Why should I in­vest my pension in se­cu­ri­ties?


We explain to you why investments in Swisscanto pillar 3a or vested benefit investment products are a smart alternative to pure pillar 3a account assets, even in the current climate.

Investing - pillar 3a with frankly

Investing is the new saving. Especially for retirement planning.


It’s always a good idea to invest in pillar 3a or vested benefits, as you can read for yourself in the article «Why is pillar 3a so important?»


Are you ready and willing to benefit from the advantages of pillar 3a or vested benefits? The only question now is which solution you should choose. Of course you can park your savings in a pension bank account. But in the current environment, depending on the provider, these are only paying low interest rates of 0.72% per year (status July 2023) on average. This means that what you have will effectively be worth less in the future than it is worth today.


But what would be a good alternative?

The answer is simple: saving with securities.

What makes securities better? - explained by Christoph Schenk, CIO Zürcher Kantonalbank (German)


The advantage of saving with securities is that your money is not simply left in a retirement savings account, it performs in line with the financial markets. This is because with this solution, your third pillar or vested benefits consists of collective investments, which, depending on your investment strategy, invest mainly in equities, real estate or bonds. These are broadly diversified in order to protect your retirement savings.


Securities can generate more income over the years, because they allow you to benefit from the opportunities for returns on the financial markets. This is a significantly higher potential return than the interest on a normal Saving account (3a or vested benefit bank account).

Why it pays to save with securities

Performance with securities

Please note: Past performance and returns are no guarantee of future investment performance. Bear in mind that the performance data does not take fees into account.


And what does that mean for me specifically?

Let’s say you’re Max, 35 years old and in employment:


The possible savings with securities are much more than just a few hundred francs. Max, for example, is 35 years old and in employment. In future, he will pay CHF 6,000 each year into his pillar 3a account at frankly and he selects an investment product with an equity component of 45%. He transfers an additional CHF 50,000 from his former pillar 3a to frankly. If he were to leave his money in his original normal 3a account, in 30 years’ time and assuming interest rates remain low at 0.50%, he would have CHF 252,719. If he were to save in securities, however, with a theoretically assumed return of 3.7% this could be CHF 491,100. That’s quite a difference, isn’t it? And if you are not Max, you can use the pension calculator* to conveniently simulate how much extra money you could save up.


What makes securities better? Pillar 3a


Equity component 45%, expected return per year 3.7% (net after costs).

Saving with securities is subject to fluctuations, the expected return cannot be guaranteed and tax effects are not included in this forecast.


And talking of saving, thanks to the extremely low fees at frankly, Max saves about CHF 74'500 over 30 years (compared to an average competitor’s product). How much would that be for you?


To the pension calculator

But is it really a smart idea to invest in equities?

invest in equities - smart idea

Prices can fall too, like we saw in March. It’s true that the markets are always moving, and of course prices do fall once in a while, as we saw with the coronavirus crisis. But the point of pillar 3a is not to make a quick profit, it’s to build up long-term assets for your old age. This means you can sit tight and wait out crises.


A glance at history shows that crises are usually followed by longer periods of recovery and upswing. So thanks to your long-term investment, securities offer you the prospect of higher potential income than a pillar 3a bank account, where interest rates are likely to remain very low for a long time.


Our tip:

Bear your investment horizon in mind. The longer it is, the more risk you can take, because it is more likely that any price drops will be made up again. The older you are, the less risk you should take.

If perhaps you are getting close to retirement age or don’t want to take the risk of saving in securities, you can also simply keep your frankly pillar 3a assets in cash.


Read more

OK, so what’s the best investment strategy for me?


At frankly, you don’t have to be a stock exchange specialist. Nine investment products from Swisscanto are available. The funds and fund managers of our partner Swisscanto regularly win the most coveted Funds Awards. But before you decide, think about what type of investor you are.


Do you want higher returns, or is security the most important thing to you? frankly offers five strategies to follow. From security-conscious (15% equity component) to balanced (45% equity component) and opportunity-oriented (95% equity component). The mix of asset classes varies depending on the type.


In addition, with five strategies (prudent, cautious, balanced, ambitious and focused on opportunities), you can choose between an actively managed or an indexed solution. In the case of active investment products, the securities are managed by portfolio managers whose goal is to “beat the market” – i.e. to achieve a better investment return than the market average.


Curious about the type of investor you are? Find your personal strategy here.


Now all you need is a smartphone, tablet or a laptop and you’ll have your retirement savings under control. Download frankly for free or register online and open your frankly pillar 3a entirely online without any paperwork. Deposits can be made from CHF 1. With frankly, pension planning is worth it even with small amounts.

best investment strategy - pillar 3a app

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