3a pillar: a place to hold emergency cash

Investing / Others
21

Ok, so here’s one sample calculation of the tax advantage which pillar-3a has over non-3a.

TL;DR: in this very example 3a would indeed be 0.2% cheaper (due to taxes) than non-3a. Or put the other way round: 3a can be up to 0.2% more expensive and still be economical.

PS: I know, if you choose different numbers you end up with a different result … but be kind, it’s just an example :slight_smile:

Assumptions:

  • 100’000.- in assets, 2.5% dividend, 2% capital gain, 20 year investment horizon
    • within 3a: 6% Kapitalbezugssteuer, TER: 0.6%
    • outside 3a: 15% income tax, 0.33% Wealth tax, TER 0.4%, 0.045% gain due to income tax deduction (0.3% Portfoliomanagement deduction at 15% tax)

Within 3a:

  • holding cash in 3a:
    • 0.3% interest for 20 years => 106174, minus 6% Kapitalbezugssteuer => 99’804
  • invested in 3a:
    • 2.5% dividend + 2% capital gain - 0.60% TER = 3.90%
    • (100’000+3.90%)^20 = 214;937
    • 214’937 minus 6% Kapitalbezugssteuer = 202’041
  • investment gain vs cash in 3a: 102’237

Outside 3a:

  • holding cash outside 3a:
    • no interest, 0.33% wealth tax minus 300.- CHF income tax deduction => -0.285% loss per year, at 20 years => 94’452
  • invested outside 3a:
    • 2.5% dividend - 15% income tax = 2.125%, plus 2% capital gain, minus 0.4% TER, minus 0.285% wealth tax = 3.44%
    • (100’000+3.44%)^20 = 196’685
  • investment gain vs cash outside 3a: 102’233

Long story short: with 0.6% TER in 3a you get about the same investment result as with 0.4% outside 3a after 20 years (in this 1 example).

I know this is a ridiculous attempt at forcing an almost impossible comparison between 3a and non-3a where there are so many variables (tax bracket, canton, market fluctuation, future tax law changes, etc etc) - but still, I think it might give some small hint at what tax advantage 3a might have. So it seems the taxing of the Kapitalbezugssteuer is rather balanced when it comes to the advantages of not taxing dividends directly (thus longer compounding) vs capital gain and dividend tax in the end… interesting :slight_smile:

Please review and criticise the calculation at your pleasure!

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