Sanity check needed please. Because I think… I’m being screwed

After reading the ‘learn from mistakes’ post and reading about the life insurance pilar 3a ‘bundle’ warnings… alarm bells went off.

I was sold this by a financial advisor after having arrived in CH, just getting started with my own business. At the time (to give the FA the benefit of doubt) the idea of disability/death insurance seemed like a good idea (although i don’t honestly remember). times changed and now since years I’m employed with Swiss company with company pension etc who would pay these death/disability.

Standard story I guess for the regulars here welcoming new forum members!

I’ll cut straight to numbers.

Part 1
Life Insurance & pilar 3a

  1. Started in 2010
  2. 37 year contract (35yr@ 3600chf, 2yr@ 3028.10chf annual premiums)
  3. Guaranteed payout in 2047 of 129,890CHF. Although i would put in 132,056chf. First real ‘huh’ moment.
  4. Documentation/statements detailed nothing of capital saving vs insurances split as per other stories.
    1. Phoned them. ”Oh we don’t know your interest rate on the capital, but you could work it out if you want’. Thanks guys.
  5. Sure enough after pressing- Insurance fees account for approx 20% of yearly premium - 750/chf yr.
  6. So actual annual capital building then calculates at approx 35yr @ 2850chf, 2yr @ 2422chf. Totalling 104,594chf, meaning 27,462 going on insurance fees.
  7. As guaranteed payout is 129,890chf, then based on my actual capital investment of 104,594 the investment earns around 1.16% interest over 37years
  8. This seems like not optimal plan.

Of course there are penalties for breaking these contracts, but I’m wise enough now if that needs to happen, I have no hesitation. Have just read the blog post on pilar 3a index fund 45 R… onwards and upwards :slight_smile:

Any advice.thoughts on the above very welcome. Either way - I think its time for some more phone calls :slight_smile:

Is your financial advisor from Swiss Life Select? I had a similar experience with them (here) on a life insurance in a 3a pillar.

To sum up things :
-The returns are indeed really low. The insurance part is eating a lot of your capital
-The allocation was not transparent at all. I had to contact my advisor three times before he acknowledge that in my situation, I would indeed lose money.
-From my point of view, a mustachian investor would not need a life insurance (or perhaps in the first two years but that is all). In case something happens to me, all my money would go to my family. The insurance plan was promising 180k CHF in 35 years, I will already have this money by the end of the year.

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Thanks for the comments - the financial advisor is not from Swiss Life Select, just a smaller local firm.

Does anyone know if it is normal for the financial advisor to receive ongoing commissions for our contributions to these pillar 3a’s? I know in other countries by law they must make this known. Maybe there is a database of such things in Switzerland?

As far as i know it is common in Switzerland. I am a software developer in a financial company, which sells various derivative products. Its main clients are regular private banks. Each time any private bank will provide our products to a final investor, my company will pay a “distribution fee” to the private bank.

From my vantage point, it corrupts any incentive the private banker would have to perform its due diligence, and it screws the final investor. I also think it is a common practice in the swiss financial industry and that explains partly why swiss financial commissions are so high.

This is just another example why, especially when it comes to money, we should rely only on ourselves, and educate ourselves accordingly.

4 Likes

Very good advice thankyou

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