What is your second pillar performance?

Investing / Others
#1

I asked mine and was shocked to discover its performance is a whopping 1% per year (the exact rate is voted each year at the end of the year for the year that just finished).

That’s… nothing at all! And they charge a combined 10–15% fee between my employer and me on each monthly deposit.

Am I getting the shittiest of second pillars or are these normal numbers?

I’m also trying to understand if you can “cash out” your second pillar upon leaving Switzerland permanently and if you’re getting only the sums you paid in, or the ones you and your employer paid in, and whether that’s with or without interest?

Or if the money paid into the second pillar is deducted from your income or if it’s taxed as part of your income.

#2

This is a known problem in pillar 2. The reason is that the required conversion rates under BVG are higher than they should. Pillar 2 was originally intended as a savings plan, but currently there is a redistribution both across generations and across incomes.

There have been several proposals to fix this but many have failed (also because of votes) so far. This is still actively discussed.

The money paid into pillar 1 and 2 is not taxed as income. It will be taxed at a special rate if withdrawn as a capital.

In my understanding both what you and your employer paid and with interest, but this is not simple. Three different minimum amounts are computed and the maximum is taken. This appears on the certificate your receive every year.

If you leave Switzerland for a country with a social security agreement, it may also be that you are not allowed to cash out (unless it was a very short period of time like a few months, and they just give it back to you).

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#3

That‘d be most, if not all, of Eu/Efta states.

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#4

I don’t mind going on a road trip and become a resident for the next year after I fire of a country that doesn’t have an agreement with CH if that means I’m getting hundreds of thousands in capital back.

#5
#6

No you are not.
My company’s one just reduced their rate to 0.5% for this year… :triumph:
So I minimized my contributions as far as I could for now (their contribution stays the same, which is in general quite generous, 2x of my “base rate”).

#7

Your mileage varies with the provider. Mine has been giving an average of just under 3% over the past 8 years. I am quite happy with that as it is a much safer investment than my stock portfolio.

However, the issue of subsidizing current retirees remains. The true interest rate would have been closer to 6% if this was not happening. Unfortunately, we will be the generation who subsidizes the previous generation but not benefit from the same when it is our time to retire as they start lowering the conversion rate. You do have the option of cashing it out (unless they change that).

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#8

My company’s workforce is rather old (average age is 45 or 50 I think) so I guess that’s where returns fo.

#9

Part of 2nd pillar is also more of an insurance… survivor’s insurance, invalidity insurance. E.g. if you die your kids will receive some monthly payment in perpetuity.

My “libre-passage” amount appears to be equal to my contributions + about 1/3 of what my employer puts in + interest. Interest in my fund is guaranteed at 1% minimum per year I think. Last year it was 2.5%.

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#10

Often the fund is a separate provider covering many companies, unless you work for a large company. In the end, it depends on many factors including the ROI during the year. My partner’s pension fund sucks compared to mine and generally also gets whatever is the minimum rate for the year.

#11

Mine was 3% last year (2020). I thought it was quite alright as a “safe” investment.

#12

That’s the part that really annoys me of the 2nd pillar as it is today.
As a single with no kids I’m paying every year for an expensive life insurance with no expected benefit whatsoever…

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#13

My 2nd pillar usually pays the minimal mandatory amount of interests (1% this year, though they seem to apply it to both mandatory and over-mandatory parts which is better than the worst, I guess).

The insurance part is clearly separated from the savings. The premiums are 2.2% of the insured salary, split 50/50 between my employer and myself. Fees are somehow at 0% if I trust my certificate, so they’re likely diluted in the other premiums.

I understand why it’s there but indeed, some people will pay it without ever becoming “elligible” for the benefits. All in all, it’s a bit sad that the 2nd pillar is designed as a way to have people protect their vulnerabilities (retirement, ability to work and dependants) without real planning on their part. We could benefit from better financial education, better coverage from mandatory insurances less linked to income and more freedom of choice in the 2nd pillar.

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#14

Don’t mix the pillar 2 provider with the age of your company’s workforce. As Novice rightfully said, most of the companies use big providers like SwissLife, AXA, Helvetia or Baloise as the P2 provider. Only some companies have a P2 on their own. There are huge differences between the P2 providers in terms of return per year. This is dependent on several different factors: the number of retirees of the P2 provider, the asset allocation, coverage rate (Deckungsgrad), type of business of the companies (e.g. gastronomy or part-time work pays less money also into P2) and the overall cost structure of the company (hint: the fancy glass palaces should have some labels with “proudly presented to you by overpaying workers” on it :wink:)

Are you sure about this one? The mandatory rate is 1% per year for BVG.

From my point of view, P2 is good to have some mandatory savings. But the ROI could be much better, if we didn’t have to subsidize the P2 providers. Unfortunately, if you are employed, you can’t do much about P2 or the provider. If you are a business owner, you can choose between different providers and check regarding age structure, coverage rates and past return. Also, as a business owner, it has (some) tax advantages.

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#15

Yeah that’s the biggest cultural shock for me here. On one hand it’s perfectly normal and acceptable to burn 3–4K a year on Heath insurance which comes with a 2500.- deductible and seeing a doc costs minimum 300.- because “we have to make people realize how expensive it is and making it expensive keeps people from seeing docs all day costing all of us much more” but on the other hand it’s fine that second pillar returns and fees are ludicrous. Sometimes it’s hard for me to figure out how Swiss people think about these things, it doesn’t seem to have any logic behind it haha

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#16

My company uses the city’s pension fund. It’s managed by the city for city workers and a few lucky companies that were part of the city but got split out at some point. Seeing my colleagues and other municipal employees, I really think they have a lot of retirees and older people without much “young blood” to make up for it.

In any case, 1% is laughable. I get more interest than that on my cash account in Canada… and I don’t have to pay 10–15% in fees with every deposit unlike my P2.

#17

How is that comparable? 0% is already a good number for CHF

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#18

Getting political here, so let any mod feel free to do whatever they want with this post but there is a logic behind it:

Insurers have money → insurers lobby lawmakers so that laws benefit them → some lawmakers believe the rethoric that this helps people, others think that having insurers in good financial shape helps, why not because they can distribute more dividends to, among others, pension funds that hold their shares (and the lawmakers who own stocks too), others are just planning to get on a board or another or get some sort of kickback at some point → a law is made and lo and behold! It serves the interests of the big insuring companies!

The funniest thing is, the higher our premiums, the more money they have to lobby to keep them high. Ain’t that magic?

#19

Unfortunately yes.
Do you maybe have a link to the regulation that I could try and challenge them on?

Perhaps there is a clause that there should be “minimum 1% on average over a set of years”?

#20

I think you can’t challenge them BEFORE you get the money. Maybe I don’t remember well, but my grade was 6 at that course. It is calculated for the whole duration and they can give more or less in a year, and then it is compared to the legal minimum

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