Use of variable part of salary

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1

Hi,

Since 2018, I work in a Swiss company as an environmental engineer.

My salary is split between a fixed part (monthly) and a variable part (quarterly, has of today it is 800CHF/month ) which depend of the result of the company and my percent (it’s a savant maths and I work at 80%).
This variable part is on a saving account at the company with an interest rate at 1.5%.

And every quarter, I ask myself what to do? Do I ask for them to pay into my account or to let it there.

Could you please share your thought about it.

Thanks

2

Depends on your desired asset allocation. In case you need the money to stay in cash, and there are no strange strings attached to this account, then 1.5% is not bad.

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3

1.5% is effectively not that bad for a short term deposit with the possibility to withdraw everything without notice. I would however ask myself what is the probability of the company to be insolvent?

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4

Thanks for your reply.

5

Yeah right.

For now it’s okay. But some former employees said, it’s the first thing that will disappear in case of insolvency. So withdraw it sometimes to be sure.

Thanks.

6

The interest rate is quite good - but there’s no question I’d definitely have it paid out and deposit/invest it myself.

Purely for risk. Who knows in whose name that interest-bearing account is? If it’s in the company’s name, you’re at risk losing it when things go haywire.

In general: if this is your only job, I’d try to isolate and dissociate your personal wealth from your employer’s as much as possible. To mitigate the cluster risk.

There is, of course, one exception: if you are to receive as disproportionately high reward when the company does well financially (basically if you’re a shareholder, e.g. granted stock options as an employee - or own the company).

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7

We seem to be working for the same company.

If so, the interest bearing “account” is not insured by esisuisse, it is more akin to a bond issued to you by your company. As such, it should not be compared to savings accounts but to an individual corporate bond. For example, an individual bond issued by Implenia maturing in October 2024 (roughly 1 year) is priced for 2.4% returns when redeemed, including interest payment and principal: https://www.finanzen.net/anleihen/a1zqq9-implenia-anleihe

Financially, it makes sense to ask for that money when it is available. However, your employer may expect you to keep it there for roughly one year, as it is how they provide themselves with liquidity. As I put some value in company optics (whether they see me as someone willing to support the company vs someone constantly asking for their money), taking it out once a year would be my baseline.

Edit:

It’s the second thing that will disappear in case of bankruptcy (it may become illiquid but not necessarily disappear in case of insolvency without bankruptcy). First, shareholders will be wiped out, then creditors (that’s you) will get paid by order of seniority. I would expect a haircut, probably to the amount of a full wipeout, in case of bankruptcy.

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8

Thanks for this answer.

It conforts me in my decision to ask for the money from time to time when my finance are tight and let it there.

9

I guess it’s what you’re saying but just in case: I wouldn’t hesitate to ask for my money whenever my finances are tight: it’s your money and money is there to be used when it is needed. They’ll understand that.

As for my former message, I may have been a bit blunt in my choice of words. What I meant by “your employer may expect you to keep it there for roughly one year” was that they may consider a once a year withdrawal as their expected baseline. Of course, money that sat in the “account” for less than a year would be withdrawn too, not only money that has been attributed more than a year earlier.

10

I would just use it to pay (part/all of) my taxes; seems like a “natural” buffer to load up until it’s time to actionize the cash (with a bit of convenient interest).

11

If you don’t need money, you could buy back 2nd pillar to decrease your taxes.

Before this, you would have to check the financial health of the pension fund.

12

It’s a way to use.

But the time to paid for the tax are early December and the interest are given at end of December.

I will reflect on it for now.

Thanks

13

For now I didn’t think about it because I didn’t quite understand well the system of the 2nd pillar especially my report file that we receive once a year.

14

If you are under 40 purchasing 2nd pillar is definitely not a good choice. Your tax saving is probably not that high and the wealth increase of a stock portfolio will outperform your pension found over a 20 years period.

15

It depends on the pension fund, your revenues.
I bought back 10k per year and saved 3k each time. Is this a bad performance?

16

The problem is that your pension found is remunerating probably at 1% your capital while a direct investment in shares would give a dividend between 1.5 and 3% plus some capital gain on the value of the shares. On 20 years that will erase your tax gain.

17

You might also not want to go 100% equity, after you assessed your risk profile. In which case it’s possible pillar2 is a pretty decent alternative to equity with lower volatility (and esp. if you’re at the top marginal tax rate, with nice tax benefits on top).

18

That highly depends on your pension fund, mine paid 3.5% on average.

19

More returns variability here: