Withdrawals from the 2nd or 3rd pillar are taxed the same way I believe, there’s a specific rate for that which depends on the kanton of residence, note that it’s not taxed together with other incomes. If you withdraw from the 2nd pillar you give up on potential tax deductions as long as you don’t pay back what you withdrew in case you plan to make buy ins into the 2nd pillar in the future. Also if you sell your property you need to pay back that withdrawal into the 2nd pillar. On the 3rd pillar there’s no such rules.
When it comes to tax consequences, the money you withdraw from either plan will become subject to wealth tax.
If you decide to pledge instead of withdrawing, as I said 3rd pillar pledges counts as equity whereas 2nd pillar pledges may only give you better interest conditions but no equity.
Many thanks for taking the time to answer with such details. I was not expecting to get an answer from someone knowing this particular product the very same day!
It is funny: 2.5 years ago when we received the contract, I tried hard to understand the product reading many times every single line and I ended up asking our “financial advisor / broker” if this was using call & put options to generate more gains than our capital could by itself. He said yes and that the options price is negotiated yearly by Swisslife.
Are you talking about the “capital participation” used to deal with the options? I have no clue how this one is defined and evolves from a year to the next one since the contract does not define that.
🡆 Do you know if this is a “black box” on purpose so that SwissLife can change it at their will ?
Using my own case as an example:
Start of contract: 5.11.18.
First CHF 6’768.- premium.
First full year:
Capital participation on 5.4.2019: CHF 654.-
Gain from 5.4.2019 to 4.4.2020: 0% (indeed, it was red nearly every month)
Second CHF 6’826.- premium
Second year:
Capital participation on 5.4.2020: CHF 2857.-
At the moment; gains are capped to 8% but won’t know until the 4.4.2021
Third CHF 6’826.- premium
How CHF 654.- and CHF 2857.- were defined is a bit of an unknown. I found our “participation code” on the yearly summary paper (PGA16C) leading me to this page but it did not help me much.
When you look at the contract estimated returns for a medium to good market it looks attractive. But I like to compare things to make a decision and not being able to understand how the “capital-participation” is defined makes me unable to compare this product to other opportunities. Just for that reason, I am thinking of opting out. Now seeing a “capital participation” of CHF 2857.- were gains are capped to 8% after putting CHF 13’594.- of premium, I am a bit like ewww
Someone working with SwissLife presented this product to me as well - at least it sounded very similar but I’ve lost the brochures now. The salesperson wasn’t pushing it though and said I’m too young for that product. Securing the capital and getting small to moderate capped gains might be useful closer to the normal retirement age. We proceeded to have a nice lunch.
The X, Y, Z, K are the parameters I am looking for, nowhere to be found in the actual contract. And the value of X, Y, Z, K could change this contract outcome from good to bad.
I do not know if I can reverse engineer these values, probably not.
First year, capital participation was CHF 654.- = Y . K
Second year, I had CHF 0.- gain from index-basket participation + CHF 154.3 of gains from safe capital excedents + risk excedents.
Second year capital participation was CHF 2’857.- = (Y + 50% of 154.3) . K
Which gives K = 28.6 ( buying 1$ of option secures 28.6$ of stock) and Y = 23 (CHF 23 taken to buy options each year, assuming it is the same value every year)
Checking the K value against market data:
1 year call option for 3’800 of S&P500 is around 300 so 12.6 factor. Not very close to 28.6!
I tried different approaches, but expecting anything from these calculations is probably not wise.
Anyway, I think I have enough to organize a meet-up with SwissLife and directly ask those questions.
I wonder why people get lured in by these complex products, that in the end they don’t even understand. There is no free lunch, either you take high risk with high return, or low risk… and low return. +1 for the “shut up and take my money” meme
I would really like to see the face of an insurance salesperson when you show them that chart. Btw how did they react when you asked about the options?
