Comparing VIAC and AXA fees

Banks, Insurances & Third Pillar
1

Hello mustachians!

In 2020 I agreed to one of these 3a pillar + life insurances by AXA. That was before I started taking an interest in personal finance and reading MP. Now I understand that this might not have been the best decision I’ve ever taken.

I’m ready to take the loss and move onto a new service provider (VIAC or finpension). I’m still awaiting for the agent’s reply regarding the contract termination value I’m able to transfer to the new service provider and an explanation of the fees I’m currently paying with AXA.

In the meantime I’m trying to compare the fees at AXA (based on the contract they gave me) and VIAC to see if it really makes sense to switch the service provider, however I’m not sure I’m doing it right. I apologize in advance, my accounting skills are almost non existent so I’m basically using my basic math and common sense to compare the fees.

For simplicity’s sake I’m assuming that: asset growth is 0%, dividend yield is 0%, cash interest is 0%, the contract starts 2020 (to compare easily to my current contract which started on 2020) and ends 2051 (including the year 2051), the yearly premium I’m paying is Fr 6825.6 (which is the amount I’m currently paying with AXA).

Calculation VIAC:

Duration: 2020-2051
Monthly premium: Fr 6’825.6

If I go the VIAC way, I’ll be choosing the 60% equity strategy which has a yearly fee of 0.4%.

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IMG_20210808_1546521080×719 161 KB

The first year it will be Fr 6’825.6 - Fr 27.3 (0.4% fee) = Fr 6’798.3
The second year will be Fr 6’798.3 + Fr 6’825.6 - Fr 54.5 (0.4% fee) = Fr 13’569.4
And so on…

At the end, total fees would be Fr 13’837.29 and I will end up with a total of Fr 204’581.91

Calculation AXA:

Duration: 2020-2051
Monthly premium: Fr 6’825.6

The contract is split into 80% Sicherheitsguthaben (this is the guaranteed part I’ll get at the end) and 20% Ertragsguthaben (this is put into equity, bonds, etc and is not guaranteed at the end of the contract - can fluctuate). Adding up the premiums I’ll be paying throughout the years, without considering fees, the 80% guaranteed part would be Fr 174’735 and the 20% equity and bonds part would be Fr 43’683 (total of Fr 218’419).

On the 80% guaranteed part they will give me back Fr 154’453 at the end of the contract which doesn’t correspond to the full amount I’ll be putting in due to fees. So the fees would amount to Fr 20’282 (Fr 174’735 - Fr 154’453).

On the 20% equity and bonds part, I don’t know if there is an extra fee so I’ll give them the benefit of the doubt and assume that the fee is already included in the 80% guaranteed part (and hopefully the agent gets back to me with the full fee explanation so that I can adjust this part later if necessary). So I’ll assume the full amount of Fr 43’683 (considering 0% asset growth).

Comparison:

VIAC:
Total fees - Fr 13’837
I’ll end up with - Fr 204’582

AXA:
Total fees - Fr 20’282
I’ll end up with - Fr 198’137

Am I missing something in my calculations? Is there anything that doesn’t make sense in my assumptions? To be honest, this difference doesn’t look as bad as stated in many of the other posts about 3a pillar + life insurance on this forum, that’s why I’m afraid I made a mistake in my calculations.

Any help/critique/suggestions are very welcome.

Thanks a lot!

2

So with 0% gain on the insurance and VIAC you are still cheaper with VIAC which makes it even more obvious to never choose the insurance plan. If you add the compounding interest into the calculation it will not even be close moneywise. You will end up with hugely more money with VIAC than with the insurance.

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3

Hello @GalaxyTraveler

Just a small input from my side: beside comparing just the costs, please also take into account the services (in this case: the insurance), you receive. From Viac you won’t receive “anything”, but low fees.

Axa - on the other hand - is an insurance company. Therefore, to have a pillar 3a at an insurance is not that bad - but maybe not suitable for you or your current situation.

4

Yes, I’d encourage running the numbers for even a conservative 3% return per year. Also need to take into account the fact that it’s (afaik) locked in with the life insurance. The comparison here is at the end of the contract but if for any reason you’d want to move out (buy house, move abroad, or just pick a different provider) you lose a huge chunk.

5

Thank you for the input.

With AXA I have the smartflex contract which makes it possible for me to change the ratio of the Sicherheitsguthaben (the guaranteed sum you’ll get back) and Ertragsguthaben (the proportion which is invested in stocks, bonds, etc). When I started this contract in 2020, the proportion was 80% guaranteed and 20% invested but I can choose to change it to 40% guaranteed and 60% invested to make it similar to the strategy i would take with VIAC.

So basically I assume that with both VIAC and my current AXA plan I can invest the same amount into the world market, it’s just that VIAC offers its own ETFs while the invested part at AXA is passively managed by Black Rock (they invest in the whole world, probably similar to VT) and the TER is 0.5% although I don’t know if this is already included in the large fee I paid when entering the contract.

The contract with AXA guarantees a 10% bonus in case I die, with VIAC, the 60% equity strategy guarantees 25% in case I die. So AXA isn’t necessarily better in terms of insurance. Against disability I’m already insured so I don’t need it.

