SwissLife 3A FlexSave Duo - yet another 3A insurance!

Dear everyone;

I just finished reading all the blog articles. A really good source of information. The forum sounds astonishing as well. Many thanks to all contributors.

I saw many messages regarding poor 3A insurance contracts. Well, here I come! I moved to Switzerland back in mid-2018. My partner and I both signed individual SwissLife Flex Save Duo contracts. Contract is 37 years ending 2055.

The biggest issue I have with this product is that I do not fully understand it, that is to say, I never managed to calculate back the expected outcome for a defined growth scenario on SwissLife document. But I really wanted to benefit from tax reduction

  • We pay max. premiums of approx. CHF 6’800.- (3 payments up to now)
  • The capital is invested in index funds (SMI: 20%, S&P500: 20%, EutoStoxx: 20%, Nikkei: 20%, FTSE 100: 20%). The portion of the full capital that is invested VS secured is something I didn’t find.
  • The monthly gains are capped per index fund from 0% (no loss possible) to 2.5% max (the gain is the addition of the index funds gains individually capped rather than capping the addition of the index fund gains.)
  • Also, the annual gain is capped to 8%.
  • 50% of annual returns are re-invested, 50% secured.

Based on their index basket and capping the average return per year over the last 15 years was 4.85% and over the last 25 years was 4.70%.

Included insurances:
Inability to pay the rents, is CHF 187.- taken of the CHF 6800.- premium.
Death, premium is variable based on death probability tables and not detailed in the contract
Home option (all paid premium can be considered as your “fond propre”) when buying home.

After 37 years:
Cumulated premiums: approx. CHF 250’000.-
Guaranteed capital after 37 years: CHF 208’450.-
(Total insurance premium around CHF 42k)

What I do not understand, at all (from my SwissLife contract)
Bad situation: invested 1.25% & secured 1.4% : CHF 217’491.-
Medium situation: invested 3.25% & secured 1.9% : CHF 370’571.-
Good situation: invested 5.25% & secured 2.4%: CHF 894’938.-

Now if I had taken at the first place every single premium in a 100% index-based investment in an average 5% pa I would end up with CHF 687’819.- which can be considered rather conservative on index funds for 37 years but rather good by SwissLife contract. I do not understand how the “good situation” from SwissLife is calculated ending around CHF 900k vs my calculations at 5% ending CHF 688k and I cannot stand not understanding my own product…

If I leave SwissLife now in 2021, the buy-out value is CHF 10k + gains. VS premium paid of 20k up to now. Starting investing at 5% pa with those remaining 10k and upcoming premiums brings me after 37 years to CHF 627’868.- which is CHF 60k lower than if I didn’t sign the SwissLife contract. (Well that’s just 10k lost at 5% over 37years).

It hurts seeing 60k gone, especially because we both have (my partner and I) the same contract meaning it is 120k gone. But I feel great seeing this 3 years-in rather than 10 years-in.

Now before taking any action, I would feel better if I could fully understand how this SwissLife contract invests the capital. I attached few pages from the contract, does anyone have any idea?

Many thanks and have a great day! :slightly_smiling_face:

Stephane


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Hi Stephane

I don’t have the time to go in full detail here but I still wanted to give you a summary. I work in the insurance industry and know that product, I even had a version of it too (until mid last year).

In short: This product was one of the top-sellers at Swisslife since it had a unique sales-pitch: Your invested money is 100% safe and if the stock market performs well, you get the upside too!

Important to know, your money is not directly invested on your behalf in these indexes! Swisslife buys every year a call option to cover possible index gains and this option is financed with the embedded fees and operative profits “Überschüsse”. So the product is more a structured product than an ETF.

And it was too good to be true. The early contracts had even a higher guaranteed payout sum, as the paid premiums, so the customer could technically not loose money IF he kept the contract for the whole duration…

So far so good, and if a customer only bought it for the security purpose, it kind of made sense.

For everyone who was more interested in participation gains, the product was attractive in the beginning, wenn the amounts you could benefit from the index-performance where high, but swisslife started to reduce them every year until it became very low (depending on the version of the product you bought) -> this is where I opted out and “lost” some money but preferred to invest it directly over VIAC / finpension and I am sure to catch up over the next years :-).

Disclaimer: My knowledge might not be actual anymore and you might have a different version of the product which might be built differently - so maybe nothing which I wrote applies to you. Its written on my memory and I didn’t recheck anything so far.

My suggestion to you:

If you bought if for the purpose of having a guaranteed sum by the end of the contract -> keep it. This is what such insurances are for and yes, they are not cheap.

If you want to have your money invested, eat the frog, cancel these contracts and invest the money (and future money) over a low cost 3a provider like VIAC or finpension.

Hope it helps!

Best,
Balaclava

5 Likes

Dear Balaclava,

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 :dizzy_face:

“Les explications susmentionnées … ne font pas partie intégrante du contrat.
Seules les conditions générales d’assurance font foi.”

:smiling_imp:

1 Like

Which would render your “absolute best gains” capped to 2% (21% of 8%).
How high are the fees?

I think it’s a no-brainer to pull out and start your 3rd pillar and life insurance (if you want one) under separate contracts.

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.

Dear all, many thanks for the interesting comments.

I spent some time drawing my understanding of the contract:


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.

4 Likes

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 :smiley:

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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.

2 Likes

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…

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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.

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…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.

1 Like

Hi Again,

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 :slight_smile:

I specially like Fry with the dollar bills on your drawing :slight_smile: 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:

  1. Be very grateful to have realized that only 3 years in!
  2. Opt-out and take what is left, without focussing on the loss.
  3. Make it right (Low-Cost 3a in Stocks) and separate life or disabilityinsurance if needed.
  4. Focus on the future gains!

Best, Balaclava.

4 Likes

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…!)
SL0

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

Now is waiting time, and:

YES :innocent:
Thank you all.

3 Likes
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