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  #121  
Old 14.08.2018, 16:23
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Re: New low-cost 3a offering: VIAC

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...still can't cash in 3a earlier
You can if you are leaving Switzerland
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  #122  
Old 14.08.2018, 16:27
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Re: New low-cost 3a offering: VIAC

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I think you may be comparing apples and oranges. For similar investments the expected returns should be similar (bar the higher management fees).
I know I am comparing apples and oranges. But I do have a CHOICE between apples and oranges: 3a or my investment of choice.


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Assumptions:
- Tax savings (payment): 33%
- Tax (withdrawal): 4.50%
- Average annual return: 5%

The alternative would offer a 7% avg. annual return (that's the average long term S&P 500 return, I believe)


Result:
- A single payment would be better invested in VIAC for up to 18 years (or 13, if using a 10% rounding)
- Payment every year (max allowed amount): VIAC is better for up to 28 years (or 21, if using a 10% rounding)
Doesn't add up.
Assuming similar returns, you would almost never be better off with the stock market. Quite hard to beat the 33% up front tax savings with the 4.5% tax on withdrawal. Even with 1% higher fees for 3a vs 0% (say an s&p EFT), it would take 40 years!!!
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  #123  
Old 14.08.2018, 16:32
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Re: New low-cost 3a offering: VIAC

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I see...

So to compensate for the tax savings in the last few years before withdrawal, the "average" goes up. In that case, I rather use the formula with 1 payment to determine the number of years before planned withdrawal to start paying into 3a.

=FV(Base_Rate+Extra_Interest, Years, -100*(100%-MR_TaxRate), 0)-FV(Base_Rate, Years, -100, 0)*(100%-Payout_TaxRate)

The best rate scenario for pillar 3a is when Base_Rate is 0%, and Payout_TaxRate is also 0%. Then use Goal Seek to find the Extra_Interest needed to break even. As long as the your alternative investment is always at least this Extra_Interest over the pillar 3a product you will win in the end. Guaranteed.

For young people with a long investment horizon of 30 years, this extra interest needed to beat pillar 3a is just 1.5% (MR 20%), 2.35% (MR 30%), ! For 20 years it is 2.28% (MR 20%), 3.6%. (MR 30%)!

Biggest advantage of pillar 3a for young people: You do not have easy access to the money to blow it on silly things. Neither can it be seized by a pursouit/Betreibung.
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  #124  
Old 14.08.2018, 16:44
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Re: New low-cost 3a offering: VIAC

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=FV(Base_Rate+Extra_Interest, Years, -100*(100%-MR_TaxRate), 0)-FV(Base_Rate, Years, -100, 0)*(100%-Payout_TaxRate)

The best rate scenario for pillar 3a is when Base_Rate is 0%, and Payout_TaxRate is also 0%. Then use Goal Seek to find the Extra_Interest needed to break even. As long as the your alternative investment is always at least this Extra_Interest over the pillar 3a product you will win in the end. Guaranteed.

For young people with a long investment horizon of 30 years, this extra interest needed to beat pillar 3a is just 1.5% (MR 20%), 2.35% (MR 30%), ! For 20 years it is 2.28% (MR 20%), 3.6%. (MR 30%)!

Biggest advantage of pillar 3a for young people: You do not have easy access to the money to blow it on silly things. Neither can it be seized by a pursouit/Betreibung.
IMHO the extra interest rate depends on the return and it is not a fixed value. The difference between 0% and 0%+2% is not the same as say 5%+2%. For 10 years the first is 21% the second difference is 34%. For 20 years, 48% vs. 121%
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  #125  
Old 14.08.2018, 16:46
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Re: New low-cost 3a offering: VIAC

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Doesn't add up.
Assuming similar returns, you would almost never be better off with the stock market. Quite hard to beat the 33% up front tax savings with the 4.5% tax on withdrawal. Even with 1% higher fees for 3a vs 0% (say an s&p EFT), it would take 40 years!!!

