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Old 11.05.2020, 12:18
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2nd pillar investment advice

Hi All,

I am (almost) completely ignorant when it comes to investing my savings, therefore I usually go for the least risky/most conservative option. My plan for 2020 was to invest app. 100k in my pension 2nd pillar, as I still have a gap that allows me pouring money there. I don't plan buying a property over the next 3 years, so this shouldn't be a deal breaker. My only concern is having all of my eggs in one basket, as I have already put most of my savings in my company's pension fund. It is one of the world's leading corporations, therefore supposed to be 'safe', but what would EF advice be, in the light of the upcoming economic crisis/recession? And wouldn't keeping savings in the bank be even more riskier, with regards to the sum exceeding the guaranteed amount of 100k CHF?

P.S. Since the 2nd pillar investments are tax-deductible, I expect to pay app. 30k less in taxes in 2020, this is the most lucrative part, obviously.
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Old 11.05.2020, 12:22
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Re: 2nd pillar investment advice

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Hi All,

I am (almost) completely ignorant when it comes to investing my savings, therefore I usually go for the least risky/most conservative option. My plan for 2020 was to invest app. 100k in my pension 2nd pillar, as I still have a gap that allows me pouring money there. I don't plan buying a property over the next 3 years, so this shouldn't be a deal breaker. My only concern is having all of my eggs in one basket, as I have already put most of my savings in my company's pension fund. It is one of the world's leading corporations, therefore supposed to be 'safe', but what would EF advice be, in the light of the upcoming economic crisis/recession? And wouldn't keeping savings in the bank be even more riskier, with regards to the sum exceeding the guaranteed amount of 100k CHF?
Return on Swiss pensions is poor I would avoid this, I bought all my back years & it was a poor investment decision
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Old 11.05.2020, 12:24
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Re: 2nd pillar investment advice

Also, investing 100k in one go will not give you the tax benefit splitting this over a couple of years might.


I put money into that pot as well, with hindsight I´d also better have invested that money.
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Old 11.05.2020, 12:37
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Re: 2nd pillar investment advice

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Return on Swiss pensions is poor I would avoid this, I bought all my back years & it was a poor investment decision
Thanks! At this point, I am not really worried about the returns, but rather about the 'safety' of the investment. Pension funds in Switzerland should be one of the safest options, shouldn't they?
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Old 11.05.2020, 12:38
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Re: 2nd pillar investment advice

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Also, investing 100k in one go will not give you the tax benefit splitting this over a couple of years might.


I put money into that pot as well, with hindsight I´d also better have invested that money.
Yes, I have figured this out, 100k was the 2020 portion of the total.
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Old 11.05.2020, 13:17
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Re: 2nd pillar investment advice

Hi

You write about the 2nd pillar, and later that you have savings in your company's pension fund. I thought the 2nd pillar was the pension built up in the company?! I am asking just to clarify it for me.

Regarding where to put the money. Just want to point you towards VIAC or Frankly (probably others as well). These invest your 3r pillar savings in the stock market (different options there). But the value is limited to 6826 Franks, which is peanuts in comparison to around 100k.

best, Erik
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Old 11.05.2020, 13:31
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Re: 2nd pillar investment advice

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You write about the 2nd pillar, and later that you have savings in your company's pension fund. I thought the 2nd pillar was the pension built up in the company?! I am asking just to clarify it for me.

If you only started paying in later on, you can "buy in" for the missing years.
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Old 11.05.2020, 13:41
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Re: 2nd pillar investment advice

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Hi

You write about the 2nd pillar, and later that you have savings in your company's pension fund. I thought the 2nd pillar was the pension built up in the company?! I am asking just to clarify it for me.

Regarding where to put the money. Just want to point you towards VIAC or Frankly (probably others as well). These invest your 3r pillar savings in the stock market (different options there). But the value is limited to 6826 Franks, which is peanuts in comparison to around 100k.

best, Erik
Hi, maybe I am not the best person to explain this, but there is a mandatory part of the 2nd pillar, as well as a voluntary one. As I have moved to Switzerland/started contributing to my 2nd pillar in my thirties, I still have a gap of several hundred thousands I could 'fill' voluntarily - I consider this 'savings' in my company's pension fund, which could be withdrawn upon retirement, leaving Switzerland or for the primary residence financing (in Switzerland). And the best part is that this 'investment' is tax deductible.

