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  #21  
Old 11.05.2020, 16:09
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Re: 2nd pillar investment advice

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Given that different pension funds offer different benefits and returns, I’d take such statements with a pinch of salt.
Perhaps you could show a link to any Swiss pension fund that has made 7% compound for 10 years or better, doubling over the last 10 years should have been reasonably easy.
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  #22  
Old 11.05.2020, 16:16
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Re: 2nd pillar investment advice

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active membersensioners = 4:1..
It is better than expected average which is around 1:3 . Problem is that all those old folks got a very good conversion rate and a high monthly pension. This directly cuts into your revenue. But even pensions funds with 1:2 like the one from the city of Zurich might still pay "good" interest.
https://www.pkzh.ch/pkzh/de/index/za...ennzahlen.html

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According to the current regulations you'll get at least 1% per year, the safety of the money is quite good. For the last years I think I got around 3.5 to 4% on average per year.
3.5 to 4% is pretty decent for pillar 2. Unfortunately many have 2% or even less.

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Given that different pension funds offer different benefits and returns, I’d take such statements with a pinch of salt.
As a rule of thumb and back of the envelope calculation: Your alternative investment must outperform pillar 2 by around 1.5 percentage point to beat the potential tax savings (investment horizon of 20 - 30 years). Most pension fund pay just ~2%.

The closer you are to retirement age the better the benefit you get from the tax saving (or if you know you will buy self lived in real estate within the next 5 to 10 years).

Two comparison and performance analysis (German).
https://www.ubs.com/microsites/focus...rformance.html

https://www.pensionskassenvergleich....2019/index.php
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Old 11.05.2020, 16:27
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Re: 2nd pillar investment advice

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Thanks for your advice, but let me clarify that I don't feel comfortable with investing in stocks (or anything else), as I don't have the knowledge, neither time, nor nerves to get educated in this direction, take the risk etc.
Therefore, my only alternative, for the time being, would be keeping the money in the bank.
On the other hand, I might be interested in buying a property in 3-4 years, given I decide to stay in Switzerland.
I do both pension fund and investing. The main difference is that with the pension fund you get the money in advance by avoiding the tax man. With investing you get the money much latter if you are lucky.

Lots of people say that if you invest by yourself you can get the money at any time. Imagine that you are in a bear market and your portfolio is at 50%. Actually a good time to buy. What do you do if need the money, do you sell?
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Old 11.05.2020, 16:39
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Re: 2nd pillar investment advice

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Thanks for your advice, but let me clarify that I don't feel comfortable with investing in stocks (or anything else), as I don't have the knowledge, neither time, nor nerves to get educated in this direction, take the risk etc.
Therefore, my only alternative, for the time being, would be keeping the money in the bank.
On the other hand, I might be interested in buying a property in 3-4 years, given I decide to stay in Switzerland.
Honestly it's not hard, and you are seriously compromising your future lifestyle if you won't do even the most basic research. If it all scares you just invest in some generic funds like fundsmith equity, bailie Gifford global discovery, Lindsell train global equity.
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Old 11.05.2020, 16:42
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Re: 2nd pillar investment advice

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Thanks for your advice, but let me clarify that I don't feel comfortable with investing in stocks (or anything else), as I don't have the knowledge, neither time, nor nerves to get educated in this direction, take the risk etc.
Therefore, my only alternative, for the time being, would be keeping the money in the bank.
On the other hand, I might be interested in buying a property in 3-4 years, given I decide to stay in Switzerland.
I was in the same situation as you are. I was able to "buy in" a rather large sum into the 2nd pillar and that would save me around 30% tax. I was quite focused on narrowing that pension gap so did not think about alternatives. Then I realized that the gap is only getting bigger all the time because the interest rates kept on getting lower, etc., and if I have a long enough horizon (at least 15 years), a low cost index fund would be a better place to put my money. Only when my time horizon gets shorter than 10 years will the 30% tax savings will get more attractive and that's when I will need to make a decision to get our of the stock market and do the buy in.

I understand your situation not wanting to risk it in the stock market. So one alternative is to purchase property but this could also be more risky (I had some great investments here in the past, but right now I think the prices are just way too high). At least you could take money out of your pension to pay for the property, so that is another advantage of going that route.