I get
- 12,188 (VIAC) and 10,928 (no VIAC) after 13 years
- 15,555 (VIAC) and 15,327 (no VIAC) after 18 years

for a single payment of 6,787 at time 0.
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  #126  
Old 14.08.2018, 16:58
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Re: New low-cost 3a offering: VIAC

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I get
- 12,188 (VIAC) and 10,928 (no VIAC) after 13 years
- 15,555 (VIAC) and 15,327 (no VIAC) after 18 years

for a single payment of 6,787 at time 0.
What rate?
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  #127  
Old 14.08.2018, 17:00
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Re: New low-cost 3a offering: VIAC

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=FV(Base_Rate+Extra_Interest, Years, -100*(100%-MR_TaxRate), 0)-FV(Base_Rate, Years, -100, 0)*(100%-Payout_TaxRate)

The best rate scenario for pillar 3a is when Base_Rate is 0%, and Payout_TaxRate is also 0%. Then use Goal Seek to find the Extra_Interest needed to break even. As long as the your alternative investment is always at least this Extra_Interest over the pillar 3a product you will win in the end. Guaranteed.

For young people with a long investment horizon of 30 years, this extra interest needed to beat pillar 3a is just 1.5% (MR 20%), 2.35% (MR 30%), ! For 20 years it is 2.28% (MR 20%), 3.6%. (MR 30%)!

Biggest advantage of pillar 3a for young people: You do not have easy access to the money to blow it on silly things. Neither can it be seized by a pursouit/Betreibung.
BTW: I wa snot aware of the goal seek function in excel (pretty cool). But I would use it differently. I have a fixed rate (say 7% historical return) and seek the extra return I need to break even. I check the same for a number of years.

OR

The other way around. I set the extra return and seek for the year when I break even.
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  #128  
Old 14.08.2018, 17:06
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Re: New low-cost 3a offering: VIAC

Comparing VIAC to stock market investments, may be worth also including:

- No wealth tax
- No tax on dividends

A smaller factor compared to the "fees and tax return vs. no fees and fully taxed" argument, but still worth considering...


FYI I use both, but I've never calculated if it's worth it. I'm just glad VIAC came along with a more reasonable pricing - maybe we'll see other competitors in future...
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  #129  
Old 14.08.2018, 17:08
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Re: New low-cost 3a offering: VIAC

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Comparing VIAC to stock market investments, may be worth also including:

- No wealth tax
- No tax on dividends

A smaller factor compared to the "fees and tax return vs. no fees and fully taxed" argument, but still worth considering...


FYI I use both, but I've never calculated if it's worth it. I'm just glad VIAC came along with a more reasonable pricing - maybe we'll see other competitors in future...
I believe that dividends are still taxed at the fund level, at least on US based stocks.
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  #130  
Old 14.08.2018, 17:09
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Re: New low-cost 3a offering: VIAC

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IMHO the extra interest rate depends on the return and it is not a fixed value. The difference between 0% and 0%+2% is not the same as say 5%+2%. For 10 years the first is 21% the second difference is 34%. For 20 years, 48% vs. 121%
Correct. As I said the best rate scenario for pillar 3a is when Base_Rate is 0%, as long as your alternative investment is always at least this Extra_Interest over the pillar 3a product you will win in the end. Guaranteed. Or in other words, as you just proved yourself, if the base rate goes up, the difference between pillar 3a and the alternative can be even lower. (I like to look at the extremes and limits. If I know I can beat those, I have no longer to worry in any scenario.)

Problem is, as you say, can you find an alternative which is so much better. Before VIAC it was easy, but with VIAC pillar 3a has gained a lot.
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  #131  
Old 14.08.2018, 17:10
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Re: New low-cost 3a offering: VIAC

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What rate?

