Are you employed part-time, and know that you need to be careful to minimise or close your pension gap? Let us show you what private retirement provision with a pillar 3a has to offer and which frankly investment product may be right for you. The following example refers exclusively to private retirement planning.
Let’s assume you are Alice, 50 years old, work part-time on a 0.2 FTE basis at a controlling company in Berne and you are not a member of a pension fund.
You are married, and have a 15-year-old daughter and a 12-year-old son. What’s important to you is that you make a sustainable contribution to society with your investments. You have another 15 years until retirement. That’s a long way off, which means that it’s all the more important for you to make the right decisions now.
Part-time workers are particularly at risk of losing their old-age pension. Part-time employees with such a low salary cannot join a pension fund. They are allowed to transfer 20% of their earned income to the 3rd pillar. This makes it all the more important for Alice to lay the foundations for her future and fill up her 3rd pillar as much as possible.
She opts for a sustainable, active investment product with a low equity component (26%) and a higher bond component (59%). The focus is more on security and manageable risks. Alice can accept minor fluctuations in assets because of her long investment horizon (15 years until retirement). Active investment products are also designed to “beat the market”, i.e. to achieve a better investment performance than the market average.
Based on the initial situation, Alice could achieve the following retirement savings with frankly compared to a traditional pillar 3a banking product:
If Alice were to leave her money in her original normal 3a account, in 15 years’ time and assuming interest rates remain low at 0.80%, she would have CHF 80,128. If she were to save in securities, however, with a hypothetical return of 2.66% (net after costs) this could rise to CHF 95,500.
Assumptions: equity component 26%, hypothetical return per year 2.66% (net after costs).
The future returns and risks presented here are for illustrative purposes only. Securities savings may fluctuate, the hypothetical return cannot be guaranteed, and tax effects are not included in this forecast.
Economic models and statistical methods are used for calculation purposes. The forecast corresponds with the most likely performance, and can be predicted for an investment horizon of up to 10 years. In the event of a longer investment horizon the calculations are continued using the same values, whereby no statements can be made about the probability of the calculated results occurring. In the event of very unfavourable market developments, the performance may be lower than the nominal savings value. The calculated values are net of the frankly all-in fee, and are based on an interest rate on the pillar 3 account of 0.80%. Please note that inflation and the taxes payable when the balance becomes due are not included in this forecast.
Based on the above values (living in Berne, married, two children, Protestant, deposit CHF 3,600 per year) and a possible taxable income of CHF 108,000 (Alice’s earnings: CHF 18,000/ her husband’s earnings: CHF 90,000), Alice can save an additional CHF 1,045 per year in taxes with the pillar 3a solution!
If her husband also pays in the maximum of CHF 7056, their tax savings add up to as much as CHF 3,081!
Source: Zürcher Kantonalbank tax calculator
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© Sparen 3 pension foundation of Zürcher Kantonalbank
and Vested Benefits Foundation of Zürcher Kantonalbank
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