Pillar 3a and Pillar 2 Digital Asset Management Services

1. What are pillar 3a and pillar 2 digital asset management services?

Digital retirement solutions provide basic asset management for pillar 3a retirement savings and vested benefits. These service providers offer their services via mobile apps and/or web-based platforms.

Digital retirement asset management services provide an alternative to conventional retirement funds for investing pillar 3a and pillar 2 vested benefits. As opposed to using a single retirement fund, retirement asset management services let you invest in a portfolio of low-cost ETFs and index funds.

2. How do digital retirement asset management services work?

Retirement asset management solutions are very similar to robo advisors and other asset management services. When you sign up, you have to answer a number of questions. You are then recommended an investment portfolio based on your answers. You receive all necessary information and can begin transferring or depositing pillar 3a assets or vested benefits to your account. You normally manage your portfolio and transactions yourself via an app or web portal.

3. What can I do with a retirement app?

In addition to account-opening, retirement apps typically include these functions:

• You can determine your risk tolerance and get a recommendation for an initial investment portfolio.
• You can modify your investment portfolio on an ongoing basis.
• You can manage your pillar 3a assets.
• You can download annual account statements for tax purposes.
• You can track the performance of your investments.

4. Which pillar 3a asset management solutions are available?

The pillar 3a is a voluntary providence and retirement-saving category that is tax privileged. You can find more information about the pillar 3a here. Currently, digital pillar 3a asset management is offered by these service providers:

• bench
• Descartes 
• finpension
• frankly (Zürcher Kantonalbank)
• Gioia 3a (Graubündner Kantonalbank)
• Inyova
• LibertyGreen
• Selma Finance
• Swissquote 3a Easy
• Tellco Bank
• True Wealth
• Viac
• Yuh

Some banks offer their customers a digital 3a solution in e-banking. The pillar 3a can be opened and managed directly in e-banking. Examples of such solutions: 

• fluks 3a (Luzerner Kantonalbank)

You can get a comparison with more information as a PDF using the box at the foot of this article.

5. Which pillar 2 asset management solutions are available?

Currently, these service providers offer digital asset management solutions for pillar 2 assets:

• Descartes 
• finpension
• freeme
• Tellco Bank
• Viac

These solutions can be used to invest vested benefits – occupational pension fund benefits which are held in trust when you are no longer eligible to participate in Swiss pension funds. You can get a free comparison with more information as a PDF using the box at the foot of this article.

6. Do digital retirement asset management services offer consultation services?

Most digital retirement services do not offer traditional consultations in an office. However, many retirement apps provide customer service via chat or over the phone.

7. How much can I invest with digital retirement asset management services?

There is no minimum amount with most providers - with some it is 100 francs. That sets digital retirement asset management services apart from regular digital asset management services (robo advisors), which generally have minimum initial deposit requirements for account opening.

However, the legal limitations on the maximum amount you can contribute to the pillar 3a each year apply. You can find the limits for pillar 3a contributions here.

8. What fees and charges apply to Swiss digital retirement asset management services?

Many different costs may apply. These include asset management fees (typically flat fees), investment vehicle costs (fees charged by funds, for example), transaction fees, stock exchange fees, currency exchange costs, spreads, stamp duties and account-closure costs.

The two main costs to consider are: asset management fees and investment vehicle costs. All other cost factors are either identical across service providers or the differences are relatively small.

The asset management fee normally covers custodial fees and general administrative costs – but it normally does not cover investment vehicle costs.

You can find the individual costs applicable to each service provider on the PDF available at the foot of this article.

9. How much do Swiss digital retirement asset management services cost?

Retirement asset management fees range from 0% to 0.1% per year depending on the service provider. These flat fees cover possible brokerage fees and custodial fees, among others.

But investment vehicle costs are not covered by the flat asset management fee. The total expense ratios (TERs) of ETFs and other funds are the main investment vehicle cost to consider. Depending on the funds included in a portfolio, the TERs can add a cost as high as 0.92% per year in addition to the asset management fee.

Example: If the asset management fee is 0.39% per year and the TERs of the ETFs used total 0.22% per year, the combined cost would be 0.61% per year.

10. Bank account or securities?

With both pillar 3a savings and vested benefits, you also have the option of placing your assets in savings accounts. Bank accounts yield interest on the account balance at an annual interest rate. Annual interest rates for pillar 3a accounts are still slightly higher than those of regular savings accounts and vested benefits accounts.

Most retirement apps only offer securities investment. Retirement accounts are recommended for people who do not want the value of their retirement assets to fluctuate along with markets. This is beneficial if, for example, you expect to withdraw your assets relatively soon.

Unlike bank accounts, stock investments can fluctuate significantly. This makes them a poor choice for short terms and for assets which you may be forced to withdraw at unfavorable pints in time (such as vested benefits which must be transferred to your pension fund if you become employed in Switzerland again). For long-term retirement saving, stock investments generally deliver much better returns than retirement accounts.

