Pillar 3a retirement accounts are one of the vehicles available for voluntary, tax-privileged private retirement savings. They are primarily used to take advantage of tax deductions for contributions to the pillar 3a. Vested benefits accounts are vehicles for occupational retirement savings, and are primarily used to temporarily park pension fund benefits. For this study of Swiss retirement accounts, independent online comparison service moneyland.ch compared pillar 3a accounts from 91 financial service providers and vested benefits accounts from 82 service providers.
The results show that the average annual interest rate of Swiss pillar 3a savings accounts now sits at 0.09% (unweighted). “Interest rates for pillar 3a accounts have never been that low,” states moneyland.ch CEO Benjamin Manz. In 1992, the average annual interest rate was still 7%, and in 2008 it still sat at 2.27% per annum.
The picture is even bleaker for vested benefits accounts: On average, account holders earn just 0.014% per year in interest. Additionally, a growing number of banks charge account fees.
The best pillar 3a retirement accounts
The following service providers currently offer the best interest rates: Crédit Agricole next bank and Tellco both offer 0.25% interest per annum. These are followed by a number of banks which offer 0.2% per annum: BancaStato, WIR Bank, and CIC Bank.
By comparison, numerous banks including Migros Bank, PostFinance and UBS only pay 0.05% interest per annum. Exceptional cases like the Alternative Bank have interest rates of 0% per annum. The unweighted average interest rate across all pillar 3a accounts is 0.09% per annum. That is a historical low.
Some banks like Crédit Agricole next bank and BancaStato only offer pillar 3a accounts in combination with their private accounts. Other costs associated with pillar 3a accounts primarily affect cashing out accounts, with some banks charging fees for certain types of withdrawals.
Currently, differences in interest are small. But for large account balances, even small differences in interest rates can make a significant difference over time. For example, for 50,000 francs of savings, a difference of 0.25% in annual interest adds up to 2560 francs over a 20-year term.
The best vested benefits accounts
Accounting for interest and fees, two service providers lead with 0.1% per year: freeMe from the Glarner Kantonalbank, and Tellco. Neither of these charges account fees. Ticino state bank BancaStato also offers 0.1% annual interest, but charges a 36-franc annual account fee.
For the sake of comparison, the average interest rate for Swiss vested benefits accounts is just 0.014% per annum. Many banks do not pay interest on vested benefits at all. Instead, banks are increasingly charging annual account fees (typically 36 francs per year) which eat away at possible interest yields.
Stock investments as an alternative to savings
Because of the low interest rates, more and more residents are turning to pillar 3a stock investment solutions instead of parking their money in pillar 3a savings accounts. There are also stock investment solutions for vested benefits. Historically, stock investments have performed better – at least for longer investment terms – because over the long term, the stock market has performed far better than savings and retirement accounts. If you plan to leave your retirement savings untouched for at least 10 years, investing them in stocks is worth considering.
Retirement funds are still the most popular vehicle for investing in the stock market. But digital vested benefits and pillar 3a asset management services now offer an additional solution for stock investments. In many cases – but not all – the new retirement asset management services are cheaper than conventional retirement funds. Comparing costs is worth it.
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