Which index product though? I checked the $380 strike call for SPY in January 2022 and it would cost $3284 (today). Volatility and index changes will have huge effects on the price. This contract started at around $1100. A different ETF tracking the same index would have different pricing.
If they were to exercise that option it would cost an additional $38’000 which is way beyond the one year contribution. A more likely course of action is that they sell the option if it has gained in value. I’m interested in knowing if they will actually tell you the real numbers.
In my case it was 1) Everyone (rightfully) says to get a 3rd pillar and 2) the insurance guy ‘educated’ me about their products before I did my own research, so I thought I got myself a 3rd pillar, while I actually got a life insurance with a shitty 3rd pillar attached…
Because they are in some ways preferrable to pillar 3a savings accounts which currently pay next to no interest. For a person who simply wants to save until retirement without losing money or having any hassles, permanent life insurance is not terrible. Assuming they live a very stable life (don’t lose their income, don’t leave the country, etc.), that type of saver may have more money by the time they retire using life insurance instead of savings accounts. The policyholder still makes a sizeable “return” in the form of the tax saving. Obviously retirement funds and asset managers are more profitable, but they aren’t nearly as widely advertised (frankly’s the exception) and most people either don’t understand them or don’t know they exist.
…or they eschew them, because the capital isn‘t guaranteed.
I think the proposition „your capital is guaranteed“ works like a magic bullet on many prospective customers: Makes them suspend their doubts and incomprehension of the product and just sign the contract. At least in markets where there’s a high degree of trust in the currency and its purchasing power itself.
You are welcome, I learned quite a lot from this Forum and wanted to give back for some time, so I guess thats a good start. I kinda know really a lot about insurances in general, so if I find the time, i might proceed some day
I specially like Fry with the dollar bills on your drawing and I totally understand why you would like to understand it fully before doing a decision. The issue here is the following: Its a total Black-Box for the customer. What you missed for example are “other costs” which can be really high with such insurances (up to 2k /year) where stuff is included like the comission of approx. 10k which the insurance-sales person got for selling you this, or even 20k for you as a couple. If the contract ends early a big part of these costs are reduced/taken/stolen first in their internal calulation before they announce you the amount you would get opting out.
So in short its along a calculation like this:
6800.- in
up to 2000.- out for costs like Insurances, the options and comissions
4800.- is really invested on their behalf with the goal to outperform the guaranteed amount they owe you. And since they can change the rules of that game every year - yes they will outperform you = They will win almost every year while you have to be really lucky to win (unless you die or become disabled (invalid) so that they will have to come up for the whole sum without getting your payments)
And since the index-linkage is based on so many rules (positive performance is caped, negative performance is not on a monthly basis but on a yearly basis etc.) it reminds me more of a betting scheme than anything else…
So again, If you don’t want the security aspect of it (an are therefore willing to pay the price for it) - You can only loose (doesn’t matter if you understand it in details or not - its a systematic problem which applies to every 3a life insurance with a saving-part)
I suggest you to:
Be very grateful to have realized that only 3 years in!
Opt-out and take what is left, without focussing on the loss.
Make it right (Low-Cost 3a in Stocks) and separate life or disabilityinsurance if needed.
Many thanks for the premium distribution insights @Balaclava .
Fun fact: SwissLife calculated the theoretical capital at the end of the 37 years contract for a given scenario (+3.25% pa index performance): CHF 370k. Now in the web interface, their calculated capital is… CHF 345k for +4.5% pa index performance. Less money with higher market performance. They clearly changed the rules of what is invested and how it is invested leading to a different outcome. It would drive me crazy to keep such a contract for over 37 years.
We decided to make a move:
1/ SwissLife 3A cashout value can be requested on the private customer portal. It takes 1 day to arrive.
Here for 2 years in the contract and 3 premium paid (meaning the last premium is nearly unused), we can leave with around 13k out of the 20k paid. (Well, I hope I am reading the correct number…!)
2/ We opened a FinPension account. No details here, plenty of info available on the MP forum/blog.
