We explain to you why investments in Swisscanto investment products are a smart alternative to a pure account solution not just in the pillar 3a account but also in the vested benefits account (2nd pillar), even in the current climate.
Investing is the new saving. Especially for retirement planning.
You are ready to invest and you’d also like to benefit from a frankly vested benefits account? The only question now is which solution you should choose. Of course you can park your savings in a vested benefits account. However, these solutions tend to have low interest rates depending on the solution. You lose purchasing power, because these interest rates don’t even cover inflation. 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: savings with securities.
The advantage of saving with securities is that your money is not simply left in a vested benefits account, but performs in line with the financial markets. This is because with this solution, your frankly vested benefits consist of collective investments which invest mainly in equities, real estate or bonds depending on your investment strategy. 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 vested benefits account.
Please note: Past performance is not an indicator of future investment performance. Bear in mind too that the performance data does not take fees into account.
And what does that mean for me exactly?
The savings you can make with securities are worth much more than just a few hundred francs. Felix, for example, is 50 years old and changing jobs. He has CHF 1,000,000 in vested pension assets, which he doesn’t have to pay into the pension fund of his new employer in full. This means that he can invest the surplus portion (let’s say CHF 200,000, for example) of his vested benefits up until he reaches age 70 and can choose an investment product with an equity component of 75%. If he were to leave his money in his original normal vested benefits account, in 20 years’ time, and assuming interest rates remain low at 0.15%, he would have CHF 206,086. If he were to save it in securities, however, with a theoretically assumed net return of 3.97% this could be CHF 442,600. That’s quite a difference, isn’t it? And if you’re not Felix, you can still use the pension calculator to work out how much extra money you could save up.
Let’s assume, for example, an equity component of 75% and an expected return per year of 3.97% (net after costs).
Saving in securities is subject to fluctuations in value and the expected return cannot be guaranteed.
And talking of saving, thanks to the extremely low fees at frankly, Felix can save about CHF 62,400 over 20 years (compared to an average competitor’s product). How much would you save?
Prices can fall too, like we saw in March 2020. It’s true that the markets are always fluctuating, and of course prices do fall once in a while like we saw at the start of the pandemic. But vested benefits are not about making a quick profit, but about preserving or building up your assets for your old age over the long term depending on your investment horizon and risk tolerance. This means you can sit tight and wait out any crises.
A glance at history shows that crises are usually followed by longer periods of recovery and upswing. Since it is a long-term investment, securities offer you the prospect of a higher potential return than with a vested benefits account.
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 falls in price will be made up again. The older you are, the less risk you should take.
At frankly, you don’t have to be a stock exchange specialist. Swisscanto offers you seven different investment products to choose from. Our partner's funds and fund managers regularly win the most coveted Funds Awards. But before you decide, think about what kind of investor you are.
Do you want higher returns, or is security the most important thing to you? frankly offers you four different strategies to follow, from safety-conscious (10% equity component), cautious (20% or 25% equity component), balanced (45% equity component) through to an ambitious investment strategy with a 75% equity component. The mix of asset classes varies depending on the type.
In addition, with four different strategies available (safety-conscious, cautious, balanced and ambitious), you can choose between an actively managed or an indexed solution. In the case of active investment products, the positions 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 which type of investor you are? Find your personal strategy here by looking at our investment products.
All you need now is a tablet or computer/laptop and you can sort out your pension from the comfort of your own home. Just register online and you can open your frankly vested benefits account without the need for any paperwork.
Knowledge
© Sparen 3 pension foundation of Zürcher Kantonalbank
and Vested Benefits Foundation of Zürcher Kantonalbank
Please rotate device