6

I would be pretty firm in requesting that explanation. Another option, which VIAC allows but can also be set up with separate accounts at different providers, would be to keep that guaranteed part in a 3a bank account, without fees and potentially with some interests. So, all fees should really be counted against the performance of the invested part, and that’s what should be compared with the alternatives.

Edit:

If you need death insurance (which means you have dependents whose needs wouldn’t be properly covered by your 2nd pillar benefits alone), I’d assess how much more they’d need and contract a pure risk insurance to cover that risk and provide that specific amount instead of relying on a variable amount depending on how much I’ve contributed so far which may, or may not, be enough to cover their needs.

If you need neither death nor disability insurance from your 3rd pillar assets, I’d just consider them a bonus and discard them for any calculation as to which solution is the best for you.

7

As nabalzbhf alluded to: The assumption of 0% interest and investment returns.

If you do assume 0%, you shouldn’t lock money into pillar 3a at all, let alone VIAC with their high fees.

8

So you’re saying that I can put the 40% cash or guaranteed part into one VIAC account which would be free of charge and only pay fees on the other 60% investment in another account (which would be put into Global 100 strategy)? That’s a great tip, thanks!

9

Also the 0.4% fee from VIAC is a ~all-in TER (most of the funds have 0% TER).

I bet the Axa funds are (at least the default ones), fund of funds with at least two levels of extra TER :slight_smile:

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10

Did you compare to a non-3a linked life insurance contract?

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11

You can, yes.

As I understand you, AXA’s insurance is a guaranteed product that pays out a guaranteed amount at the end of the investment period. Only 20% of your contributions (less fees) will be invested into securities at market returns.

If you invested three times that, namely

…into equities, the expected difference in investment returns will likely far outweigh the differences in costs between products.

The additional 40% you’ll be investing in securities at market returns in VIAC will likely a huge impact on your calculation - if you assume reasonable rates of returns.

That is why you should assume some long-term investment return in your calculation.

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12

Since both with VIAC and AXA I can invest in a 60% equity, 40% cash strategy, I am assuming 0% interest to be able to compare the costs. The only difference is that VIAC has its own ETFs to choose from while at AXA it is fixed. But both follow the same 60/40 strategy and both invest in the world market

13

The Blackrock fund has a TER of 0.5. However I don’t know if it is already included in the fees or if it is separately calculated at a later stage, I hope my agent can explain that to me. If I have to pay it on top of the already huge fees, then the costs of my AXA contract will surely outweigh the ones at VIAC

14

Bet you it isn’t. :wink:

The fees are included in the assumed investment returns.

EDIT: If you can dynamically adjust the split between Ertrags- and Sicherheitsguthaben, it makes even less sense that the 0.5% costs are included in overall costs.

15

FYI the factsheet says 0.5%, so yes it’s in addition to the other fees.

16

That is correct. I wanted to keep it safe when I entered the contract but now I realize that it’s probably not the best use of my money.

Do you mean that it doesn’t matter if I choose AXA or VIAC, the 60% equity investment will outweigh the differences in fees between them?

Looking at the VIAC Global 60 strategy, they invest 60% into equity, 29% into liquidity CHF, 10% into real estate and 4% into commodities. What you’re saying is that the 40% invested with VIAC would do much better than the 40% invested with AXA (which I assume will not really be invested, just kept liquid), is that correct?

17

Well, in your initial post you stated you currently are at 20-80 (Ertragsguthaben-Sicherheitsguthaben) with AXA - but that you would choose a 60% equity strategy with VIAC.

For comparison purposes, you should probably rather compare that to 20-80 (20% equity, 80% cash) on VIAC as well.

If you’re comparing 20-80 with AXA to 60-40 with VIAC, the difference in investment returns will most probably dwarf the differences in fees.

The additional 40 percentage points (out of total of 60%) equity investments in VIAC would (likely) do much better than corresponding 40 percentage points (out of a total of 80% as per your initial post) of Sicherheitsguthaben with AXA.

18

Btw I assume you’ve also read Retire In Progress - Trolling my first “Financial Advisor” Part 3 of 3 – Insurance Policy Pillar 3AB

(I assume the swisslife and axa products aren’t so different).

The fact those products are so opaque is often a good sign it’s a ripoff, the salesperson and insurance company are the one who are going to come out ahead (with ~no risk)

2 Likes
19

You’re right, it cannot be included if one can adjust the split dynamically. It means that I have to factor in an extra 0.5 on the Ertragsguthaben.

I’m currently split 20-80 with AXA but even if I would decide to stay at AXA, I’d change it to 60-40. But probably it’s best to compare 20-80 AXA with 20-80 VIAC, just like you said, since I don’t know the fees at AXA if I’d go with the 60-40 split.

A very entertaining post and sadly a very true one. The comments are also very interesting. I wonder if MrRIP “declared war on policy linked pillars 3a’s” on Swiss TV just like he mentioned in the comments, would be interesting to watch!

EDIT: seems like he did :slight_smile: https://retireinprogress.com/patti-chiari-the-full-story/

20

It would probably make sense to contribute towards the invested part in the first years and the guaranteed part at the end in order for the invested part to stay longer in the market, hence higher returns