I guess the 6,826 CHF refer to the 3rd pillar, which I keep with my bank(s).
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Old 11.05.2020, 13:48
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Re: 2nd pillar investment advice

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Return on Swiss pensions is poor I would avoid this, I bought all my back years & it was a poor investment decision
Given that different pension funds offer different benefits and returns, I’d take such statements with a pinch of salt.
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Old 11.05.2020, 13:59
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Re: 2nd pillar investment advice

Do you have the full pension fund report? Do you know the Deckunsgrad (coverage ratio), past performance, age structure, number of current pensioners, investment structure, management cost and how is it managed, comparison with other pillar 2 funds, aware about the non-mandatory conversion rate and its impact?

PS: Pension funds are always independent of the company. If the company goes bankrupt the pension money is not at risk. But also otherwise, even if the company does well a pension fund might under perform or even lose substantial money.
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Old 11.05.2020, 14:59
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Re: 2nd pillar investment advice

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Hi, maybe I am not the best person to explain this, but there is a mandatory part of the 2nd pillar, as well as a voluntary one. As I have moved to Switzerland/started contributing to my 2nd pillar in my thirties, I still have a gap of several hundred thousands I could 'fill' voluntarily - I consider this 'savings' in my company's pension fund, which could be withdrawn upon retirement, leaving Switzerland or for the primary residence financing (in Switzerland). And the best part is that this 'investment' is tax deductible.

I guess the 6,826 CHF refer to the 3rd pillar, which I keep with my bank(s).
Ok, clear! I know that gap when arriving in your thirties, but mine is not several hundred thousands, unfortunately!

The 6826 is indeed the 3rd pillar. I justed wanted to say that with 3rd pillar you can save for retirement and save taxes (just like the 2nd pillar), but there are possibilities to play with it in the stock market.

best regards, Erik
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Old 11.05.2020, 15:21
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Re: 2nd pillar investment advice

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Hi All,

I am (almost) completely ignorant when it comes to investing my savings, therefore I usually go for the least risky/most conservative option. My plan for 2020 was to invest app. 100k in my pension 2nd pillar, as I still have a gap that allows me pouring money there. I don't plan buying a property over the next 3 years, so this shouldn't be a deal breaker. My only concern is having all of my eggs in one basket, as I have already put most of my savings in my company's pension fund. It is one of the world's leading corporations, therefore supposed to be 'safe', but what would EF advice be, in the light of the upcoming economic crisis/recession? And wouldn't keeping savings in the bank be even more riskier, with regards to the sum exceeding the guaranteed amount of 100k CHF?

P.S. Since the 2nd pillar investments are tax-deductible, I expect to pay app. 30k less in taxes in 2020, this is the most lucrative part, obviously.
Is it a defined contribution plan?

It all depends, in the UK I had a similar plan but I didn't put more money to it since paying the 40% tax gave me more flexibility rather than lock the money for 20 years even though the future tax would be lower.
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Old 11.05.2020, 16:02
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Re: 2nd pillar investment advice

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Hi All,

I am (almost) completely ignorant when it comes to investing my savings, therefore I usually go for the least risky/most conservative option. My plan for 2020 was to invest app. 100k in my pension 2nd pillar, as I still have a gap that allows me pouring money there. I don't plan buying a property over the next 3 years, so this shouldn't be a deal breaker. My only concern is having all of my eggs in one basket, as I have already put most of my savings in my company's pension fund. It is one of the world's leading corporations, therefore supposed to be 'safe', but what would EF advice be, in the light of the upcoming economic crisis/recession? And wouldn't keeping savings in the bank be even more riskier, with regards to the sum exceeding the guaranteed amount of 100k CHF?

P.S. Since the 2nd pillar investments are tax-deductible, I expect to pay app. 30k less in taxes in 2020, this is the most lucrative part, obviously.
No, no, no. Unless you are a few years from retirement or a few years from buying a property, voluntary purchases into the pension fund are pretty much the worst investment you can make.

The tax savings - at your marginal tax rate (I hope you know yours by now) - are eroded in 5- 10 years by the under-performance of your pension fund vs. the stock market.

