# What is your second pillar performance?
**URL:** https://forum.mustachianpost.com/t/what-is-your-second-pillar-performance/6004
**Category:** Investing / Others
**Created:** [March 20, 2021, 5:54am UTC](https://forum.mustachianpost.com/t/what-is-your-second-pillar-performance/6004 "2021-03-20T05:54:59Z")
**Posts on this page:** 20
**Page:** 2
### Author:  [@FIREstarter](https://forum.mustachianpost.com/u/FIREstarter)
#### Post date: [March 20, 2021, 9:47pm UTC](https://forum.mustachianpost.com/t/what-is-your-second-pillar-performance/6004/22 "2021-03-20T21:47:07Z")
> [@boschika](#):
>
> a few lucky companies
Maybe you should put “lucky” in quotes 🙂 Indeed it might be different, if the pension fund is rather small. Also, if it’s a city pension fund, they might have less stocks in their overall asset allocation, hence less returns. And, as you rightfully said, the number of retirees can be higher than for bigger P2 providers.
> [@boschika](#):
>
> In any case, 1% is laughable. I get more interest than that on my cash account in Canada
You’re comparing apples and pears here. CAD has devalued against the CHF in 2020. You can check the annual average rates at [ICTax](https://www.ictax.admin.ch/extern/en.html)
Annual rate of 1 CAD in 2019 was 0.746771 CHF, compared to 0.693835 CHF in 2020. So even with your 1% interest (100 CAD) gained, you would have lost in CHF (7467.71 CHF in 2019 vs 6938.35 CHF in 2020 - didn’t consider the 100 CAD in the equation, too late for that now)
> [@boschika](#):
>
> and I don’t have to pay 10–15% in fees with every deposit unlike my P2.
The 10-15% fees are actually quite ok. I have seen offers up to 25% fees for P2 providers offering the full BVG insurance coverage (Vollversicherung vs teilautonom). Also, your cash account doesn’t insure you against death or inability to work.
> [@dbu](#):
>
> 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”?
Not as far as I can see. You can check [here](https://www.bsv.admin.ch/bsv/de/home/glossar/mindestzinssatz.html) (German) or [here](https://www.ipe.com/news/minimum-interest-rate-for-swiss-schemes-stays-at-1-despite-crisis/10048815.article) (English). From my understanding, the mandatory part has to be paid every year, not on average.
> [@Double\_A](#):
>
> Mine had +5,21% in 2020.
5.21% is pretty good. Most probably Asga is having more stocks than other providers. EDIT: just checked: 32% stocks and 3% private equity. Interesting that they are able to achieve such high return with this asset allocation.
To add some numbers: my BVG provider had 2.25% for the mandatory part, and 3% for the uber-mandatory part.
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### Author:  [@s-g](https://forum.mustachianpost.com/u/s-g)
#### Post date: [March 20, 2021, 10:59pm UTC](https://forum.mustachianpost.com/t/what-is-your-second-pillar-performance/6004/23 "2021-03-20T22:59:03Z")
> [@FIREstarter](#):
>
> Not as far as I can see. You can check [here](https://www.bsv.admin.ch/bsv/de/home/glossar/mindestzinssatz.html) (German) or [here](https://www.ipe.com/news/minimum-interest-rate-for-swiss-schemes-stays-at-1-despite-crisis/10048815.article) (English). From my understanding, the mandatory part has to be paid every year, not on average.
They can actually give 0.5% less than the minimum interest (even on the mandatory part) for a maximum of 5 years if the “coverage ratio” is lower than 100%. This is to try prevent a complete default of the institution.
[Art 65d of the LPP](https://www.fedlex.admin.ch/eli/cc/1983/797_797_797/fr#art_65_d)
And on the extra-mandatory part they are free to give 0% interest anyway. So if you have a lot of extra-mandatory (quite possible if the employer is “generous”) the 0.5% could just be the weighted average of the 2 parts.
