Pension account and saving with securities
Articles

Pillar 3a: Securities Offer More Potential Returns Over the Long Run Than a Pension Account 

The private pension provision (third pillar) is a supplement to government and employee benefits insurance. It also makes sense from a tax perspective. Due to persistently low interest rates, pension accounts have lost some of their appeal in recent years. Anyone getting an early start on their pension provision can potentially obtain larger returns by using a security solution. 

The first pillar (AHV) and second pillar (BVG) are sometimes not enough to maintain your existing standard of living in old age. Voluntary pension provision, e.g. tied pension provision, can fill in these gaps. This also makes sense from a tax perspective. After all, annual contributions to Pillar 3a may be deducted from taxable income.

You can sign up for a tied pension provision with either a bank or an insurance company. Those opting for banks have the choice of either a pension account or saving with securities. Both options offer interesting benefits.

Pillar 3a Pension Account: Preferential Interest Rate

If you contribute to a tied pension provision held by a bank, your money is kept in a pension account with a preferential interest rate. You can contribute to this account flexibly at any time without any pressure to save.

Pillar 3a Saving with Securities: Potential for Larger Returns

Saving with securities provides you with the opportunity to achieve larger returns. This means that if you invest in securities early enough, you could potentially have more money available than if you leave your assets in a pension account.

Several security solutions are available to you, depending on how much risk you assume and how long you want to invest your money. The main difference among these is their equity holding and investment style. You decide whether your solution should be managed actively or passively.

With actively managed assets, professional portfolio managers aim to optimize your returns over the long run. In contrast, indexed investment groups focus on a specific index and attempt to replicate it as closely as possible.

The solution that suits you best depends entirely on your personal circumstances. Speaking with an expert can help you make your decision.

Over the long run, a pension provision with securities has better return prospects than a pension account. 

Rocco Baldinger 

Returns: Saving with Securities Compared with Pension Account 

Both clients made the maximum contributions from January 1, 1987 through December 31, 2017 at the start of each year. The client that opted for pension provision with securities (the CSA Mixta-BVG investment group in this example) achieved
CHF 99,558 more return that the client that went with the pension account. 

Pillar 3a Insurance: Additional Coverage in the Event of Death or Disability

You can also sign up for a tied pension provision with an insurance company. There are fund-linked policies with securities and traditional solutions without securities. In both cases, part of the amount contributed is used for insurance coverage and is no longer available for retirement provision. As a result, you have more money available if you have a pension account or a security solution held by the bank than with life insurance. With insurance, you are also entering into a long-term contract that can result in costs in the event of changes. In order to stay flexible, we suggest saving up for retirement with a bank and potentially taking out a separate risk policy with an insurance company for coverage in the event of death or disability.