Last updated: November 16, 2024
Ah, the 3rd pillar… what a great tool for Swiss tax optimisation, and completely legal!
But the question I’m regularly asked is which is the best 3a pillar for a Swiss Mustachian?
I’m going to answer that question in this article, starting with a quick introduction to the world of the 3rd pillar, just in case you’re just starting out in life (and so that you don’t get taken in by those pesky insurers like I did in the past!)
What is a 3a pillar (aka 3rd pillar) for?
The three-pillar pension system in Switzerland was introduced gradually over time. The first pillar, financed by the State, was created in 1948. The second pillar, financed by employers, was added in 1985. Finally, the third pillar, based on individual savings, was introduced in the 1970s.
The 1st pillar (or AVS pension) is compulsory in Switzerland if you live or work there. It corresponds to the AVS contributions you have paid (i.e. the money you have paid in) from the age of 20 until you reach retirement. It is used to guarantee the minimum living standard for everyone.
The 2nd pillar (or LPP pension) is the money you put aside via your pension fund when you work in Switzerland. It is automatically deducted from your salary. It is also compulsory from the moment you start work. It is used to guarantee the “usual” standard of living" once you reach your retirement.
The 3rd pillar (or 3a pillar) is an optional, personal Swiss retirement solution. Generally speaking, the 1st and 2nd pillars are not enough to provide you with a full pension. 3a pillar therefore allows you to put some money in the piggy bank until your 65th birthday (i.e. after the legal “retirement” age).
Is the 3rd pillar actually useful?
So, from a purely technical point of view, the 3rd pillar will not be mega-useful for us Mustachians trying to achieve early retirement from the age of 40 in Switzerland.
After all, you save a lot more than the CHF 7000 or so a year that you can put aside via your pillar 3a.
But the 3rd pillar has one significant advantage: you can deduct your contributions from your tax bill.
On average, that saves you around 1'000 Swiss Francs each year!
Personally, I wouldn’t pass on that offer!
Maximum 3a Pillar amount for 2024
In 2024, the 3rd pillar ceiling will be CHF 7'056 for employees who are affiliated with a pension fund. Self-employed people who are not affiliated with a pension fund may contribute a maximum of CHF 35'280 (but no more than 20% of net income).
Maximum 3a pillar amount in 2024: CHF 7'056 per year
This maximum 3a pillar amount is defined and announced annually by the Federal Council at the end of the year.
What type of 3rd pillar should a Mustachian choose?
As a reminder, on this blog, we want to be able to put our savings to work while we sleep.
That way, we can live off the returns on our savings.
So the money saved in a 3a pillar should also be working as hard as possible.
The first piece of good news is that you can invest the money in your 3rd pillar on the stock market.
And the second piece of very good news is that there is no longer a limit on the percentage of your 3a pillar that can be invested in stocks and shares (previously, in the 2010s, it was a maximum of 45% in stocks and shares; but that’s in the past!)
Any supporter of the FIRE movement in Switzerland will therefore be looking for a 3a pillar with the following characteristics:
- 100% in global equities
You want to be able to invest the maximum amount of the 3rd pillar in 100% global equities (meaning that you would be covering the whole world in order to have an optimum risk/return ratio thanks to a broad diversification of the companies in which you invest) - The best return
You want the 3rd pillar with the best return, once all costs are included. Because at the end of the day, that’s the goal: returns!
IMPORTANT REMINDER: never start a 3a pillar with an insurance company!!!
As long as I’m blogging, I’ll keep telling you: NEVER start a 3a with an insurance company, also known as 3rd pillar mixed insurance, or 3rd pillar life insurance.
It’s the worst (legal) scam in Switzerland!
I’ve been ripped off myself (twice 🤬).
I’ll explain why — and above all how — to close your 3rd pillar life insurance in this detailed article.
And if you’re lucky enough to be tied to your 3a pillar life insurance because of your mortgage: check out my article on how I managed to terminate these two long-standing liabilities early!
Candidates for the best 3rd pillar in 2024
Until the end of 2017, only a few banks offered to invest the money in your 3a pillar on the stock market at fairly reasonable fees.
I had even gone so far as to open a 3a pillar account with Lucerne Cantonal Bank to take advantage of the best pillar 3a in Switzerland…
But a certain VIAC came along and kicked the banks and insurance companies in the teeth for the fees they were charging their customers.
The result has been the creation of a number of competing fintechs that are finally competing on the basis of the right criteria to satisfy their customers: maximum returns for minimum fees.
So, to date, here are the Swiss 3rd pillar offers worth considering in 2024:
Invest 100% of your 3rd pillar in global stocks
Here’s how much you can invest in your 3a pillar via each of these financial institutions:
- VIAC: 99%
- finpension: 99%
- frankly: 95%
- Selma: 97%
- Descartes Prévoyance: 99%
As a reminder, I want as much of my money as possible invested in my 3rd pillar to work for me. And 2 to 5% more invested over decades quickly makes a big difference!
