Best choice for Pillar 2?

bruce · July 5, 2019, 3:13pm

I am looking for the best Pillar 2 pension provider. I am self-employed with a small company so I am able to select the fund provider and the “employer contribution” level myself.

Can someone tell me which funds are best? Or where to look for information? Or where to get unbiased advice? I have found many threads about Pillar 2 but none that identifies which fund to choose and what the “gotches” are on the others.

Current status is that I found the website http://www.compare-invest.ch/ that seems to list funds and their expense ratios (which is often not the full story due to other fees such as “spread” on buy/sell) and my Pillar 2 provider is currently AXA (I have no idea if this is good or bad and that’s why I’m looking into it now.)

bruce · July 6, 2019, 11:31am

(Crickets.)

Maybe this topic has been discussed to death and the reason there is no Pillar 2 recommendation is that the whole system stinks and we should minimize our involvement in it, focusing instead on Pillar 3a and taxable accounts?

Maybe what we need is a Wiki article to that effect?

nabalzbhf · July 6, 2019, 1:59pm

Maybe Viac is worth a shot, but their pillar2 product keeps being delayed…

FIREstarter · July 8, 2019, 6:36pm

Same situation here. I chose a Pillar 2 provider, but when I checked the performance for last year, I wasn’t happy. Also, I’m not completely convinced about the mandatory (obligatorisch) and optional (überobligatorisch) parts of the pillar 2. Basically, they only promise you to receive the interest on the mandatory part (which is down to 1% btw).

Most of the Swiss Pillar 2 providers have a strong home-bias, plus put a strong emphasis on real estate (in Switzerland). From my point of view, the main problem with real-estate in Switzerland is that houses are built somewhere in the middle of nowhere (e.g. Huttwil), and then they are empty.

Cheers for the link to Compare Invest. At least you get an overview about the asset allocation and TERs. I just wonder how you can choose those funds directly, or if you have to get them via Compare Invest.

I’d also be highly interested in a Wiki article. Regarding pillar 2 vs pillar 3: I guess it’s just a matter of calculating your salary. The disadvantage of pillar 3 is that you can only save up 6’826 CHF per year, whereas you can save much more in pillar 2. VIAC as a possible pillar 2 option sounds really nice, but no product available yet.

wapiti · July 9, 2019, 1:43am

VZ is offering Pillar 2 analysis. I would try their free analysis

FIREstarter · July 9, 2019, 5:29pm

Have you tried VZ personally? According to their website, they are independent and are working on a honorary basis. Which would be ok for me.

nugget · July 9, 2019, 6:13pm

this is exactly my personal conclusion, and the margin to an acceptable solution is ridiculously large. However I solely focus on the return on my investment, and all pillar 2 funds focus heavily (enforced by legislation) on security. widow-rent, children-support, death insurance and demographic transfer are (yet) worthless to me but part of any pillar 2 fund, at serious costs. Average-financially witted families have a different idea about this.

I guess it comes down to comparing a few and then throw the darts

yea, the only thing this forum supports is a wiki-article, and the few i made long ago don’t rightfully bear this name…

afaik the viac solution won’t be a pillar 2 fund you can use for a company, rather than just an alternative for private persons to the Freizügigkeit -Account. it won’t offer any insurances, “only” a somewhat passive ETF portfolio with rebalancing.

If you have the coice, hands off the Überobligatorium. it’s just a made-complicated-and-intransparent way of cross-financing the loss-making mandatory part, and hence is not exactly beneficial for the employees. But again, most people dont’t know or care, and are happy about more pillar 2 coverage

Zerte2 · July 11, 2019, 6:14am

Pillar 2 was designed in a completely different era : at the time, there were positive bond yields, and a certain control of money supply.
Now with negative rates (not to mention that the amount of CHF has been multiplied by 15.6 since 2000) it will be difficult for a fund to keep the promise of a decent rent…

balmung · July 11, 2019, 11:24am

there is a comparison here: https://www.fuw.ch/wp-content/uploads/2019/06/fuw_pk-rating_2019.pdf
but for a small company choice will be limited.

