Pillar 3a: compare pension funds and accounts

The pension account is a very secure form of 3a saving: what you have paid in will be paid out to you upon retirement. There are no price risks. This solution is especially suitable if you are planning an advance withdrawal of your 3a credit over the next five years.

Retirement funds are the alternative

Many 3a savers have a very long investment horizon, so it’s worth checking out pension funds as an alternative. Both banks and insurance companies offer various fund solutions as an alternative to the 3a interest account. Insurance companies always offer an insurance component with their 3a solutions.

2. Pension fund: investing with pillar 3

By investing in a fund, you ensure good diversification with little effort. A fund invests in various investment products and companies. This disperses the investment risk. At the same time, you participate in the price increases of various financial markets.

Risk and return with shares

Depending on the provider and fund, up to 100%-equities strategies are possible. A higher equity-share means potentially more income. But every coin has two sides: you have to take on more risk. In the short term, price fluctuations can be enormous.

Historically stocks are more profitable

In the end, however, stocks always manage to bounce back from price declines. Shares usually recovers after ten years at the latest. You should wait just as long before you draw on your pillar 3 money.

Digital pension funds

Various digital providers let you open a 3a pension fund via app. These include Viac, Finpension and Frankly, the digital pillar 3a developed by Zürcher Kantonalbank. The apps offer lower fees and greater flexibility than a conventional fund contract. For example, you can usually adjust your investment strategy in the app quickly and intuitively.

3. Active or passive investing?

People looking to invest can choose from both active and passive funds. The distinction refers to how the funds are managed.

Passive funds aim to offer as much diversification as possible. They are based on the market and usually automatically replicate a stock index. Therefore, they require less management.

Active funds try to outperform the market. Portfolio managers of active pension funds advertise that they can find and seize opportunities in the market and generate more income thanks to deeper research.

Do you want to invest broadly? Then passive funds are usually a good idea for your pillar 3a. Actively managed funds tend not to beat the overall market.

4. Fees for 3a pension accounts and funds

Interest-bearing account: free-of-charge account maintenance

Most providers offer conventional 3a pension accounts free of charge.

Passive funds are cheaper

Fees for pension funds vary considerably. You usually have to pay higher fees for an actively managed pension fund. When you take all these fees into account, passive funds also lag behind the index. You should therefore be particularly aware of the costs. All funds must report the fees as a total expense ratio (TER).

5. The takeaway: fund or account for retirement?

Funds can generate better returns than an interest-bearing account. However, this additional return comes at a steeper cost – more risk. Do you want to invest in funds? If so, it’s worth comparing different providers and funds. Pay particular attention to the fees.