3/ Sent the 3A transfer request to SwissLife through postal services. (Document from Finpension)
Tip: You can send the document for free by printing the SwissLife stamp-free slip
I’d love your follow-up opinion: What should we do with the bought-back funds? Do they allow to just close one life insurance and move it to a bank/investment 3a?
FYI, I have been with Allianz “Balance Invest”. I chose the 3A as I had a dependable wife and kid back in 2016. Then, in the middle, I had a severe health issue with open-heart surgery.
Now my wife has her own career and the family grew to 4 members ( 2 kids). I believe that might be safe to forgo life insurance and move it to an aggressive investment 3A.
Currently, I have 2.89 parts of 278392 Pictet Swiss Equities [1].
I paid 6768 from 2016 to 2020.
I got the letter saying that the value of buy-back on 31.12.2020 is 19 490.70.
Second, I’m no specialist and you may be safe but if you’re still interested in a life insurance policy (to protect your dependants), this may make getting a new policy either difficult or expensive. I’d get a new proposition before canceling the old policy.
If you’re not interested in the protection part of your policy, then they’ll allow for the closing of the account as long as the funds go into another 3A account. The easiest way to do it is to open a new account and ask your new provider to retrieve your funds. They’ll request what documents they need from you and handle the process themselves.
Alternatively, VIAC added a few months ago that for every 10k you have in your 3A, you get 2.5k of life/disability insurance. I doubt that that compensates for your previous policy 100%, but if you’re looking for just a small bit, that may be relevant information. See first question here: VIAC Life EN – VIAC
Oh, it looks like I’m not the only one that wanted to terminate this contract!!
I terminated it mid-February (it was actually pretty easy, cause I just printed the “Transfer” document from VIAC, ant they did it all for me), it took 10 days for the amount to be transferred to the VIAC account et terminate the SwissLife contract.
Out of 27k paid every during the last 4 years, the cashout value was only of about 13k. So @stefbuet if you get 13k out of 20k it’s good (at least better than me ahah)! I’d be interested to know the final amount you get, ping me when you have it
I did my own analysis of the contract in French here for those interested.
Totally agree with this. That’s how they won so many clients probably.
Okay, the case is now settled and I can write my feedback here for others.
Both my partner and I sent the document from Finpension the same day using the prepaid printable stamp from swissLife.
I had a quick 2-3 days response from SwissLife that they received the request and would process it within 10-15 days. Indeed 10 days later I received the official confirmation and the funds on Finpension. Great.
It was not as flawless for my partner. Few days after I received the funds, she still had nothing. She called twice SwissLife to push them and try to understand why such a timing difference between two letters sent at the same time. They’re very busy apparently. Never-the-less she received as well the funds approx. 30 days after the initial request (versus 15 days on my end).
For information, the account closure date used for the funds calculations is the letter reception date and not the handling date from SwissLife. So it was roughly the same for both of us (1 day later for my partner) regardless of the fact she received the funds 15 days later.
Out of 3 premiums for a total of CHF 20’420.-, we got back approx. CHF 12’500.- both.
That being said, we were only getting started on the 3rd year so I assume a good part of the 3rd premium was not yet consumed.
Looking forward to using Finpension.
Thanks @Balaclava for your priceless knowledge!
I hope this will help others.
HI @Mr.Paprika
Thank you so much for sharing your experience, and Im very happy for you that you managed to recover your premiums.
Can I ask you how did you manage to do that?
I am in a similar situation, which my financial advisor clearly mis-sold me the product, not presenting me all my alternatives and failing to act in my best interests. I spoke with Swiss Life and they said I could file an internal complaint with them bringing up these points.
Questions
During these 1.5 months had you already cancelled the contract and was only “fighting” for your rights?
Did you send any complaint letter?
Your complaint - even if against the advisor/broker - was made only through AXA?
I want to exit the contract asap, but still continue contacting and fighting for the premiums.
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