Comparison is difficult because of different coverage on death and invalidity. If you don’t care about this insurance just look for low admin cost and low risk cost. There might be a way to structure it to have minimal risk coverage (death and invalidity).

You also need to be careful that you don’t subsidize other people and that the money you and the company pay is on the company’s individual BVG account, as opposed to pooled with other people, that maybe will retire before you and receive an annuity at your expense (6.8% Umwandlungsatz…).

If you own the company and can do what you want, best solution is to minimize BVG as much as possible. Fees for 2 Pillar are ridiculous, all of them: admin, risk and investment.

FIREstarter · July 11, 2019, 3:18pm

Thank you very much for the link @balmung
Haven’t read all of it, but it’s eight pages of good information!

Of course, depending on coverages for death/invalidity, the costs do differ. I’m definitely going to ask our contact person if we are having an individual BVG account! Also, he’s going to need some explanations why the shortfall (Unterdeckung) for our pillar 2 provider was worse than the average BVG provider.

When I started the company, I only had minimal contribution to pillar 2 first (by chance, not by choice). We have changed this one to include Ueberobligatorium as well, but now I’m getting second thoughts the more I read about this topic (and also speaking to other business owners, who went back to only pay the minimal amount).

The best would be to have a comparison of the different BVG providers, with asset allocation, cost per year, individual vs pool account. I’m going to get in touch with VZ to see if they have something similar, otherwise it will be a manual task. I had two different options when the company was started, and took the one with smaller costs already. You should have experienced the reaction of the other guy, who was really pissed that I didn’t sign the offer sheet of his company…

Having a higher invalidity insurance is not that expensive btw. Question is if you really need it, especially if you are working in IT and can basically work while laying in a bed.

nyunai · August 30, 2019, 8:31am

Hi @FIREstarter,

Just curious if you have made any progress/conclusion, I am in the same situation where I need to choose a pillar 2 institution and also unsure whether to contribute above the minimum or not.

FIREstarter · August 30, 2019, 3:07pm

I had some talks with my current PK2 provider, and of course they are trying to calm me down that everything is perfect at their side.

Meeting with VZ will be in 2.5 weeks. I’ll post an update here once I have more information.
At least I found out the asset allocation and TER in the meantime, and I’m not very happy with 35% swiss real estate (bubble anyone) and a TER of 1.05%

For the Uberobligatorium: nothing decided yet. I guess there are several factors which have to be checked (how long you’ll need to reach FIRE; planning on staying in Switzerland, opportunity costs of net money invested in the stock markt vs gross money used for PK). It would be some math stuff definitely.

nyunai · August 31, 2019, 8:05am

Thanks a lot for the update. Would be interested to hear what VZ has to say.

I am planning to do some calculations and happy to share the results when that’s done. I am also thinking of checking with Liberty what they can offer, I will report back if I do.

FIREstarter · September 16, 2019, 3:36pm

Hi guys,

here’s the promised update after the meeting with VZ. They seemed to be competent, and also the first meeting was for free. At least they are not trying to sell you certain stuff right away, like some multi-level marketing companies.

If someone has to choose a new pillar 2 solution (like @nyunai), please make sure to check for the following topics

make sure to only get the minimum contract duration! That’s a big one, because only today I found out that I won’t be able to change P2 provider within the next 4 years (5y contract duration, could have changed that to the minimum of 3y instead…)
only insure obligatory part first. There’s always the option to include uber-obligatory part later on, but it’s best to only go for the mandatory part first.
check shortfall (Unterdeckung), number of retired people for each pillar 2 provider, costs and TER

@balmung: also found out today that we have a shared BVG account only (teilautonome Einrichtung mit Poolanlage), hence I’m also cross-financing other pillar 2 providers with my uber-obligatory part. You can change that to have a pot for your own company, e.g. VG BVG Sammelstiftung.
I now have to check with my current P2 provider how I can at least change the uber-obligatory part. For the mandatory part, I’m more or less stuck for the next 4 years -.-
Also, I got some numbers how my P2 provider has reallocated money from their customers to other P2 providers. It shows the last seven years, and those are nightmare numbers. The difference between the planned cover ratio and the realised cover ratio was 14% last year. That really sucks.

If someone wants to know more, please PN me.