Independent online comparison service moneyland.ch compared the annual interest rates of the pillar 3a savings accounts from 90 different Swiss financial service providers. The arithmetic average annual interest rate across all included Swiss pillar 3a savings accounts is 0.14% per annum. That is the lowest average interest rate in the history of the pillar 3a. The average interest rate for pillar 3a accounts was still 7% per annum in 1992 and 2.27% per annum in 2008.
The highest-yield pillar 3a accounts
In terms of interest rates, these service providers currently deliver the highest yields: Crédit Agricole next bank (0.35% per annum), Bank CIC (0.3% per annum), and Appenzeller Kantonalbank (0.25% per annum). These are followed by WIR Bank and a number of regional banks which pay 0.2% interest per annum.
Interest rates can be changed at any time. But in many cases, the banks which offer the highest yields remain the most favorable for many years at a time even if interest rates sink.
It is important to consider the terms and possible fees and charges in addition to interest rates when choosing pillar 3a accounts. For example, Crédit Agricole next bank only provides pillar 3a accounts in combination with its private accounts.
Around half of pillar 3a accounts have fees and charges attached to certain kinds of withdrawals. The interactive pillar 3a account comparison on moneyland.ch clearly shows all applicable fees and charges.
The lowest-yield pillar 3a accounts
Bank J. Safra Sarasin currently pays no interest to pillar 3a account holders at all. UBS and a number of other banks currently only pay a negligible 0.05% interest per annum.
Although differences in interest rates are now in the decimal points, even these small differences can make a substantial difference. Example: If you held 50,000 Swiss francs in pillar 3a savings account balances at the current highest available interest rate (0.35%) for 15 years, you would earn 2690 francs in interest. If you earned interest at the current lowest available rate (0.05%) for interest-bearing accounts, you would earn just 376 francs – 2314 francs less – over the same term.
Tax deductions are the primary benefit
Although the interest paid on pillar 3a accounts is low, using the pillar 3a can still make financial sense. Because payments into the pillar 3a can be deducted from your taxable income, you can achieve significant tax savings. The pillar 3a tax deduction can easily save you more than 1000 francs per year depending on the size of contributions and your tax situation.
Pillar 3a savings account or pillar 3a retirement fund?
If you expect to hold your pillar 3a assets over long periods of time, you should consider the option of investing in pillar 3a retirement funds with large stock components. The reason for this is that retirement funds have historically far outperformed savings accounts over the long-term.
Be aware that the value of retirement funds with large stock components can fall significantly over short- to mid-terms. If you do not have the risk tolerance or capacity to deal with temporary declines in the value of your assets, then pillar 3a accounts are a better fit.
Pillar 3a accounts are also the safest option if you expect to withdraw your pillar 3a assets in several years or less (to buy a primary residence, for example). This is especially true if you will soon reach standard retirement age by which you will be forced to withdraw your pillar 3a assets.
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