> [@dbu](#):
>
> My company’s one just reduced their rate to 0.5% for this year… 😤
In your place I’d ask for the detailed pension plan regulation, have a look at the annual report of the provider, and try to contact the employee representatives (they’re on the certificate) to get some detailed explanation…it doesn’t look very good.
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### Author:  [@FIREstarter](https://forum.mustachianpost.com/u/FIREstarter)
#### Post date: [March 21, 2021, 7:01am UTC](https://forum.mustachianpost.com/t/what-is-your-second-pillar-performance/6004/24 "2021-03-21T07:01:14Z")
> [@s-g](#):
>
> Art 65d of the LPP
Cheers for the link. Learned something new again!
> [@s-g](#):
>
> So if you have a lot of extra-mandatory (quite possible if the employer is “generous”) the 0.5% could just be the weighted average of the 2 parts.
In my annual P2 statement, the provider mentions both mandatory and extra-mandatory interest rates. It might be different for other providers though.
> [@s-g](#):
>
> They can actually give 0.5% less than the minimum interest (even on the mandatory part) for a maximum of 5 years if the “coverage ratio” is lower than 100%.
How is it possible to have a coverage ratio under 100%, if stocks are at an all-time high and real estate prices have not gone down? Seems they have a really bad asset allocation, e.g. lots of government bonds. Or they sold (rebalanced) their stocks in March 2020.
@dbu: you can check the website of the P2 provider for details like asset allocation and coverage ratio. If the coverage ratio is below 100% for the past years, it might indeed not be a good P2 provider. BUT: your employer is obligated to pay you back 100% of the money which was “invested”, so even if the coverage ratio of the P2 provider is under 100% (e.g. 95%), your employer has to pay the 5%. That is if the plan is not a full insurance (which most of the companies don’t offer anymore anyway, aside from SwissLife, Helvetia and Baloise).
As an employer, I would always have a close look at the coverage ratio and the ratio of retired vs working people. One of the problems is that you can only change the P2 provider every 3 years, so once you decide for a provider, you’re kinda stuck.
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### Author:  [@s-g](https://forum.mustachianpost.com/u/s-g)
#### Post date: [March 21, 2021, 8:01am UTC](https://forum.mustachianpost.com/t/what-is-your-second-pillar-performance/6004/25 "2021-03-21T08:01:25Z")
> [@FIREstarter](#):
>
> How is it possible to have a coverage ratio under 100%, if stocks are at an all-time high and real estate prices have not gone down?
The coverage ratio is calculated once a year, not necessarily in December. We seem to have forgotten, but last year there was a massive market crash…
Also lowering the minimum interest is one of the last resort measures. They might have already been in bad shape well before that.
Maybe it’s fine, but it’s certainly worth a look into the annual report as you also said.
> [@FIREstarter](#):
>
> you can only change the P2 provider every 3 years
Thanks for the info, it’s nice to have an employer on the forum sharing knowledge “from the other side”
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### Author:  [@chca](https://forum.mustachianpost.com/u/chca)
#### Post date: [March 21, 2021, 8:15am UTC](https://forum.mustachianpost.com/t/what-is-your-second-pillar-performance/6004/26 "2021-03-21T08:15:56Z")
> [@boschika](#):
>
> . I get more interest than that on my cash account in Canada…
Yes, but your point of reference should be the central bank rate, not 0. Canada’s is 0.25%, Switzerland’s -0.75%.
You can currently earn about 10% on Kyrgyz som denominated accounts. What are you waiting for?
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### Author:  [@LeStache](https://forum.mustachianpost.com/u/LeStache)
#### Post date: [March 21, 2021, 9:29am UTC](https://forum.mustachianpost.com/t/what-is-your-second-pillar-performance/6004/27 "2021-03-21T09:29:43Z")
My employer’s PK is split into two/three parts:
1. the mandatory BVG for income up to 112k
2. a supplementary plan for the part of income exceeding 112k
A part of 2. is a profit sharing plan in which the employee cannot contribute but the employer pays a fixed amount (about 7k) annually.
