2nd pillar advice (VIAC) - strategy

Banks, Insurances & Third Pillar
1

Hello everyone.

Since the beginning of this year, I have been employed internationally, which means that I do not contribute to the 2nd pillar anymore after working in Swiss companies and contributing for about 30 years. In 11 years, I will be at the legal retirement age, and my goal now is to optimize the contributed amount in my 2nd pillar.

I moved my capital from my former employee’s swiss insurance account to the VIAC 2nd pillar account, but wondering now what strategy I should use (for the moment, I have the 60 with CS). I’ve seen that the global 100 is the recommended mustachian strategy for the 3a pillar; I wonder if it is the same for the 2nd pillar?

Unless things go bad, I do not plan to work again for a swiss-based company (and hence move my 2nd pillar capital again to the employer’s institution). That money is now sitting idle, and I want to maximize the amount I will get in 10-11 years from it.

I’m not an expert at all, and all suggestions are welcome. Thanks for reading me.

2

Hi Wismie,

I would recommand targetting a global allocation for all your (liquid) assets, including taxable, pillar 2 and 3a. Since pillar 2 allows to add some tax efficiency into the mix (depending on your taxable regime, which should be checked), @Dr.PI’s splitting the world topic might contain relevant approaches to the situation: Splitting the world

Edit: I may have misunderstood the question, which may be “should I keep assets with high growth in my pillar 2 account since it won’t get taxed until I withdraw them?”, in which case, I would say the answer depends on the capital gains tax regime under which you are and will be at the time of pillar 2 withdrawal. If you are facing low or no capital gains, then favoring assets that pay income (divindends or interests) in pillar 2 probably makes more sense, irrelevant of the total growth of the account, since capital gains will get taxed (at a preferential rate) once you withdraw your pillar 2.

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3

Thanks for replying. I was asking about the VIAC investment strategy that the mustachians would suggest. I do not have much choice about this money, I am still residing in Switzerland; hence I cannot take it anywhere except in a second pillar account. I already invested part of it in my house, I could consider repaying it, but that’s not an obligation.

I now work for an international organization, so my salary isn’t taxable. However, as a Swiss citizen, I am not fully exempted from everything, plus I have a rental revenue (which is taxable). I do not plan to retire earlier, but of course, I might change plans in a few years, and so far no plans to move abroad at retirement age (could change as well).

4

As @Wolverine suggested, it is best to start with a global asset allocation. There is some good info on the bogleheads wiki, although it is a bit US centric:

https://www.bogleheads.org/wiki/Asset_allocation

It is a common approach to consider the classic 2nd pillar as equivalent to bonds (as far as asset allocation is concerned), which then leads to 100% stocks in other investments. Now that you have control over how your 2nd pillar money is invested, you might want to have a more conservative approach. What your risk tolerance (and expectation on investment return) is only you can answer.

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5

As other said, it’s highly dependent on your personal situation. The forum often mentions high equity allocations, but remembers that it is also fairly biased (early career, high risk). 11y to legal retirement age isn’t very long, so it might make sense to be more conservative than most, especially when looking at the global portfolio (a lot of people have their 2nd pillar invested fairly conservatively, tho they don’t have a choice).

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6

Check this over the weekend (keywords glidepath, bond tent)

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7

10-11 years is fairly long, not many high equity strategies are negative after that time.
What’s your risk tolerance? How bad would you feel if the value drops say 35% and stays there for 3 years?
How much do you need the money to grow by (for comfy retirement)?
These would the questions to answer, to decide between Global 40, 60, 80 & 100 or some personal strategy.

This is too late now, but it would’ve been good to split the 2nd pillar and put half at Viac & other half at Finpension (to diversify providers, and reduce taxes when cashing out)).

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8

This may raise interesting questions: how are interests/dividends/rental income taxed in your situation? At the rate they would if your salary was taxable or at the rate they would if you didn’t have a salary? Or a different way?

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10

Thanks for all your comments,

(a lot of people have their 2nd pillar invested fairly conservatively, tho they don’t have a choice).

That’s where I am lucky, is that now I have some control over that money (I didn’t, before). But for the same reasons you mention, there isn’t much literature or suggestions about investing it wisely. I am quite open to risk, but as you mention, I have only 10 to 11 years in front of me and not 20 or 30.

10-11 years is fairly long, not many high equity strategies are negative after that time.
What’s your risk tolerance? How bad would you feel if the value drops say 35% and stays there for 3 years?
How much do you need the money to grow by (for comfy retirement)?
These would the questions to answer, to decide between Global 40, 60, 80 & 100 or some personal strategy.
This is too late now, but it would’ve been good to split the 2nd pillar and put half at Viac & other half at Finpension (to diversify providers, and reduce taxes when cashing out)).

Why would it be too late? I could still transfer part of the money there (maybe I’m wrong, I’ll check). It would make sense to split the risks, I agree. I have to admit that I didn’t do a proper calculations for my retirement (it still seems so far away, but I reckon it isn’t), and I should start from here. Especially because now I also contribute to a new pension fund. If anyone has a nice excel spreadsheet to share, I would be grateful!

This may raise interesting questions: how are interests/dividends/rental income taxed in your situation? At the rate they would if your salary was taxable or at the rate they would if you didn’t have a salary? Or a different way?

To my knowledge, only the revenue from my work is non-taxable. All other revenues (dividends, fortune, rent) are taxable. However, for 2023, I will be below the taxable minimum. It would also make a good case to reimburse the 2nd pillar to stay below that threshold (if that makes sense).

I was thinking this night, would it make sense to adopt a fairly aggressive strategy in the first years and progressively lower the risks? Or is it better to keep a strategy and not change it?

11

No, you can’t, they won’t allow you to do that. You can only do that when you change employer. Also then you can only split the mandatory and the additional part as far as I remember.

12

Yes, this has automatically been split by VIAC.

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13

Materials on this linked above.

I would personally adjust as I near/move away from retirement date.

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14

Thanks, I’m sorry I didn’t have the time to read that yet.

15

Ah Ok, so it is currently split.
Although it may have been your old PK that split it before sending to Viac?
But that’s a detail now, I suppose.
To spread the risk, should a provider do naughty things, I would/will put half at Viac and half at Finpension. These 2 providers have similarly good products and make a similarly good impression.
That may be something for you to consider.

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A pension fund can can split (mandatory and non-mandatory, e.g. 50% of mandatory and non-mandatory benefits) 2nd pillar pension fund benefits and transfer them to two different vested benefits foundation. The latter in turn though may not split them up further.

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Yes, that’s what I meant too (kind of).

Finpension has a really great FAQ to this topic btw, much info to splitting, well written, answering all the possible questions concisely but completely.

Finpension FAQ is impressive in general, not just this topic.

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