And: the money is locked for a loooong time.
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Old 11.05.2020, 16:13
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Re: 2nd pillar investment advice

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Hi, maybe I am not the best person to explain this, but there is a mandatory part of the 2nd pillar, as well as a voluntary one. As I have moved to Switzerland/started contributing to my 2nd pillar in my thirties, I still have a gap of several hundred thousands I could 'fill' voluntarily - I consider this 'savings' in my company's pension fund, which could be withdrawn upon retirement, leaving Switzerland or for the primary residence financing (in Switzerland). And the best part is that this 'investment' is tax deductible.
Given the initial huge saving on tax, it is very well worth it, the maximum marginal tax rate is 30% to 40%, depending on the canton.

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.

You should know that you'll probably pay tax when you get the money back - around max.10%. Leave to some countries, you won't pay this tax - hearsay.

If you don't have a C permit/citizenship, there is/was a maximum amount of money you can yearly transfer into your PK - 20% from your salary.
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Old 11.05.2020, 16:24
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Re: 2nd pillar investment advice

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)


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No, no, no. Unless you are a few years from retirement or a few years from buying a property, voluntary purchases into the pension fund are pretty much the worst investment you can make.

The tax savings - at your marginal tax rate (I hope you know yours by now) - are eroded in 5- 10 years by the under-performance of your pension fund vs. the stock market.

And: the money is locked for a loooong time.
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Old 11.05.2020, 16:24
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Re: 2nd pillar investment advice

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Hi

You write about the 2nd pillar, and later that you have savings in your company's pension fund. I thought the 2nd pillar was the pension built up in the company?! I am asking just to clarify it for me.

Regarding where to put the money. Just want to point you towards VIAC or Frankly (probably others as well). These invest your 3r pillar savings in the stock market (different options there). But the value is limited to 6826 Franks, which is peanuts in comparison to around 100k.

best, Erik
VIAC will soon also start with offering 2nd pillar with possibilities to invest.
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Old 11.05.2020, 16:28
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Re: 2nd pillar investment advice

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Do you have the full pension fund report? Do you know the Deckunsgrad (coverage ratio), past performance, age structure, number of current pensioners, investment structure, management cost and how is it managed, comparison with other pillar 2 funds, aware about the non-mandatory conversion rate and its impact?
I am completely ignorant about the most of the issues you have mentioned, but I checked the latest report I have (for 2018): the coverage ratio as of end of 2018 was 111.2% (they said this was good), performance in the past 6 years was usually positive with the lowest year being -6.8% and the highest +15.5%, active members: pensioners = 4:1...overall, seems to be fine, but, again...I am not confident to assess the pros and cons.

Last edited by Joros; 11.05.2020 at 16:41.
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Old 11.05.2020, 16:28
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Re: 2nd pillar investment advice

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If you don't have a C permit/citizenship, there is/was a maximum amount of money you can yearly transfer into your PK - 20% from your salary.
The limit has nothing to do with citizenship and permit.

The rule is: If you moved from abroad and have never contributed to a Swiss pillar 2 scheme, then during the first five years the possible annual buy-in is limited to 20% of your annual insured salary.
Art. 60b BVV2 https://www.admin.ch/opc/de/classifi...ndex.html#a60b
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Old 11.05.2020, 16:32
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Re: 2nd pillar investment advice

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Is it a defined contribution plan?

It all depends, in the UK I had a similar plan but I didn't put more money to it since paying the 40% tax gave me more flexibility rather than lock the money for 20 years even though the future tax would be lower.
Not sure what 'defined' means here...normally, I choose between 3 levels of monthly contribution once per year (standard, higher or the highest), but what I was asking above was regarding the lump sum payments, which I choose based on the cash I feel comfortable with 'investing' in the 2nd pillar.
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Old 11.05.2020, 16:38
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Re: 2nd pillar investment advice

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No, no, no. Unless you are a few years from retirement or a few years from buying a property, voluntary purchases into the pension fund are pretty much the worst investment you can make.

The tax savings - at your marginal tax rate (I hope you know yours by now) - are eroded in 5- 10 years by the under-performance of your pension fund vs. the stock market.

And: the money is locked for a loooong time.
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.
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