5% return for VIAC, 7% for no VIAC
33% tax savings upon payment and 4.5% tax on withdrawal.
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  #132  
Old 14.08.2018, 18:16
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Re: New low-cost 3a offering: VIAC

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Correct. As I said the best rate scenario for pillar 3a is when Base_Rate is 0%, as long as your alternative investment is always at least this Extra_Interest over the pillar 3a product you will win in the end. Guaranteed. Or in other words, as you just proved yourself, if the base rate goes up, the difference between pillar 3a and the alternative can be even lower. (I like to look at the extremes and limits. If I know I can beat those, I have no longer to worry in any scenario.)

Problem is, as you say, can you find an alternative which is so much better. Before VIAC it was easy, but with VIAC pillar 3a has gained a lot.
Ok, now I understand what you mean by "best rate scenario". I would call 05 return a worst case scenario, but that's just me

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5% return for VIAC, 7% for no VIAC
33% tax savings upon payment and 4.5% tax on withdrawal.
Obviously we have 2 very big unknowns here:
- the long term market return using VIAC 100%
- by how much can we beat the VIAC offering

But as I only need 1.5% to beat it until my earliest retirement in CH, I will stick to my own investments.

Last edited by EPMike; 14.08.2018 at 18:30.
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  #133  
Old 14.08.2018, 19:52
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Re: New low-cost 3a offering: VIAC

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Obviously we have 2 very big unknowns here:
- the long term market return using VIAC 100%
- by how much can we beat the VIAC offering

But as I only need 1.5% to beat it until my earliest retirement in CH, I will stick to my own investments.

I have no idea about your stock picking skills, but the average investor had a 2.1% annual return from 1996 to 2015.
In that timeframe the S&P 500 returned 8.2% pa.
Source: https://www.valuewalk.com/2016/08/spencer-jakab-book/

For every Amazon and Apple there is an Enron or Netscape
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  #134  
Old 15.08.2018, 16:55
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Re: New low-cost 3a offering: VIAC

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I have no idea about your stock picking skills, but the average investor had a 2.1% annual return from 1996 to 2015.
In that timeframe the S&P 500 returned 8.2% pa.
Source: https://www.valuewalk.com/2016/08/spencer-jakab-book/

For every Amazon and Apple there is an Enron or Netscape
I didn't mean stock picking. But due to legal constraints, the VIAC is CH heavy, hence likely to underperform somewhat.

Also it is not that difficult to find a fund that beats the S&P 500. FMF is happy to suggest one
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  #135  
Old 16.08.2018, 10:58
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Re: New low-cost 3a offering: VIAC

Another point to mention is you can not be 100% invested in VIAC, even in the G100 there is 3% in cash.

Unless somebody knows another way to be 100% invested.
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  #136  
Old 19.08.2018, 21:27
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Re: New low-cost 3a offering: VIAC

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Another point to mention is you can not be 100% invested in VIAC, even in the G100 there is 3% in cash.

Unless somebody knows another way to be 100% invested.
You can't.
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  #137  
Old 07.09.2018, 11:52
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Re: New low-cost 3a offering: VIAC

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You can recommend up to 3 friends. For each new account created, you will be entitled to CHF 500 (each) of free lifetime management fees at VIAC. Over 30 years with a Global 100 strategy, this represents about CHF 700 less in discounts on costs. Itís always better than nothing; especially I prefer a company that provides less with this kind of program, but focuses on offering an initial product with the lowest possible fees.
My referral codes for CHF 500 invested fee-free:
plcBdu
bl9Dpy
ZMProK
Thanks!
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  #138  
Old 14.09.2018, 14:00
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Re: New low-cost 3a offering: VIAC

Looking for a referral code, Someone please PM me, Thanks in advance.
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  #139  
Old 14.09.2018, 15:38
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Re: New low-cost 3a offering: VIAC

Already sorted. Thank you for all the PM.
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  #140  
Old 17.09.2018, 07:41
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Re: New low-cost 3a offering: VIAC

Dear all,
anybody willing to share a referral code?


Francesco
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