There is also the risk that the „Deckungsgrad“ of your pension fund falls below 100%. This will then trigger recovery/restructuring activities, which affects you.
Recent study showed that 57% of all pension funds fall below a coverage of 100% in a scenario of: stocks -20%, bonds -10%, foreign currencies -5%.
Also the hidden risk of cash-flow problems even if degree of coverage is sufficient. Do you know what PF do in such cases? They just redirect inflows directly to pensioners.
are these issues for you if you will anyway just withdraw your capital?
No
Unless your fund go bust and employer refuse to fund it in another way. And all this happens between now and when you retire
Big companies typically will infuse cash on top to avoid issues
Once the funds are in VB - you are on your own. Nothing to do with previous employer and their fund
If we are talking about a pension fund and not VB then yes, this can be a problem. Its then very like that part of funds profits and employer/employee contributions go into fund „recovery“.
If you leave the fund during that time, they will take part of your voluntary bvg part for the „recovery“.
This could be a risk, but it would be quite extreme as it would:
I don’t think it’s something you need to worry about. You are retiring in one year
I hope to retire in 2028, but under the current US administration, a lot could happen in 3 years!
yep agree I would never buy additional contribution infact trying to get the stash out instead as its just wasting away doing nothing. It all depends on your own expected return and your risk free rate
Well for me, I don’t want to go all in on stocks so need a bond component, so I treat pension a bit like that.
Plus, if I manage to retire in 3 years, the funds will be transferred to VIAC and Finpension where I have more control/flexibility over investments and hopefully not just the 1%.
While in the past decade, I would not have wanted my money in PF instead of the stock market. Over the next decade, I think a 1%-2% CHF return might not be so bad. YTD, you’d be up 11% compared to S&P500.
An interesting interview
That’s the issue, with increasing job uncertainty, you can’t rely on having a job at 60. Heck, holding a job after 50 is challenging and getting a new one after losing a job once you’re over 50 is an even greater challenge. That’s why I don’t bank on getting an annuity.
Current annuity rates are pretty poor, but there’s a chance that this changes in the future, so we might want to keep our eyes open for good luck too.
By the way, I read somewhere that annuities are taxed differently than regular income. So maybe there is some value in private annuities from tax perspective
I make the assumption that overall, retirement tax advantaged schemes should at worst have a neutral taxation balance when compared to equivalent taxable alternatives for most people (that is, tax saved at the moment we put money into the scheme and while the scheme was active should at worst be equivalent to the taxes paid when withdrawing).
I think it falls from common sense and political changes to taxation that could be made would at least try to adhere to this principle.
For what it’s worth, we don’t know how much taxable assets we will have by retirement either, not even bonds or cash, as that also can be subject to changes in taxation.
For me its rather funny the set of assumptions we have
For taxable account -: we know the expected return, we know the future tax regime & we know the final amount we will get. None of this is true.
For 2nd Pillar -: we assume worst case where Govt take all our money to give to someone. This will be done by cross transfer, raising taxes and every bad thing that is possible. None of this is also true
Reality is the purpose of 3 pillar system is to enable good retirement for all. That is all. If Govt really want to screw the high earners, they can easily apply high wealth tax or capital gains tax and it would bring much more money to the coffers. But I do not think that is the goal anyways.
I am pretty sure CH will feature in one of the top 10 pension systems in the world. It is already one of the top income country & also very favorable tax regime for rich or super rich.
Thus I try to assume the current rules will be valid until I retire, do a couple of scenarios & add money to different pillars accordingly. Trying to guess future tax regime is practically impossible.
Are we talking about the rich and super rich here? I am more interested to what will it be for someone like me (above median salary, 1.5-2X median) after spending a decade plus in uni and academic work earning below median and barely median salary.
Raising retirement age should be part of the solution. It preserves intergenerational fairness and has a double effect: people contribute for a longer period and receive benefits for a shorter time compared to keeping the retirement age at 65. For example, we could spend half of the additional life expectancy we gain in retirement and work the other half longer.
Ah yes, the old “well when pensions were instituted people retired at 62 and died at 65” argument 
I said rich & super rich because normally taxes are higher for richer people in some countries. In CH they are still reasonable.
Taxes are anyways lower for people who make less money.
Accepted. I thought you meant this in context of pension system. Which I am discovering more and more to be ‘healthy’ because of hidden cross subsidies.
Based on what I have learnt so far. Following is my understanding
AHV is there to allow minimum income for people irrespective of what they might have earned during their lifetime. There is some sort of variation but there is a cap on how much one can get.
3a is completely independent and helps people who have higher income. Reason is that only people with higher income have money to invest in 3a.
2nd pillar is kind of mixed bag. Traditional systems were build on defined benefits schemes where employer’s funds were funding the retirement of employees. The system worked well when life expectancy was low and demographics were favourable. Now things have changed and many funds are defined contribution schemes and depend heavily on their configuration of retirees vs contributing members.
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Talking specifically about 2nd pillar. There is a very big variation between funds. Some provide very good interest, some don’t. Some have high conversion (blended) rate, some don’t. Some offer 1e, some don’t.
But if we ignore all the differences, following is always true
I understand that 1e is easy to understand and it looks better as it is more or less similar to 3a. But it also has it’s disadvantages for an individual because all risk moves to the individual. Most people don’t know how to invest even if they think they do. It also has this problem of transferability as it’s not standard yet. Thus changing employers during bear market can be extremely painful unless laws are changed
This is why rather than looking at fund configuration & offers (as it depends on where you work) , I focus mainly on following to decide if voluntary contribution makes sense or not for me
For a country which is built with direct democracy, is known for its financial system and highly educated citizens, I remain confident that whatever happens in future will not be bad. It might be a bit better for people with lower income and perhaps less better for people with higher income. But in the end if I end up on the side with person with higher income and higher wealth, I will be fine anyhow
P.S -: I believe pension money is meant for funding last 20-25 years of our life. And this will always be the case. So I don’t count on getting it to fund 40 years of my life. If life expectancy increases, the retirement age will increase too.
P.S -: personally I like 1e system as it brings a balanced approach where base plan takes care of redistribution and 1e is personal.