[UBS] Replacing 213k Pax insurance with 263k LPP pledge?

Real Estate
1

"Hello everyone,

I am looking to optimize my mortgage setup with UBS (590k CHF, SARON + 0.85% margin). My indirect amortization is currently pledged via three Pax life insurance policies.

Key Figures:

Pax Guarantee (Guaranteed cash value at maturity): A total of 213,747 CHF (maturing 2049/2054).

LPP Guarantee (Current Vested Benefits): 263,132 CHF (2025 statement).

My Proposal:

I intend to ask UBS to release/cancel the Pax policies (to stop paying insurance premiums and switch to a 3a bank solution like VIAC) by offering to pledge my entire Vested Benefits (LPP) account instead.

My Logic:

My current LPP balance is already 50k CHF higher than what the Pax insurance policies only promise to reach in 25 years. Effectively, the bank would be ‘over-collateralized’ from day one compared to the current contract. Furthermore, my LPP survivor benefits (50k/year) already provide solid family protection, making the Pax insurance redundant.

Questions:

In your opinion, can UBS legitimately oppose this substitution given that the LPP collateral is mathematically superior and already fully funded?

Has anyone here used this kind of LPP collateral surplus to force UBS to accept a third-party 3a (like VIAC) with a 100% equity strategy for indirect amortization?

Does anyone know what ‘haircut’ (discount) UBS typically applies to a pledged Vested Benefits account?

Thanks in advance for your help and insights!"

2

Hi! I tried to do something similar with my cantonal bank:

Close pillar 3a from insurance, move it to viac and pledge that instead.

They refused, of course your position and proposal are way better and safer for the bank, mine was a bit extreme.

The LPP value you mention if I got you implies that you will keep working for that salary, so it’s not guaranteed for them as the 3a is.

What I took as a lesson is what they said at a certain point: “you signed a contract where are stated the pledged items so we can choose whether to stick with the agreed solution or sign a different one”. I was upset but what they said is true, if one of the two parts doesn’t agree there is nothing the other one can do.

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3

If you would have had SARON, you could have started negotiating with other mortgage providers straight away.

4

Well still depending on the notice period (some have that), in my case I could have paid the penalty if I really wanted to change.

I can imagine with the situation you mentioned, or if close to the end of the contract, that one could have even openly say that it would cause a change of bank, hoping they don’t like to lose good customers.

In any case I just wanted to point out that is not possible to force someone to change what a contract says, not even if it’s in their favour.

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5

As also mentioned by @Ezra : UBS can, for any stupid or for any legitimate reason, oppose and you would have no legal recourse. But of course, you should absolutely give it a try.

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6

I would approach it with the consideration that they already have their deal and that what you are suggesting is additional work for them.

I’m not learned in the insides of the trade but I would guess that better guarantees wouldn’t be particularly attractive: they’ve made their risk assessment and it was good enough for them when you signed the deal. I’d expect them to want improvements on the returns part of the deal (or put pressure on their returns prospects by appearing as a flight risk and playing the competition).

Edit: as a side note, the PAX policy may offer additional coverage in case of death or disability before maturity that a non-insurance type of pillar 3a may not offer. You’d have to check that (and have probably done so already).

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