3a solution from Finpension

[skyw4lker]

Good News

Finpension is abolishing VAT on its administrative fee. The gross fee will therefore decrease from 0.42% to 0.39%.

[Burningstone]

I wonder how they are able to pull this off, VAT is not something that you can decide yourself to get rid of.

[skyw4lker]

My wording was imprecise. They will continue to charge VAT, but rather decrease their administrative fee. The rest is marketing slang.

Edit: looking at the news published today by finpension, it really is a bit unclear with how they handle VAT:

“VAT increase? Not with us! We are abolishing VAT on the administration fee of our #3a securities #app altogether. This means that the gross fee will decrease from 0.42 % to 0.39 % (incl. VAT). And this already retroactively as of 1 October 2022.”

[OrientExpress]

Additionally, the will start to offer Swisscanto Funds: finpension senkt die Gebühr und erweitert das Angebot | HZ Insurance

[Dr.PI]

This is a great initiative, but unfortunately Swisscanto funds look like normal classes, no preferential treatment for withholding taxes paid to pension foundations.

However I might switch CSIF funds which are not classes for pension funds.

Hmm, IPF = Institutional Pension Fund…

[Wolverine]

Additionally, the Swisscanto funds seem to be under custody of Swisscanto themselves (ZKB) and not Credit Suisse (Schweiz) AG. They react quickly, though their actual structure is still a bit opaque to me.

[Dr.PI]

Comparing performances of CSIF vs. Swisscanto funds over 5 years (same benchmark/index and currency):

• USA, pension fund shares without withholding taxes: no difference. Yearly performances are also almost the same with a small difference in either direction.

• Europe ex CH: CSIF overperforms by 0.24%

• Japan (3 years), pension fund shares without withholding taxes: CSIF overperforms by 0.03%

• Canada: CSIF overperforms by 0.34%

• Pacific ex Japan (very low L1 withholding taxes): CSIF overperforms by 0.02%

• World ex CH (3 years, same composition but different index types: gross vs net total return): no difference. Yearly performances are also almost the same with a small difference in either direction.

This I don’t understand. CSIF funds overperform for individual geographic segments which have significant L1 withholding taxes (Europe ex CH, Canada), but for the whole “World ex CH” there is hardly any difference.

• Switzerland total market (SPI): Swisscanto overperforms by 0.03%.

• Emerging Markets (CS fund is not zero-TER): Swisscanto overperforms by 0.18%.
  It seems that finpension kinds of promising to reimburse from now on TER for non zero-TER funds. However it is better to not rely too much on other’s promises. So the Swisscanto fund is clearly much better than CSIF one.

Furthermore, with the new pricing of finpension, the total investment cost for investing in MSCI Emerging Markets via the Swisscanto fund is now 0.2% to 0.3% p.a. more advantageous than via a US or IE ETF.

This is an even stronger argument to maximize investment in USA stocks in a taxable account (at IB?).

[greenore]

Thanks a lot for your research!

Following the work of other forum members I tried to replicate a world portfolio on Finpension (i.e, similiar distrubtion as VT).

• 74.0 % - CSIF (CH) III Equity World ex CH Blue - Pension Fund Plus ZB
• 11.0 % - CSIF (CH) III Equity World ex CH Small Cap Blue - Pension Fund DB
• 11.0 % - CSIF (CH) Equity Emerging Markets Blue DB
• 2.0 % - CSIF (CH) Equity Switzerland Large Cap Blue ZB
• 1.0 % - CSIF (CH) Equity Switzerland Small & Mid Cap ZB
• 1.0 % - Cash

First, am I reading your post correctly that a more optimal strategy would be to swap the two Swiss funds (CS) and the Emerging Markets Fund (CS) with the Swisscanto funds?

Second, I couldn’t find the passage where Finpension “promis[es] to reimburse from now on TER for non zero-TER funds”. Are you sure about that?

[Dr.PI]

@greenore

• 2.0 % - CSIF (CH) Equity Switzerland Large Cap Blue ZB
• 1.0 % - CSIF (CH) Equity Switzerland Small & Mid Cap ZB

There is Switzerland Total Market. Also from CS

@greenore

that a more optimal strategy would be to swap the two Swiss funds (CS)

No.

@greenore

Emerging Markets Fund (CS) with the Swisscanto funds?

Yes.

@greenore

, I couldn’t find the passage where Finpension “promis[es] to reimburse from now on TER for non zero-TER funds”. Are you sure about that?

