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.
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.
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.
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?
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.
And they also pay pensions.
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.
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?
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)
In all 3 case my employer contributes the standard amount of 8.4% anyway so I will lower my contribution starting next year
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
Can you elaborate on the marginal tax rate?
I’m in the same situation (I can contribute 8, 9.25 or 12.25%, my employer 13.2% in any case) and wondering if the less contribution is not better but can’t wrap my head around it…
Here is how I estimate my Marginal tax rate:
- Go to Comparis ch tax calculator and enter your approx income - does not need to be precise. Write down the tax. Example 100k income and 20k taxes
- Repeat but enter your salary reduced by 1k CHF. Example 99k income and 19.6k taxes
The marginal tax rate in the example is 40% (=400/1000). Every 1000 CHF contributed to 2nd pillar would result in approx 400 CHF less taxes paid in that year.
Remember, taxes are payable when you take out the 2nd pillar. In Switzerland a reduced rate is applied. If you are resident of another country at the time you may have to pay taxes there.
The tax tables are available.
This is only for the federal income tax. It’s a very incomplete picture.
A more comprehensive table is here:
If you want it more accurate, you need to calculate yourself. Or maybe someone has a tax calculator that does the calculation for you.
Ah indeed I’m on mobile so harder to check. I’m fairly sure theres an estv doc with a summary for all cantons as well (but yes that one is only federal).
They haven’t “give” it to you, but credited to your account that they manage anyway.
But they are not businesses ! Or, let’s say, depending what pension fund you have, their goal is not exactly to earn performance fees by taking investment risks with your money.
What does it change? I FIRE tomorrow and take it with me…
It’s not the point how you call them. Fact, that their accumulated profit/losses are not distributed outright. More thinking what estimate I should put to my future NW growth in respective to 2nd pillar. Cap it to 1% which is mandatory, right?
You can count it with 1% or with a historical yield credited to pension accounts, not the portfolio yield.
What I do is use the tax software used for filling taxes from the previous year (or even this years) and play with the numbers. That way I get pretty much the exact amount (assuming all my deductions are valid as they have always been so far).