Finpension vs VIAC for vested benefits with withdrawal for home purchase

1

I’m looking at options for VB to transfer my pillar 2 pension after quitting my job. I expect to use part of the funds to pay off the mortgage a few years down the line.

With finpension, I see fees:

Index strategies

  • All-in-fee: 0.49% p.a.

Partner strategies

  • Foundation fee: 0.20% p.a.

Delegate asset management

  • Foundation fee: 0.20% p.a.

Early withdrawal for home ownership per case: CHF 500

But then I also see fees:

  • Costs based on time spent will be calculated on the basis of CHF 200 for every hour or fraction thereof.
  • With the written consent of the pension fund member, a maximum annual fee of 1.2% on the average vested benefit capital may
    be charged for advice or asset management services.
  • With the pension fund member’s written consent, a maximum brokerage fee of 3% may be charged in advance on each deposit as
    compensation for the brokerage activity.

With VIAC:

  • The VIAC administration fee is 0.52% per annum
  • Early withdrawal in the context of home ownership promotion, a fee of CHF 300

Question

Is anyone here using Finpension for VB? Are they really charging:

  • 1.2% on the capital for advice or asset management services
  • and a maximum brokerage fee of 3% may be charged in advance on each deposit as compensation for the brokerage activity.

It seems quite steep!

2

I suspect you are confusing different finpension products. Those fees make no sense for a VB solution, and they specifically mention pension fund (members), which decisively isn’t a VB.

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3

It’s 0.52% p.a. on the part of your portfolio that you actually invest, but it’s capped to 0.40% p.a. of the portfolio. The same as VIAC 3a. I.e., unless you allocate more than 23% in cash, 0.40% p.a. is the relevant fee, less expensive then finpension.

While I prefer the flexibility of VIAC and finpension, frankly could also be a reasonable option with their 0.44% fee.

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4

The fees were here: https://finpension.ch/en/fee_schedule2 and here https://finpension.ch/en/fee_schedule and were the specific fee schedules for the VB foundations.

5

Also interested to hear any experiences from people who actually managed to withdraw funds early from either FP or VIAC to pay off their mortgage and whether it went smoothly and/or whether there were any unexpected surprises?

6

I have VB with finpension. By default it was with index strategy ( same fund list as 3a more or less, e.g. IBIT ETF is not available but IB1T ETP has been added last time I checked) and the fee is what is described for index strategies. I wasn’t even aware of these other options / strategy / products till I saw the document you linked. It is deducted per quarter. Over the year it looks close to 0.49% as described in the document.

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7

Some observations/ thoughts (Not very well structured)

  • you would likely split into 2 VBs and try your luck at staggered withdrawal if still possible ( let’s assume FP and VIAC)
  • given you intend to use some amount for mortgage reduction, you could have 2 accounts of unequal size: X1, X2+Y, where Y is the amount you intend to withdraw in a couple of years.
  • transfer to FP VB ( or VB2) will stay as one account ( my experience)
  • transfer to VIAC VB will further split your capital into 2: mandatory and above mandatory. The maximum equity % in the Mandatory part is restricted ( I read this in this forum sometime back - please search and confirm or better check with someone with VIAC VB)
  • VIAC looks good for lower equity strategy which might be preferable for the X2+Y account till you withdraw Y.
  • After that you can keep both accounts at full equity till you reach 65 - it’s risky but if they crash just before you turn 65, you simply invest the proceeds into near identical portfolio in taxable.

In this scenario, at the start X2>X1 assuming X2 grows slower in a conservative low equity portfolio till you withdraw Y. After that you can crank it up to highest possible equity allowed.

Ask VIAC that is you do partial withdrawal, does it come out proportionally from mandatory and above mandatory part or you can choose.

8

I have to say, I am quite impressed by Frankly in general. They have reasonable fees, and Swisscanto manages their pension funds quite well since years.

But yeah you cannot micromanage your asset mix like FP or VIAC

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9

That’s almost my strategy. My tax optimal withdrawal schedule is something like: 300, 400, 400, 400, balance.

I will try for:

  • Y1: (VB1, 300 - WEF)
  • Y2: (VB2, 400 - WEF)
  • Y3: (3a, cash out balance likely less than 400)
  • Y4: (VB1, balance cashout - should ideally be close to 400)
  • Y5: (VB2, balance cashout - forced at retirement age)

So it means that I need to have VB1 around 700k at and VB2 will contain the balance.

So I would do an assymetric split to target VB1 to be at 700k near retirement with the balance in VB2.

The asymetric split with double mortgage payoff (Y1, and Y2 are partial liquidations for WEF) allows for a near tax-optimal withdrawal.

10

PF can be with for WEF once every 5 years ( at least that what I read). I don’t know about the VB regulation. But if this is possible then it is very good solution for you.

11

Yes, once every 5 years, BUT I researched it today and discovered that the 5 years is PER pension fund.

I didn’t believe it at first (and I’m not a trusting type, so I still want to find the legislation to confirm), but it looks like it is true based on two credible sources.

By combining asymmetric split and double-WEF, I can get a 4 year split that pencils out near the optimal values.

Of course, the law can change until, then, but it was a fun little exercise to work out. The tax saving compared to no early withdrawal is 31k, so it’s not a big deal in the scheme of things. I can get the same tax saving without double WEF, but with double WEF it means I get the same savings and get the first 300k out of the PF four years earlier.

12

That’s not how I read it, but wouldn’t be surprised if they’re not tracking/enforcing it.

edit: that said might be implicit from the reference to Art 30c LPP, assuming this talks about a single institution.

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13

Well, for the 3a it seems to be enforced and for tax purposes it seems that 3a withdrawals within 5 years are aggregated for tax purposes.

I’m not sure if there is also a similar tax aggregation rule for Pillar 2, though.

My reading was similar and I was also surprised, but my understanding is that this measure applies to the pension fund and not the taxable person and so applies per pension fund. So it is implicit as you suggest.

I asked my current PF who confirmed (FinPension pages also have this same interpretation - so that’s my current PF and likely future VB provider supporting this treatment), maybe you want to ask yours to check too :wink:

But like I said, I’m not sure if there is a tax rule which ‘unwinds’ this for tax purposes.

14

Circular 17 (the tax office rules about withdrawal for early ownership) doesn’t mention the 5y at all, so I wouldn’t worry too much.

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15

And the plan to cash out rather than leaving invested in VB is because you would eventually like to own your home or it’s purely a return maximisation exercise?

I think one critical point to keep in mind is that if VB funds are withdrawn in tranches but placed in Real estate then eventually you will get taxed again (capital gains ) at time of sale. So the effective tax rate might be higher.

But if purpose is to own the place, then this money becomes dead money and only results is cash flow ( = mortgage payments)

16

Return maximisation. The cash out will be 3-4 years before I’m forced to cash out anyway upon reaching retirement age.

Real estate will be taxed regardless of how much of the mortgage you pay off.

Exactly, it will form a bond-like component of the retirement portfolio.

17

Yeah … I wasn’t thinking right.
The mortgage repayment has nothing to do with actual asset. It’s more of a debt reduction