and the 2nd pillar version of this awesome product?
that sounds fantastic, I’m curious about this as well
Keep in mind this will only work for self employed people, that is unless you can convince your company to switch their entire pension (all employees) to VIAC.
“So… boss, you know how our 2. pillar is like this 20% stock fund? Well how about this 100% stock fund!?” I will definitely try it with my boss.
I’m self employed
I actually have a pretty good 2nd pillar at my work. last year the company returned 9% and payed out 3%. Obviously compared to the stock market its pretty terrible but a 3% verzinsung is pretty nice. My problem is that my 2nd pillar is tiny so it doesnt matter anyways
Yeah actually I’ve been asking my boss to explain to me how the 2nd pillar works. I don’t really get this 9% return, but only 3% “paid out”? Paid out where? What’s with the other 6%?
I need to know these things, because I can tell my boss to either pay me a bonus or send the money to the 2. pillar. If it’s a bonus, I gotta cover the AHV contribution of the employer & employee + income tax. The money sent to 2. pillar goes there in full. So I could sent 50k to the 2. pillar, or pay out 30k and invest it in VT. The question is, which of these solutions will yield better results after 10, 20, 30 years?
I’m still far from having all the answers. I know that an important thing to keep in mind is that by leaving Switzerland or buying real estate you can cash out that 2. pillar. So if I knew I will buy a flat soon, it would make sense to send tons of money to the 2. pillar.
The second thing to remember is the cash out fee, which varies by canton, and the amount being cashed out. It can be something like 5-10%.
The 2. pillars are often heavily invested in bonds, Swiss stock and real estate. They use hedging. They manage to soften the crash, when it comes, but as a result you can forget about a long-term return of 7%.
My 2nd pillar returns something like 1% for the mandatory part and 0.5% for the non-mandatory one
since i (have to) swich my pension fund soon, i looked into it. i had the situation for 2017, where stock markets made 20%+, that my pension fund made 6% and increased my stash by 1%.
I inquired and they simply told me, that the remaining 5% are used for the pension fund’s reserve fund and paying today’s pension. suckers. that’s my money.
since this is not about to change (pension funds are obliged by law to put ~2/3 of their assets into mostly swiss bonds @currently 0%, and demographics get even worse) you probably should reduce your contributions to the absolute minimum/ save whatever you can from the pension fund.
imagine, throughout the bull market of the last decade pension funds returned to the savers 1-2% p.a… what could you have done with VT in that time?
What you’re saying is really appalling.
My company recently changed their pension fund as well, so I had a look into the websites of both funds. Their performance for the last 10 years was around 4-5% per year. Not impressive, given that it was a decade of growth, but still not terrible. But I didn’t find any information that this return does not fully apply to the capital that you put in there. Also no mention of management fee. So it’s a system I don’t really understand. Why do they brag about their if it’s not my performance? How do I check the real growth of a retirement portfolio?
Let’s see. In 2008, I could have put 10’000 CHF in 2. pillar. I basically don’t know how much would they have returned. If it’s indeed that 1-2% that you mention, then i would have now 12’000 CHF. If I decided to cash out in 2008 and invest in S&P 500, I would have to pay the AHV (12%) and then the marginal tax rate (35%). That means I would have cashed out only 5’700 CHF. The S&P 500 returned 134% over the last 10 years. That gives 13’400 CHF when investing on your own.
So already after 10 years the whole tax advantage i gone! But that’s not the whole calculation. We only include here the last 10 years, which have mostly been bull years. Maybe the pension fund is very defensive, and so in times of crises it does not drop as hard as the stock market. For that we would need to calculate for the last 15 or 25 years.
you on the right track.
i can give you the example of publica, the fund of the employees of the federal administration. this is how they compounded peoples’s staches in the recent years. this is representative for all pension funds the middle “altersguthaben” is what they did and “BVG-Mindestzins” is the mandatory minimum, decided upon by some gremium:
you are correct to include ahv and income tax, however your also pay the same income tax when you recieve the pensions later, or the kapitalbezugssteuer if you cash out instead.
management fees of publica they claim to have 0.2% which is insignificant compared to the Umverteilung to the current retirees.
you’d have to dig deep into heir geschäftsberict or such. it’s really not transparent. that means, prone for waste, inefficiencies, and consultant expenses.
yes the pesions funds are extremely defensive for a number of reasons. makes lots of sense for 30y olds, of course ^^
On the long term they will never reach what a bogleheads-portfolio can do, and so many people earn their share in this PK industry that returns for the savers are forever bad
Yes, but this capital withdrawal tax is something like 5-10%. You’re right, that I forgot to put it in the calculation.
It’s just mind-boggling to me, that I WANT to save for my retirement, and I am not given the tools to do so. I am given a highly regulated and restricted fund, which has to feed many mouths. But somehow this solution is given a HUGE tax exemption. Just imagine, that if I want to take the income into my pocket and invest it without the “help” of the pension funds, I have to pay over 40% tax already at the start! Given such a head start, it’s just unbelievable that the pension funds still are the weaker choice after a few years.
The 3rd pillar solution from VIAC should at least on paper deliver very close returns to VT, so I guess I will just focus on it. The downside is, that we are only allowed to put 7000 CHF in it, and that the AHV I have to pay (in contrary to the 2nd pillar).
Or maybe, I will invest in the 2nd pillar for 2-3 years and then buy a flat and take a mortgage. Then I can use that money, right? And the AHV and income tax are still saved.
According to BVG you should wait minimum 3 years to get the voluntary contributions back (art. 79b.3, “Wurden Einkäufe getätigt, so dürfen die daraus resultierenden Leistungen innerhalb der nächsten drei Jahre nicht in Kapitalform aus der Vorsorge zurückgezogen werden.”, see https://www.admin.ch/opc/de/classified-compilation/19820152/index.html)
Just remember that you have to finance the flat at 20% with equity and that only the half of the equity (i.e. 10% of the total amount to be financed) can be taken out of your 2nd pillar. Make sure you have enough savings before wiring all your bonus to your 2nd pillar
Good to know. Well, I hate all these regulations. Let’s make it all super complicated for the people!
I would anyway not go for such a high leverage. Would I be able to finance the flat at 35%? My idea was to let’s say buy a flat worth 600k. So it would be financed by 100k savings, 100k 2nd pillar, 400k loan. Anyway, not a plan for the immediate future.
Agreed I split the threads
Well you can change that Joey. What you can do are some volontary purchase in your 2nd pillar. What’s more… Everything you put in reduces your taxable income!
watch out, 2nd pillar has the trade off of a one-time tax bonus vs. years of horribly low compounding, compared to a bogleheads inestor.
Unless you cash out to repay a mortgage