Thoughts on moving Pillar 3a to Cash

Banks, Insurances & Third Pillar
1

Hi
I know many might scold me for the question, but in all sincerity: I am thinking about moving my Pillar 3a from the 95% stocks to cash, and would value your considerations.

Background: the 3a is pledged to a mortgage and in 3 years a fixed part of the mortgage needs to be renewed. Now we don’t know where the world heads to, but the idea is that I could use this money to reduce the mortgage, in case interests are becoming higher again and to reduce the monthly burden. Right now it’s at 30%+ over the past years and a good sum and would be
I opened a second 3a and started paying into it as well but it’s just started and I could live with higher risk there, since the amount won’t be as high and go 95% stocks again.

Are my considerations stupid?

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Incomplete. Instead of focusing on 3a and accumulated gains, what is your overall wealth composition? For example, would you be able and willing to reimburse your mortgage with “fixed income”/second pillar instead of selling stocks?

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Second pillar is roughly similar in size to the 3a actually (also pledged) and then I am holding a mix of bonds and stocks (1:3 ratio). Shifted a part to bonds just before Christmas as well due to before mentioned rising uncertainties. Before it was all stocks.

So your idea is if the mortgage has a higher interest rate than the second pillar is yielding, then I should use the second pillar to amortize a part, right?

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Unless it’s real crap and your mortgage is very expensive, probably it won’t. But if you hold bonds, their yield will most probably much lower than your mortgage. So, reimbursing a debt is like paying into a savings account with a higher interest.

Another aspect: I think it makes sense to strive to reimburse enough of the mortgage to not be required to do amortization payments.

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Thank you. I hope I can stop doing the amortization payments, since the value increased and I guess they will revalue the apartment with the mortgage renewing, but I am not 100% sure.

Still what to do with the 3a… you suggest letting it run and stomaching the risk of a downturn of the market since I can wait it out and in the worst case just use the second pillar?

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Consider your overall portfolio. 3a is very tax efficient for stocks, so it makes more sense to have it filled with stocks and keep cash in taxable than the other way around.

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