If I remember correctly, the performance of 1. in 2020 was 1% and for 2. it was 5%. The difference is explained by the different coverage ratios between the plans.
So not great performance but otherwise the plan is generous: the company matches the employee contribution almost 2:1 and the profit sharing part is a nice extra. The owners also chose to do a sizeable extra capital injection some years ago.
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### Author:  [@Dr.PI](https://forum.mustachianpost.com/u/Dr.PI)
#### Post date: [March 22, 2021, 12:55pm UTC](https://forum.mustachianpost.com/t/what-is-your-second-pillar-performance/6004/28 "2021-03-22T12:55:08Z")
2019: 4%
2018: 1% (allowed minimum)
2017: 4.25%
2016: 2%
2015: 1.75% (and that was the allowed minimum!)
I think I saw 3.25% for 2020, but I cannot find it in any document now.
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### Author:  [@Erma](https://forum.mustachianpost.com/u/Erma)
#### Post date: [March 22, 2021, 3:09pm UTC](https://forum.mustachianpost.com/t/what-is-your-second-pillar-performance/6004/29 "2021-03-22T15:09:56Z")
I get 1%. There is a line that states they will decide in December if it will be more.
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### Author:  [@dbu](https://forum.mustachianpost.com/u/dbu)
#### Post date: [March 23, 2021, 12:54pm UTC](https://forum.mustachianpost.com/t/what-is-your-second-pillar-performance/6004/31 "2021-03-23T12:54:23Z")
Thank you all for your inputs, I learned a lot!
> [@s-g](#):
>
> In your place I’d ask for the detailed pension plan regulation, have a look at the annual report of the provider, and try to contact the employee representatives (they’re on the certificate) to get some detailed explanation…it doesn’t look very good.
I have asked around with my pension fund contact, and also looked into the older documents I received through the years.
It turns out at the start of each year, they set a “provisional” interest rate - which has been communicated as 0.5% (has been the case for the past couple of years).
But then as the year completes, they define and communicate a “definitive” interest rate for the past year - and that has been 2-2.5% for the past couple of years.
I was just pissed when I saw the latest report, yet I have not even thought about it in the past years (but could have been equally pissed at first). 😁
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### Author:  [@boschika](https://forum.mustachianpost.com/u/boschika)
#### Post date: [August 29, 2021, 9:51am UTC](https://forum.mustachianpost.com/t/what-is-your-second-pillar-performance/6004/32 "2021-08-29T09:51:26Z")
I can’t edit my original post so I’m adding the correction here. What I thought was a 10–15% fee on deposits is actually insurance premiums for long term disability (I think). So there is that.
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### Author:  [@Fliss](https://forum.mustachianpost.com/u/Fliss)
#### Post date: [August 31, 2021, 9:22am UTC](https://forum.mustachianpost.com/t/what-is-your-second-pillar-performance/6004/33 "2021-08-31T09:22:10Z")
Just noticed this thread – I always complain about my Pension fund (Publica) because it actually uses contributions from mostly rather underpaid PhD students (~40k CHF/year) to subsidize the retirements of well to do ex-civil servants.
Howeveverm their performance over the last couple of years is not bad with 4.2% in 2020 and 8.9% in 2019.
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### Author:  [@Dr.PI](https://forum.mustachianpost.com/u/Dr.PI)
#### Post date: [August 31, 2021, 11:12am UTC](https://forum.mustachianpost.com/t/what-is-your-second-pillar-performance/6004/34 "2021-08-31T11:12:40Z")
There is a difference between performance of the pension fund portfolio and how much they have credited to individual pension saving accounts. Above I was showing what I got credited.
