3rd Pillar - Multiple Portfolios question

Banks, Insurances & Third Pillar
1

Hi everyone. I have a Third Pillar question and this is the forum I trust more then anywhere else for advice.

I have a 3rd Pillar with VIAC, 2 years worth, so approx. 14k. I have it in one portfolio. I was thinking to open the next portfolio when this one had some more investments built up. But I read online recently that its better to open the accounts now and split the 14k, and then also split future payments. Does that make sense? Does that mean for 2020 setting up various Direct debits to the various portfolios? Its not a problem to do that but wanted to make sure my understanding was correct first.

Thank you community for your help.

2

Just open a second one (or ones) and fill them up until 14k in the coming N years.
Then rotate each year after that.
No need to complicate (and print out 5 forms with 1.x k each for the yearly tax purposes).

I don’t know by which criteria would the other approach be “better”.
What matters is when you start withdrawing at the end, years from now - that’s when it’s better to have them in separate accounts for tax purposes.

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3

You can’t split an existing account.

Open a 2nd and fill it up till 14k (or whatever), then open a 3rd and do the same. You could do this till you have 5 accounts. After that I would just rotate year after year (or split your standing order into 5 standing orders).

This will give you the possibility to withdraw them in different years and save a lot of taxes.

4

Thanks for the advice. I was making it more complicated then needed.

I will open a new account for 2020

I guess there are no extra costs for multiple accounts, as fee is charged on total assets?
How many portfolios do you or anyone else have, or plan to have ?

5

Nope, no extra costs. I have the maximum of 5, which some people would argue is overkill (3 is also a popular choice
 it just depends on how many years you want it to take from a tax-perspective to withdraw your total 3a contributions).

I suggest using a naming convention like “2019, 2024” for this year’s 3a account, “2020, 2025” for next year’s, etc. Then it’s easier to keep track of which account to contribute to in which year.

6

You can always contribute to the account that has the lowest balance.

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7

Thanks guys, that makes total sense. I will open a new account for next year and keep it simple. Thanks for the help. Appreciate it.

8

Hey all,
But how is this compared to just dropping all into, lets say, VT.
So no Third pillar, just standard investing ?

9

Guys, what is the limit until which you should fill into an existing VIAC 3A account?

For e.g. I have a 3A account and have put into it 5568 for 2018 and 6826 for 2019. With appreciation, the account is currently around 14,000.

Should I go ahead and invest another 6826 for 2020 also in the same account OR should I open a 2nd 3A account and invest over there?

Sorry if this has already been answered in some other thread. Thanks!

10

If you want to split it up fairly, just open 5 accounts and put the money in one of them and alternate every year. Do not see any negative impact with that related to fees nor distribution process from VIAC. And from 60 (to 65), you can close each of them every year to get targeted with a lower tax.

11

I believe this has been touched on multiple occasions already. Read through other threads on the topic.
In short: taxes (both when paying in, on dividends, as well as taking money out) vs. not unlimited freedom of asset allocation.

Yes it has been, in this literal thread.
Are you really that lazy not to read through the first 3 posts of the topic you are posting in?

12

Well, I know i read it, indeed.
And the difference is clear, but the choice is not. Because the analysis is not so straight forward.
I will try to find it.

13

Just look at your marginal tax rate and the wealth tax in your canton and plug in the numbers in my spreadsheet.

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I get that one saves on taxes if one has more than ‘1’ single 3a account (I dont know the specific details of how much one saves but I get the idea). By having, say, 5 accounts, after the age of 60, you can close each account individually, over time; I understand that you are thereby ‘delaying’ the cashing in of some of the accounts until you are older and in doing so one is achieving a tax saving.
My question is, is there any disadvantage at all to opening ‘5’ 3rd Pillar accounts? If there is no disadvantage then why is it not widely done among the general public?
Thank you for your feedback.

15

Possibly fees (transaction fees, account management fees, fees at payout or when closing, etc.).

Lack of information or knowledge?

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16

The general public isn’t very intelligent or/and into financials that much. Most of the people do stupid stuff and don’t know any better. Plus splitting up your 3rd pillar into more accounts wasn’t possible from the beginning, it’s a rather “new” thing.

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17

I agree with what @Cortana & @San_Francisco says.
Additionally, my question to you - how do you know that it is not widely done? Did you see a survey result (quote source)?
Most providers recommend you split, Viac etc makes it a simple swipe-right to open a new account, even a CS sales guy recommended this to me, around 2013.

18

I’ve thought about this a bit more and I’m not sure staggered withdrawals are really overwhelmingly better taxwise.

What we usually don’t take into consideration:

  • Withdrawing early means starting 5 years before the mandatory date for withdrawal. Withdrawing all at once means we can withdraw it all on the last year.

  • The amount withdrawn early will enter our taxable wealth and be taxed accordingly every year. The dividends resulting of its investments will be taxed. The amount still in 3A won’t be taxed whatsoever.

It can make a big difference depending on our marginal tax rate for both wealth and income. I’ve run the calculation for someone with 1’000’000 taxable wealth, 7% growth of stocks invested, 2% dividends taxed, living in Sitten/Sion (because Wallis/Valais has a very useful taxation calculating tool, you may still want to withdraw that money while living in a tax-friendly Kanton).

My fictional person had 200’000.- in 3A assets at age 60. The final difference between taking it out all at once at age 65 or taking out 5 slices, one per year, was CHF 600


Of course, our numbers will vary and it’s good to have the option, even if we withdraw all our accounts at the same time in the end but I think we’re overplaying the advantages that having several 3A accounts has.

Of course too, the situation is different if you need (part of) that money as soon as you can withdraw it.

Your thoughts?

Edit: Oh! I’ve forgotten to take into account that the increased taxable wealth would increase our AHV/AVS contribution if we don’t have a salary anymore (FIRE’d people)!

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19

So if we take the higher AHV contributions into account, maybe it would be even better to take it all at once at 65? Assuming your taxable portfolio is still big enough to cover your withdrawal rate without depleting it too much.

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20

I guess it would depend on whether we’ve already capped our AHV contributions or not. In my example, that would probably make withdrawing all at once at the later possible date the better option (I’ve not taken into account any other income that would have pushed the marginal tax rate up).

Though if we get at the point where we can wait until age 65 to withdraw our 3A assets and then wait until age 70 to use AHV benefits, we’re probably past the point where optimizing this makes much sense (that is, our needs are more than covered at that point).

We don’t know how the legal situation will evolve, though, and there’s no drawback to having several accounts, that we can still withdraw all at once. That doesn’t change the situation while in the accumulation phase in my opinion but would warrant being taken into account when planing for later retirement (after legal retirement age).