No

Normalerweise kommen zur Verwaltungsgebühr noch Kosten der Fonds hinzu, die im Fonds-Factsheet als Total Expense Ratio (TER) ausgewiesen werden.Bei der finpension 3a Vorsorgestiftung sind die Kosten der eingesetzten Fonds bereits in der Gebühr enthalten (Ausnahme: Crypto Market Index Fonds). Die Kosten für den Zugang zu den eingesetzten Fonds übernimmt die Stiftung.

[johndoe1]

@greenore

Second, I couldn’t find the passage where Finpension “promis[es] to reimburse from now on TER for non zero-TER funds”. Are you sure about that?

On an other note: I think it’s about time to lower fees in the whole 3a/vested benefits sector. I don’t see much justification for a %-fee either. 3a/2nd pillar pension funds are comparable to brokers, so there should be a low fixed-price brokerage fee imho.

[Burningstone]

And how are the employees of the foundations paid?

[johndoe1]

Paid by the fixed annual fee, just like broker-employees.

And maybe, if really necessary, some tiny trading fees, for those of us who want to trade a lot with their retirement funds (not me certainly ). But to be honest, trading fees are a thing of the past to me, see IBKR. They’ll soon have to disappear in Switzerland, we pay way too much for Swissquote etc.

[Burningstone]

@johndoe1

But to be honest, trading fees are a thing of the past to me, see IBKR.

Are you mixing up custody fees and trading fees, because you still pay trading fees at IBKR.

Also you can’t compare buying single securities/ETFs at IBKR with buying active mutual funds at a foundation. There’s a lot of work involved with funds sold at foundations, there are managers picking the investments, they have to comply to countless laws and regulations, there’s fund accounting to be made, rebalancing for mixed funds, marketing material to be prepared, etc., etc. In addition the volumes traded are lower as well as each individual can invest only up to a few thousands a year.

[Dr.PI]

@johndoe1

I think it’s about time to lower fees in the whole 3a/vested benefits sector. I don’t see much justification for a %-fee either.

The main justification for high fees is the fact that people pay them. Because many don’t know that they are paying them.

[wapiti]

In the US, if you invest with Vanguard in a 401k the fees are 0.10% for a total market index.

In Europe, funds have always been more expensive due to regulation and smaller funds. The total market fund fees of Vanguard UK are 0.24% and 0.15% for managing the account.

Obviously, I would love to pay less but the fee la of Finpension are competitives.

[johndoe1]

Coming back to the Swisscanto vs. CSIF-topic: Great analysis, @Dr.PI !

@Dr.PI

This is an even stronger argument to maximize investment in USA stocks in a taxable account (at IB?).

This I didn’t quite get (maybe because I’m about to fall asleep ). Why shouldn’t you hold US stocks at ginpension?

And is there any update on finpension covering for CSIF-fees?

[Dr.PI]

@johndoe1

Why shouldn’t you hold US stocks at ginpension?

Because you are going to do better holding there the rest of the world.

Splitting the world

It should be clear from the posts above that, when building a globally diversified stocks portfolio using 3a and taxable accounts, it is advantageous to hold US stocks as US ETFs at Interactive Brokers and Developed Markets ex US as CSIF funds in 3a account (finpension). The question now is: how advantageous it is and if it is worth extra efforts? I will use parameters which are pessimistic for 3a investment (marked red), so an actual advantage should be higher. Note that I refer to MSCI classi…

[dbu]

I currently hold CSIF’s funds in the “total world market cap” proportions.

Attempting to switch to

• “non-US” arrangement, i.e. hold all (or at least most) of the US equity outside of 3a (as the rest of the world is more fitting in these tax-delayed accounts)
• Swisscanto bunch of funds

Seems that will require dangling with a plethora of funds:

• EM
• Europe ex CH
• Switzerland
• UK
• Canada
• Pacific ex Japan
• Japan
• (plus Small caps)

I know the exact weights depend on the rest of our non-3a-portfolios; but has anyone done the numbers to define their “ideal” weights among these?
(If not, I will try and contribute with mine over the next weekend)

Cheers!

[jay]

@dbu

I know the exact weights depend on the rest of our non-3a-portfolios; but has anyone done the numbers to define their “ideal” weights among these?

I haven’t but this should be simple to calculate using https://marketcaps.site/, at least if you don’t split World Small Cap.