3a solution from Finpension

Please be not too lazy to at least read the posts above :wink: I have already asked. MrLeanLife kindly shared his google sheets. I am trying to find some time to re-do the exercise at some point. Maybe some others can share their own exercise.

@San_Francisco nice selection. I am less interested in CH and EP exposure and more interested in US exposure. My selection will probably be:
1% Cash
15% Equity world ex CH Small Cap blue (for high risk high growth)
65% Equity world ex CH Quality (for stable growth)
19% Equity US blue (to increase weight on US equities)
(I may adjust the weightings slightly)
I would welcome any comments or insights.

Does anyone know how finpension proposes such high percentages of equity/unhedged investments?

I think VIAC does it because it’s pooled with terzo foundation, but finpension doesn’t seem to pool it.
The regulations even say:

3.6 The following category restrictions also apply to account
holders and at the Foundation level:
a) 50% for investments in equities
b) 30% for investments in real estate, with a maximum of one-third outside Switzerland
c) 15% for alternative investments
d) 30% for foreign currencies with no currency hedging

From: https://finpension.ch/app/uploads/2020/11/Anlagereglement_EN.pdf
(which matches the Art 55 BVV 2)

Do they really have that many people who don’t invest in equity that they’re below 50% at the foundation level?

I‘d guess that article 3.7 might mistakenly refer to article 3.5 instead of 3.6.
Even in the German version article 3.7 refers to „Kategorienbegrenzungen“, which aren‘t really found in 3.5 (which rather limits exposure to individual real estate properties), yet are explicity mentioned in the immediately preceding 3.6.

But even if that’s what they mean, it would only allow it at the individual level. 55 BVV 2 limitations would still apply at the foundation level iiuc (which is why e.g. VIAC is forced to have such an amount of hedged/chf investments.

Care to share an example where this happened?

Just read this, Pension fund are allowed to go over:

Art 50
German
4 Sofern die Vorsorgeeinrichtung die Einhaltung der Absätze 1–3 im Anhang der Jahresrechnung schlüssig darlegt, kann sie gestützt auf ihr Reglement die Anlagemöglichkeiten nach den Artikeln 53 Absätze 1–4, 54, 54a , 54b Absatz 1, 55, 56, 56a Absätze 1 und 5 sowie 57 Absätze 2 und 3 erweitern. Anlagen mit Nachschusspflichten sind verboten. Ausgenommen sind Anlagen nach Artikel 53 Absatz 5 Buchstabe c.

French
4 Si l’institution de prévoyance prouve de façon concluante dans l’annexe aux comptes annuels qu’elle respecte les al. 1 à 3, elle peut, si son règlement le prévoit, étendre les possibilités de placement prévues aux art. 53, al. 1 à 4, 54, 54a , 54b , al. 1, 55, 56, 56a , al. 1 et 5, et 57, al. 2 et 3.

What does the Absätze 1 to 3 say:

1.The pension fund must carefully select, manage and monitor its assets.
2 When investing its assets, it must ensure that the security of the fulfilment of the pension purposes is guaranteed. The assessment of security shall be based in particular on an appreciation of all assets and liabilities as well as the structure and expected development of the insured population.2
3 When investing the assets, the pension fund must comply with the principle of appropriate risk diversification; in particular, the funds must be distributed among various investment categories, regions and economic sectors

If you are still not convinced, you can read this analysis from a renowned law professor (in french) https://www.fw2s.ch/fr/wp-content/uploads/sites/2/2019/02/article-55-opp-2.pdf

Many pensions go over the limitations.

No, it’s a question of liabilities. Finpension assumes no risk, they will give you the return of the stock market.
For sure, if they need to pay monthly pension the story would be different as you would need to manage the risk/return to transform the returns into the monthly pension.

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thanks for the link, going through it now. Did finpension already publish an annual report? (that would include the justifications wrt BVV 2 obligations).