You do have until the end of the year to buy in. I suggest you read a bit more about passive investing. I have shifted from buying into the pension fund towards passive investing some years ago, and have not regretted it even with the current market turmoil.
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Old 11.05.2020, 16:48
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Re: 2nd pillar investment advice

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I do both pension fund and investing. The main difference is that with the pension fund you get the money in advance by avoiding the tax man. With investing you get the money much latter if you are lucky.

Lots of people say that if you invest by yourself you can get the money at any time. Imagine that you are in a bear market and your portfolio is at 50%. Actually a good time to buy. What do you do if need the money, do you sell?
Part of building your portfolio means that you invest in different stocks, bonds and also hold some cash.
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Old 11.05.2020, 16:49
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Re: 2nd pillar investment advice

Is there a Swiss equivalent to what we Brits call a sipp (self invested pension)?
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Old 11.05.2020, 17:07
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Re: 2nd pillar investment advice

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Is there a Swiss equivalent to what we Brits call a sipp (self invested pension)?
If it's also a "deferred tax account" (i.e. you get a tax break today, you pay far less when withdrawing at the end), as well as where dividends are not taxed, then it's most probably closest to the swiss 3rd pillar.

If you want that portion to be invested in the stock markets, check for VIAC (or frankly as most recent, although I am still sceptical about their fund offers).
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  #29  
Old 11.05.2020, 17:19
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Re: 2nd pillar investment advice

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Honestly it's not hard, and you are seriously compromising your future lifestyle if you won't do even the most basic research. If it all scares you just invest in some generic funds like fundsmith equity, bailie Gifford global discovery, Lindsell train global equity.
OK, it might be silly from a financial perspective, but I am used to relying on my salary as the only source of income, I always keep some emergency cash (3-4 salaries, even though I have all the insurances I need), I own 1-2 properties in my home country, for personal use, no renting, and I am planning to rely on my pension once I retire. Looking at the projections, it should definitely cover for my lifestyle, but they might be wrong, of course.
Should I decide to permanently stay in Switzerland, I would consider buying a property here, as well.
Anyway, there is still some time to decide until the year end...but 2nd pillar seems like a safe investment, even though not too sexy, doesn't it?
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Old 11.05.2020, 17:20
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Re: 2nd pillar investment advice

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Is there a Swiss equivalent to what we Brits call a sipp (self invested pension)?
If you are self employed than that is properly what you have to do through pillar 3a.

If you are an employed person your pension fund might provide more personalized options for high income (>127k) people. So called 1e-plans
https://www.vermoegenszentrum.ch/rat...n/1e-plan.html
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Old 11.05.2020, 21:30
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Re: 2nd pillar investment advice

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Is there a Swiss equivalent to what we Brits call a sipp (self invested pension)?
No

However CGT is not charged on gains so no need, UK dividends don't have a tax credit so any investment is equal to an ISA.
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Old 12.05.2020, 05:34
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Re: 2nd pillar investment advice

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VIAC will soon also start with offering 2nd pillar with possibilities to invest.

Where have you heard this? Please share.

I have only read that VIAC will soon offer a compte de libre passage (Freizügigkeitskonto). Closely related to the 2nd pillar -- used to hold the money from the 2nd pillar when changing employers -- but by no means a real 2nd pillar.

I'm not even sure that what you suggest would be allowed by the pension law but I'd love to be wrong.
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Old 12.05.2020, 07:49
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Re: 2nd pillar investment advice

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No

However CGT is not charged on gains so no need, UK dividends don't have a tax credit so any investment is equal to an ISA.
Well, there'd still be income tax advantages of investing in a sipp like product right? I moved recently to CH, and am in my early 30s, and was basically wondering if I could backpay into a sipp like 2nd pillar to get the best of both worlds?

PS
I'm also looking to buy a house in a year or two (in my calculations buying a modest property (say 600k CHF) with a minimum deposit should be at least break even).

