frank so much to pay 1-2% p.a extra for holding onto it?

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for example 0.09% TER for S&P 500 ETF
That's nice, except lost US withholding taxes would add another 0.30% and you can only go maximum a mere 27% into it before bumping into their limits for unhedged portfolio part
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Old 26.08.2017, 12:23
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Re: Säule 3a Investments - what to do... ?

i thought the hedging costs are included in the TER? Why wouldn't they be.
and the swisscanto VT passiv is also Currency hedged to CHF in 70% of the assets. I Think they have to for 3a. i couldnt find the Asset Allocation in this one. but with VZ the costs are about the same and you can choose and Change the assets any time if you want to.
Edit found the Allocation. its 50 % Foreign stocks 25% Swiss stock and 70% of it has to be in chf.
i Chose 0% Swiss stock and quite a bit of Emerging Market, small cap, a part in msci World and instead of Bonds i Chose reits and a Bit of gold and commodities. for a total cost of 0.87%, not too Bad i think

Last edited by HannoA; 26.08.2017 at 13:02.
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Old 26.08.2017, 13:15
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Re: Säule 3a Investments - what to do... ?

This might help: https://www.vermoegenszentrum.ch/rat...ftendepot.html
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Old 26.08.2017, 13:16
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Re: Säule 3a Investments - what to do... ?

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i thought the hedging costs are included in the TER? Why wouldn't they be.
and the swisscanto VT passiv is also Currency hedged to CHF in 70% of the assets. I Think they have to for 3a. i couldnt find the Asset Allocation in this one. but with VZ the costs are about the same and you can choose and Change the assets any time if you want to.
Edit found the Allocation. its 50 % Foreign stocks 25% Swiss stock and 70% of it has to be in chf.
i Chose 0% Swiss stock and quite a bit of Emerging Market, small cap, a part in msci World and instead of Bonds i Chose reits and a Bit of gold and commodities. for a total cost of 0.87%, not too Bad i think
The hedge is just another position in the portfolio, which value will; go up or down inversely proportionally to the currency change.
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Old 26.08.2017, 14:15
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Re: Säule 3a Investments - what to do... ?

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The hedge is just another position in the portfolio, which value will; go up or down inversely proportionally to the currency change.
I don`t understand this. Is there another fee I can`t see for the hedging? Or do you mean that depending on the currency you hold the portfolio will increase/decrease in value with the exchange rates of the currency? Because thats always the case, wheater I stay in CHF, Euro or USD, and can be at times an advantage, at others a disadvantage but in the long term should not play too much of a role with stocks
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