I think educating the public about the facts is much more beneficial than imposing regulations.
The fact is, it is theoretically possible to create favorable permanent life insurance products which could compete with other financial products. But this will only happen as more transparency and competition is brought to the market.
We’ve seen this development with mutual funds, with ETFs introducing much more transparency and lower costs. Conventional asset management services too are evolving into cheap, transparent robo advisors. This didn’t happen because of regulations on TERs or asset-management fees.
In my point of view the proposal above would not introduce more regulations. It is also miles away from regulating fees and/or the structure of those products directly. It would bring however more transparency.
One could argue that today tax deductible structure favours the combined product over taking a life insurance and retirement capital saving plan separately. Why should that be the case?
It is not always possible to deduct the same amount for a standalone life insurance since in practice the deductible can be maxed out by the health insurance premiums alone.
But point taken, it is only that threshold which makes the life insurance premiums “not deductible”. It can and actually will increase.Thus, my initial proposal is silly.
What about making each component of the combined products premiums deductible in their respective bucket?
The split of the premiums contribution to each component would then have to be reported transparently.
I know the view here is that 3a with insurance is worse compared to a 3a with a bank (VIAC, frankly etc). Today I have everything with VIAC Global 100. My financial advisor is recommending an insurance based solution and I am trying to make my own conclusions about it.
Here is my understanding of the Helvetia Performanceplan. I can choose my own funds where the money will be invested. The option selected by my advisor is
UBS (CH) Investment Fund - Equities Global Passive W
UBS (CH) Investment Fund - Equities Switzerland Passive All W
The TER is low at 0.14% and 0.19%. Lower than VIAC. The expected returns are similar to VIAC Global 100.
This part alone already surprised me. Is the investment here really better than VIAC?
Regarding the flexibility I was told that every 3 years I can adjust the payment plan if I want. To a minimum of 100 CHF per month.
The main selling point from the advisor is that since I earn significantly more than my wife it would cause a huge impact if something (death, unemployment due to sickness) would happen to me. Hence it would be foolish to not be insured against it - those are the words my advisor.
I don’t know what to think. The investment plan does not seem that bad. The negative effect on my wife in case I am unable to work really worries me as well.
So please mustachian help me before I possibly make a mistake. Why should I stick with VIAC?
Look at your 2nd pillar first. What would be the annuities paid to the widow and orphans? What are the conditions for such payments (based on the pension fun rules)?
At the top of annuities, an employer may subscribe to a life insurance and pays a lump sum to the widow.
In case of death, could your wife increase her salary (higher working rate etc) ?
If all the above arent enough, a pure risk life insurance may make sense.
How is Helvetia product working? How much is used for savings? How much to cover the risk? What are the payouts?
Of course he’ll told you all these good things about it as he earns a large commission (up to CHF 10’000) if you make a contract.
If you really need insurance in addition to what 2nd pillar provides (you need to check what the benefits of your pension fund are for death, disability etc.), make a separate life insurance.
These mixed life insurance 3rd pillar products are always a scam. You pay thr commission of the advisor and they are really intransparent about their fees.
I believe you shouldn’t so much look at your income in relation to your wife’s. What you should rather look at is your wife’s income in relation to her cost of living / expenses (in case you pass away). If your wife can sustain herself and cover her own expenses from her own income - what’s the point of spending money on insuring against loss of yours?
Combining risk insurance with investment of personal wealth is often a great idea - for insurance companies and their advisors salesmen. For consumers (you)? Not so much. Conflating the two seems to almost invariably make for intransparent, hard-to-understand products and contract terms that leave ample room to cost you - without you noticing.
Possibly.
Without having read the terns and fine print (yet), only a part of your contributions will likely be invested into these funds. And I suppose that the catch is that will be less than you think.
EDIT: they’re actually selling fund units to cover your risk insurance premiums: „Die Prämienanteile für die Leistungen im Todesfall und die Kos- ten werden ab dem zweiten Versicherungsjahr durch den Verkauf von Fondsanteilen finanziert.“
How are we supposed to know? It’s not as if Helvetia publicly provided any concrete figures and numbers for for insurance premiums and costs on their Performance Plan, do they?
You can have cheap, low-cost (low TER) funds to invest in that plan. What’s that to say if we - or you - don’t know about the other costs and premiums? Well, at least there does seem to be a limit to them…
„Der Rückkaufswert entspricht dem Wert Ihres Fondsguthabens abzüglich der nicht amortisierten Abschlusskosten. Diese betragen maximal 1⁄3 des modifizierten Fondsguthabens“
The answer to your questions seems to be “We don’t know!” and “We don’t have enough information to evaluate it”. And this is the main problem: intransparency of fees and (potentially on purpose) complicated conditions. It is better to invoke an old rule that served well many generations of investors:
Never invest in a financial product that you don’t understand.
Specifically there is another rule also based on long community experience:
Never mix investments and insurances.
Even if we don’t have information about fees, there are very straightforward indications that these products are extremely lucrative for companies that offer them. Meaning, they rip people off and most don’t even notice it. The provisions that they pay for them are 4-5 digit numbers. They also try to attract customers by promotions, offering 3-4 digit number “bonuses”. It also seems to be usual for these products to have a surrender value of 0 first two years, that means your contributions for first two years go straight into their pockets.
The main problem with these insurances from my point of view is the binding of your capital. The opportunity cost in comparison with a scenario where you invest them yourself are enormous. And that what will hit you most.
All in all I again suggest you to trust your peers and not a salesman and discard completely any thoughts about 3a life insurance. It doesn’t mean you should not have a life insurance. Evaluate your needs and buy a pure risk life insurance. You can buy it even if you are not completely sure, the costs are moderate. With this type of insurance you pay a premium and that’s it.
P.S. I hope it is the last time I am writing about 3a life insurance, I really hate them.
Friend of mine works for such an insurance company as a client advisor. They get a sizeable „rebate“ for employees. I believe the employer pays something between a fifth and a third of the contributions.
Also, he earned about CHF 150k, including sales bonuses, last year. As a mid 20 year old on a mediocre (and not really insurance-related) vocational degree. Go figure.
At Zurich Insurance you can make a “kapitalgebundene Lebensversicherung” with a duration of 10 years, you pay 5’000 per year and the employer pays 5’000 per year, not a bad deal.
I know a guy (currently in his mid 30s) who worked for a beauty company as a B2B sales person. He got caught stealing and was fired immediately. Then he switched his field of work to the insurance industry. He had no degree, just an EFZ. Still he earned over 1 million in the last 3 years in this insurance company. He basically sold a 3a life insurance with the maximum amount to anybody he knows. Depending on age he got 9-14k in provision per sold 3a insurance that way. Now he quit and started his own insurance broker company. Earns probably even more now.
I still don’t get why this is possible and not regulated heavily. A couple of guys making millions for thousands of people losing money that they could have for their retirement.
@dubsta
To answer your question: don’t trust them. Doesn’t matter how good it looks on paper.
You can get a good separate life insurance for CHF 400-500 a year, go figure if this is a good deal
Ask your advisor about the price of a separate life insurance (Helvetia offers them as well) and then ask him what justifies the difference you pay for the mixed product, I would be interested what he’ll say.
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