I have removed this part of my post.
I know that standard pension funds need to publish a report. I’m not sure about 3a and vested benefit.
To my knowledge, finpension or Viac haven’t publish a public report.

Then how can you satisfy Art. 50 al 4 if you don’t publish a report? Going over the limits is conditioned on demonstrating it in the report, right?

The accounts are reviewed by an auditor. You need to trust them :roll_eyes:

Could you elaborate? It’s a severe accusation. Providing some arguments may help us to make our minds.

Finpension is on the official list of the Swiss tax authorities of 3A providers. There are some control in order to be and stay on this list.

Finpension has top Swiss companies including banks as clients.

No one here knows, me included, how the legislation applies for a pension provider like finpension offerring vested benefit, 1E, 3A.

From my point of view, the fears are overated and only due to a misconception/limited knowledge on this complex topic, the Swiss pension system.

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My take on it as well. They won’t be paying out pensions to their customers - they are only delivering them the returns of the funds their customers are invested in.

They aren’t even promising preservation of capital (with the exception of the share of cash held). So customer can even lose money without a problem, if they actually do invest customer’s funds as indicated.

In principle yes.
Just as they should be audited.
The question remains however how strict their supervision actually is?

To what degree do supervision and auditing rely on (assumptions of) integrity and trust - vs. stringent controls and thorough checks?
(side note: this may be an interesting question that transcends pensions funds and personal retirement savings but pertains to societies as a whole - and lead to very surprising revelations).

There have been allegations of severe mismanagement or downright fraud againt (even) pension funds and vested benefits institutions not too long ago. Accompanied by allegations of lack of adequate supervision.

As for 3a foundations in general, I don’t believe for a second that they are more strictly regulated and supervised, compared pension funds - quite the contrary!

I have invested some money with Finpension and am not alarmed. I’m also willing to cut them some slack, as they are a relatively new provider. However, the more I think about it, the more I am standing by my earlier assessment

…that they might indeed have made a mistake in their investment regulations.
It may be small one, but would not be a good sign.

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This is in fact a false reference. However, as we are not allowed to adapt the regulations without approval of the supervisory authority, the change is pending.

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Here’s a list of things that put me off a bit:

  1. finpension themselves said in this thread that 3a deposits are insured up to 100kchf. This is wrong and they had to be corrected by the members of the forum.
  2. While Frankly and Viac do an ID check, finpension does not. Their explanation here in the forum might certainly be correct, but for example the operator of this forum and The Poor Swiss in his blog share my concerns.
  3. As @San_Francisco is saying above, the mistake in their investment regulations is indeed a small one. But it’s not a good sign.

I’ll pass for now.

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Actually this is correct for the cash portion of 3A and vested accounts.

See here for further information

Nope. You own link says: “The balances of vested benefits accounts and pillar 3a retirement accounts are preferential deposits, but not protected deposits.”

And finpension said (quote) “All 3a foundations are covered under the deposit insurance”.

Preferential: yes.
Protected (insured): no.

After reading the post from @nabalzbhf I was concerned about the legitimacy of Finpension, so I called to Finpension ask them to clarify the limitations. First they confirmed that there is a typo in paragraph 3.7 and that it should in fact refer to ‘3.6’. Second, they said that they are required by law to put the regulation outlined in paragraph 3.6 into their regulations, however they siad that Paragraph 4 of Art 50 (i bleieve that this is cited by @wapiti below) allows to overrule the limitations outlined in para 3.6 of the regulations.

Thanks for your analysis, but I disagree as mentioned in my previous posts.
What is the issue if the foundation holds 100% diversified stocks? The volatility will be higher, but this has no impact on the liabilities. Customers will receive the returns of their selected strategies. If you select 100% stocks, you have a warning that the strategy is risky.

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I’m personally ok with having people have more control over their pension assets. The question is what is actually inline with the swiss regulations (because I don’t think that at least the spirit of them is in line with having full control on investment strategy, otherwise what’s the point of Art 50-55?)

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