You can compare retirement accounts here:
Pillar 3a account comparison
Vested benefits account comparison

11. Which investment portfolio is right for me?

Digital retirement asset management solutions let you choose between various investment portfolios with different stock components.

The rule of thumb is: If you will withdraw your assets in 10 years or more, you can choose the portfolio with the highest stock component. While the stock market may dip over the short- to mid-term, you will likely achieve positive returns over a long term of 10 years or more.

The shorter the term over which you will hold your retirement assets, the higher the risk of making a loss with portfolios that have high stock components. It may also not be worth being heavily invested in the stock market if market recessions result in your being stressed.

12. How are digital retirement asset management services different from retirement funds?

These are the main differences between retirement asset management services and retirement funds:

• Digital retirement asset management services let you open and manage accounts via apps or other digital channels. This is not normally possible with conventional retirement funds.
• A retirement fund is a single investment vehicle and has an ISIN identifier. Retirement asset management services make use of multiple investment vehicles in investment portfolios – including ETFs and index funds which are not available as stand-alone retirement funds.
• The vast majority of invested pillar 2 and pillar 3a assets are held in retirement funds. Retirement asset management services currently hold just a small fraction of the market. However, digital retirement asset management solutions will likely gain in popularity in the future.
• Digital retirement asset management solutions are typically cheaper than investment funds. Retirement funds often have sales charges, and holding retirement fund shares generates custodial fees. Many retirement asset management services include at least some of these costs in their flat fees.
  Example: The cost of investing in high-stock-component portfolios with retirement asset management services starts at just 0.13% per year (including investment vehicle costs). The cost of many retirement funds with high stock components start at around 1% per year.

13. Which custodian banks do digital retirement asset management services use?

Different retirement asset management services use different custodian banks to hold securities.

• Descartes: Lienhardt & Partner Privatbank.
• finpension: ZKB and UBS.
• frankly: Zürcher Kantonalbank.
• Inyova: Hypothekarbank Lenzburg.
• Selma Finance: VZ Bank.
• Viac: Bank WIR, UBS, ZKB.
• You can find more in the PDF (below in the box).

14. How secure are digital retirement asset management services?

Digital retirement asset management solutions are relatively secure.

The securities you invest in via retirement apps are held at Swiss custodian banks. They are classified as segregated assets and remain in your possession in the event of bank failure.

Retirement assets which are held in retirement accounts instead of invested in securities are not segregated assets. If the bank at which a retirement account is held goes bankrupt, up to 100,000 francs per customer and bank is classified as preferential assets. You can find more information about Swiss bank depositor protection here.

15. Which investment vehicles do digital retirement asset management services use?

ETFs and index funds are the investment vehicles which are the most widely used by retirement asset management services. However, some service providers also make used of actively-managed mutual funds.

16. Which asset classes do digital retirement asset management services invest in?

Digital retirement asset management services invest in various asset classes. Depending on the service provider, these may include stocks, bonds, real estate, commodities, precious metals, alternative investments and cash.

With many providers (Descartes, finpension, frankly, GKB, Inyova, LibertyGreen, Viac) you can also invest sustainably. 

17. How much wealth is managed by digital retirement asset management services?

Some service providers do not publish details about assets under management. According to moneyland.ch estimates, the total volume of assets administrated by Swiss digital retirement asset management services is less than 15 billion Swiss francs.

The vast majority of retirement asset investments are still made using retirement funds. But digital retirement asset management services have only recently become available to Swiss retirement savers. It is likely that they will see substantial growth in the coming years.

18. How good do digital retirement asset management services perform?

Most digital retirement asset management services have only recently launched. This makes it difficult to calculate their performance. However, you can find performance information for many of the investment vehicles used.

Important: Performance is not the most important factor. Performance varies based on market developments, and these are impossible to predict. The cost of investing is the most important factor. You should generally use the most affordable investment solution for your risk profile and the markets you want to invest in.

19. When is using digital retirement asset management a bad move?

If you have difficulty using digital interfaces, retirement apps may not be the right fit. However, these apps or web portals are generally easy to use.

Investing your pillar 2 or pillar 3a assets is generally not a good idea if you expect to withdraw them in relatively soon. Note that when you reach retirement age, you have to cash out your pillar 3a asset. If you are in between jobs, note that you will have to transfer your vested benefits to your new Swiss employer’s pension fund when you become employed again. In these cases, using retirement accounts makes more sense because you avoid being forced to cash out your investments at a loss if markets dip at the wrong time.

More on this topic:
Compare pillar 3a retirement accounts
Compare Swiss retirement funds
Compare vested benefits accounts
The costs of retirement funds explained