September 29, 2017

Swiss pillar three burglary: Is the regulator sleeping?



The third pillar is supposed to make saving cheap. Unfortunately, the opposite is the case. Comparing investment fund performance of the third pillar with index investments reveals a large gap.

On average, pillar 3a funds are 0.83% more expensive than index investments. This doesn’t sound like a lot of money. However, the third pillar and the vested benefit accounts contain investments of 29 billion Swiss francs. 0.83% of 29 billion is 240 million francs that the savers are paying every year.

Individual 3a accounts are hit especially hard. If you pay the permitted 6,867 francs into the third pillar every year, you will have lost a staggering 106,000 francs after 30 years. That’s 76,000 francs more than if you had invested the money in index funds.

Why doesn’t the price regulator of Switzerland see this problem? If the average fees of 106,000 francs are divided by the 30-year savings period, that's more than 3,000 francs a year that people pay for saving in the third pillar. The supervisory authorities should be asked to act more responsibly.



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