My current plan to save for the deposit is to invest extra in my regular company (not sipp) 2nd pillar as in the short term (ie aforementioned year or two), the income tax savings from pension investments should outweigh the better performance of the stock market vs company pension fund. Is this sensible? Once that is done I'll make the minimum contribution.

Last edited by jorido; 12.05.2020 at 10:37.
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  #34  
Old 12.05.2020, 09:18
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Re: 2nd pillar investment advice

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Can be, but:
- 2nd pillar is still better than 3rd pillar, because 2nd pillar is like a perpetual bond
- some diversification would not hurt anyone, one cannot invest infinite amounts into 2nd pillar, usually it is capped at quite low level (compared with one's overall assets)
Over 30 years the opportunity cost of underperformance even by 1-2% is immense (not to mention the more realistic 5-6% underperformance of the avg. swiss pension fund)

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Thanks for your advice, but let me clarify that I don't feel comfortable with investing in stocks (or anything else), as I don't have the knowledge, neither time, nor nerves to get educated in this direction, take the risk etc.
Therefore, my only alternative, for the time being, would be keeping the money in the bank.
On the other hand, I might be interested in buying a property in 3-4 years, given I decide to stay in Switzerland.
Ok, but your laziness now is a huge lost opportunity. Waiting another 7-10 years and realise you want to invest will mean you need to invest twice the amount for the rest of your life as compared to starting to invest today!

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I do both pension fund and investing. The main difference is that with the pension fund you get the money in advance by avoiding the tax man. With investing you get the money much latter if you are lucky.

Lots of people say that if you invest by yourself you can get the money at any time. Imagine that you are in a bear market and your portfolio is at 50%. Actually a good time to buy. What do you do if need the money, do you sell?
You will spend (hopefully) at least 30 years in retirement. No bear market ever lasted 30 years.

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Honestly it's not hard, and you are seriously compromising your future lifestyle if you won't do even the most basic research. If it all scares you just invest in some generic funds like fundsmith equity, bailie Gifford global discovery, Lindsell train global equity.
Couldn't have said it better.

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OK, it might be silly from a financial perspective, but I am used to relying on my salary as the only source of income, I always keep some emergency cash (3-4 salaries, even though I have all the insurances I need)
How much will 3-4 salaries help you if you loose your job when you are 55 or 60?

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, I own 1-2 properties in my home country, for personal use, no renting,
Another huge lost opportunity. Do you really need 1-2 properties in your home country. Imagine you could have 10-20 when you retire in 30 years (5-10x compount in 30 years is pretty easy: 5.5% to 8% annual returns).

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and I am planning to rely on my pension once I retire. Looking at the projections, it should definitely cover for my lifestyle, but they might be wrong, of course.
Good luck with that.




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Should I decide to permanently stay in Switzerland, I would consider buying a property here, as well.
See other threads why real estate is not a good FINANCIAL investment.

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Anyway, there is still some time to decide until the year end...but 2nd pillar seems like a safe investment, even though not too sexy, doesn't it?
It not that it is not "sexy" it is a poor investment choice at your age and your plans.
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Old 12.05.2020, 10:46
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Re: 2nd pillar investment advice

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OK, it might be silly from a financial perspective, but I am used to relying on my salary as the only source of income, I always keep some emergency cash (3-4 salaries, even though I have all the insurances I need), I own 1-2 properties in my home country, for personal use, no renting, and I am planning to rely on my pension once I retire. Looking at the projections, it should definitely cover for my lifestyle, but they might be wrong, of course.
Should I decide to permanently stay in Switzerland, I would consider buying a property here, as well.
Anyway, there is still some time to decide until the year end...but 2nd pillar seems like a safe investment, even though not too sexy, doesn't it?
Safety is something you should be thinking about if you are both poor and old. It sounds like you are neither. It is utter, utter madness to take a low risk approach when you are young and (I presume by your two properties) high income. Yes funds can drop in value but they are almost guaranteed to increase over a lengthy timespan of a decade or two.

If I was new to investing and in your position I'd ask close, trusted friends to give you a hand setting up some investments. Lots of us millennials have parents who made a significant amount of money in property. That is not likely to happen to our generation. You are best off either renting, or, in my opinion buying the cheapest property you can put up with with a minimal deposit and paying back the minimum amount.