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### Author:  [@boschika](https://forum.mustachianpost.com/u/boschika)
#### Post date: [September 2, 2021, 8:30am UTC](https://forum.mustachianpost.com/t/what-is-your-second-pillar-performance/6004/35 "2021-09-02T08:30:34Z")
I don’t understand. Do you mean they credited you for more than the fund performance or less?
If it’s more, where did the money come from? If less, where did it go?
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### Author:  [@Burningstone](https://forum.mustachianpost.com/u/Burningstone)
#### Post date: [September 2, 2021, 8:43am UTC](https://forum.mustachianpost.com/t/what-is-your-second-pillar-performance/6004/36 "2021-09-02T08:43:54Z")
Pension funds credit less than their portfolio performs in general. The rest goes into reserves. In years the portfolio performs worse than the market, they still need to credit a minimum amount and will then use part of these reserves.
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### Author:  [@Dr.PI](https://forum.mustachianpost.com/u/Dr.PI)
#### Post date: [September 2, 2021, 10:59am UTC](https://forum.mustachianpost.com/t/what-is-your-second-pillar-performance/6004/37 "2021-09-02T10:59:41Z")
And they also pay pensions.
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### Author:  [@capmac](https://forum.mustachianpost.com/u/capmac)
#### Post date: [September 2, 2021, 2:23pm UTC](https://forum.mustachianpost.com/t/what-is-your-second-pillar-performance/6004/38 "2021-09-02T14:23:55Z")
Roughly 3% on average over the last 10 years. 5% performance while handing down 2% to employees.
A large part of the “rest” does not go into reserves. It’s used to pay ongoing pensions. Hence the controversy about moving wealth from younger to older generations.
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### Author:  [@Le0](https://forum.mustachianpost.com/u/Le0)
#### Post date: [September 8, 2021, 12:48pm UTC](https://forum.mustachianpost.com/t/what-is-your-second-pillar-performance/6004/39 "2021-09-08T12:48:45Z")
For me it looks like it is 1% but I joined this year so I’m not sure if it is decided at the end of the year. It is written somewhere that the projected rate is 1.75% and min 1%
My company has its own fund with a good return of 9.05% for Q1 Q2 2021 but if I understand correctly this money mostly goes to pay the pensions and to the reserve. Which leads to my question. I can choose between a contribution of 6.4%, 8.4% or 10.4% am I correct in thinking I should just go to the lower contribution and invest the rest myself in VT?
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### Author:  [@MUFC\_OK](https://forum.mustachianpost.com/u/MUFC_OK)
#### Post date: [September 8, 2021, 1:09pm UTC](https://forum.mustachianpost.com/t/what-is-your-second-pillar-performance/6004/40 "2021-09-08T13:09:02Z")
> [@Le0](#):
>
> I can choose between a contribution of 6.4%, 8.4% or 10.4% am I correct in thinking I should just go to the lower contribution and invest the rest myself in VT
Unless they do match your contribution it‘s not worth it; and even then the market will probably perform better longterm than the pension fund (or at least what they pass on to you)
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### Author:  [@Le0](https://forum.mustachianpost.com/u/Le0)
#### Post date: [September 8, 2021, 1:11pm UTC](https://forum.mustachianpost.com/t/what-is-your-second-pillar-performance/6004/41 "2021-09-08T13:11:55Z")
In all 3 case my employer contributes the standard amount of 8.4% anyway so I will lower my contribution starting next year
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### Author:  [@capmac](https://forum.mustachianpost.com/u/capmac)
#### Post date: [September 8, 2021, 3:06pm UTC](https://forum.mustachianpost.com/t/what-is-your-second-pillar-performance/6004/42 "2021-09-08T15:06:31Z")
Depends on your marginal tax rate. If it is 30% for example then your VT investment needs to grow 43% just to break even. And that is not even including the interest you’re getting with the pension fund (2% on average) and some kind of risk premium.
The disadvantage with pension fund contributions is that the money is not easily accessible and you will have to pay a (low) tax if you’re planning to extract the capital instead of a pension. Somewhat complex topic 😉
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