Last edited by jorido; 12.05.2020 at 11:11.
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Old 12.05.2020, 14:25
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Re: 2nd pillar investment advice

I get your points, but we are all different in terms of personal experience and culture, so it is not just laziness that prevents me from investing.
Just to illustrate where I am coming from - recently, I have been awarded a (modest) long-term bonus, including stocks and options; what happened is that I ended up checking the stock's price first thing in the morning, even though it was a really modest amount and could be vested in 3 years! Well, I definitely do not want to spend my life doing this!
Isn't one of the best things about Switzerland all the insurances we have in case of unemployment, illness etc.?! And looking at my pension projection (planned with 1.5% interest), it seems more than acceptable, even without the voluntary contributions.
BTW, I did not consider buying a property as an investment, rather as having a place to call home (in Switzerland) and not worrying about paying the rent, in case I lose my job etc. Likewise, I would never sell or rent my parents' or grandparents' houses, with all the memories etc. unless it is a question of life and death.
But again, maybe I am wrong, so I am definitely going to give all these a second thought, thank you for the valuable opinions!
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Old 12.05.2020, 14:34
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Re: 2nd pillar investment advice

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I get your points, but we are all different in terms of personal experience and culture, so it is not just laziness that prevents me from investing.
Just to illustrate where I am coming from - recently, I have been awarded a (modest) long-term bonus, including stocks and options; what happened is that I ended up checking the stock's price first thing in the morning, even though it was a really modest amount and could be vested in 3 years! Well, I definitely do not want to spend my life doing this!
Isn't one of the best things about Switzerland all the insurances we have in case of unemployment, illness etc.?! And looking at my pension projection (planned with 1.5% interest), it seems more than acceptable, even without the voluntary contributions.
BTW, I did not consider buying a property as an investment, rather as having a place to call home (in Switzerland) and not worrying about paying the rent, in case I lose my job etc. Likewise, I would never sell or rent my parents' or grandparents' houses, with all the memories etc. unless it is a question of life and death.
But again, maybe I am wrong, so I am definitely going to give all these a second thought, thank you for the valuable opinions!
100,000 CHF at 1.5% interest over 30 years is 156k, which accounting for inflation will probably be worth less than you started with.

At 8% (typical fund performance historically) it's over 1 million.

Pillar 2 investments make sense for tax reduction if you are very close to retirement or buying a house. Otherwise they don't.
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Old 12.05.2020, 14:57
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Re: 2nd pillar investment advice

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I get your points, but we are all different in terms of personal experience and culture, so it is not just laziness that prevents me from investing.
Just to illustrate where I am coming from - recently, I have been awarded a (modest) long-term bonus, including stocks and options; what happened is that I ended up checking the stock's price first thing in the morning, even though it was a really modest amount and could be vested in 3 years! Well, I definitely do not want to spend my life doing this!
Isn't one of the best things about Switzerland all the insurances we have in case of unemployment, illness etc.?! And looking at my pension projection (planned with 1.5% interest), it seems more than acceptable, even without the voluntary contributions.
BTW, I did not consider buying a property as an investment, rather as having a place to call home (in Switzerland) and not worrying about paying the rent, in case I lose my job etc. Likewise, I would never sell or rent my parents' or grandparents' houses, with all the memories etc. unless it is a question of life and death.
But again, maybe I am wrong, so I am definitely going to give all these a second thought, thank you for the valuable opinions!
You don't need to. Actually it is better if you don't. Just pick your investments and stick with them for at least a decade.
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Old 13.05.2020, 13:50
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Re: 2nd pillar investment advice

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VIAC will soon also start with offering 2nd pillar with possibilities to invest.
Don't they already do. I have 3rd pillar with them and they allow to invest in the Stock market of choice and the level of exposure.
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Old 13.05.2020, 14:14
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Re: 2nd pillar investment advice

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Don't they already do. I have 3rd pillar with them and they allow to invest in the Stock market of choice and the level of exposure.
Yes they do for 3rd pillar, but will soon offer 2nd pillar in addition to that (Freizügigkeitskonto).
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