My top 5 quickly turn into a top 3:
- VIAC
- finpension
- Descartes Prévoyance
All 3rd pillar institutions invest a maximum of 99% of your savings in stocks and keep 1% in cash to debit their fees.
3rd pillar with the best return (fees included)
Since I started the blog, I’ve been far too worried about fees, and far too little about returns.
That was until I came across the Handelszeitung’s (a Swiss German business magazine) great 3rd pillar comparison.
Every year around the end of November, they publish a comparison of each of the 3rd pillars according to its return, including all fees.
The ranking of the best 3a pillars which invest 100% in global stocks is undisputable:
Score: The performance and risks over one, three, and five years including fees which were weighted and converted into a score. Products less than five years old were given a worse score due to their short track record. Funds with less than a three-year track record were excluded.
Fees: The performance was measured after deducting fees. For institutional funds, a custody fee of 0.3 percent per annum has been taken into account, which is usually included in the fund fee for retail products. For retail funds, which are not available for purchase without a custody fee, this has been taken into account when presenting performance.
Reference index: In order to properly assess the risk profile of each fund, it has been compared to the corresponding reference index based on its stock share.
(source: Handelszeitung)
My first comment: We certainly didn’t screw up with the top 3 I mentioned earlier, since they’re all in the Handelszeitung’s list of the best 3rd pillars (100% invested).
Next, here are the other comments I made myself while reading this list from top to bottom:
- finpension Schweiz 100: I won’t consider it, because it’s invested in Swiss stocks only, and I want diversification with global stocks
- Volt 3a Dynamic: hmmm, interesting, Vontobel has launched its own 3a pillar solution.
I didn’t have it on my radar, as the fees are double of VIAC or finpension. Furthermore, active management is always beaten by passive management over the long term.
So, I took my time and checked out their website… it’s cryptic… impossible to know what their “Dynamic” investment strategy is all about… You have no other way to gain information unless you create an account or… call them…
In short, a lack of transparency is not OK.
I found just one piece of information about their other stock market investment solution with a portfolio that I think is similar (it has the same name: “Dynamic”), and only has 93% stocks, and 5% in Megatrend stocks (“trendy” stuff like cannabis, cleantech, etc)… no thanks, not for me! (more details via this link)
Nevertheless, I don’t want active management, because historically it underperforms by over 10-20 years (which corresponds to my investment horizon with my pillar 3a) - VIAC and finpension: Unsurprisingly, we find VIAC and finpension competing with one another for a slight 0.05 difference in score. It’s interesting to see that sustainable funds have the same score as standard global funds
- VIAC Schweiz 100: Same comment as for point 1 above
- Quantex Funds - Spectravest 3A: Same comment as Volt/Vontobel, I didn’t have this 3a fund on my radar because of the high fees and active management. Nevertheless, I visited their site, and I really like their teams’ approach (see Quantex’s description as well as their philosophy. On the contrary, they don’t have a mobile app or digital solution. Well anyways, active management is a showstopper for me in the long run)
- Descartes Vorsorge 99%: finally a 3a fund that uses a correct name instead of a marketing name with 99% stocks ;) but well, active management and a lower score than VIAC and finpension
- UBS and Tellco: that’s a score above 4, so I’m not even going to go into depth on that. On the other hand, it was interesting to see that there are more and more new participants (I never heard about Tellco) in the field of 3rd pillars which invest in the stock market. And this competition can only be a good thing for us investors!
The editors at Handelszeitung came to the same conclusion as I did:
Over a longer period of five years, pension funds with a higher equity component tend to achieve a higher absolute return than defensive products. But few of them manage to beat the market. Passively managed funds generally achieve a better return than actively managed funds. They are also cheaper.
VIAC, the best 3a pillar in 2024
VIAC is the Swiss fintech company that was created to give the old, fee-ridden 3rd pillar world a big kick in the teeth.
They’ve already been around since 2017, and have added a lot to their product range.
Mrs. Mp and I have ten 3a pillars (no, no, you aren’t mistaken, read the FAQ section below to understand why).
You can find my detailed review of VIAC 3a by following this link.
The VIAC promo code below gives you free management of your first CHF 2'000 in pension balance on your 3a pension account – and it's valid for life!
===> 3aMust <===
I also wanted to make a few clarifications regarding VIAC:
VIAC and the currency exchange margin
I regularly get the question as to whether VIAC is better than finpension when it comes to currency exchange.
VIAC talks about a 0.75% basic currency exchange fee on its site, whereas finpension highlights its 0% exchange fee (in reality, it’s around 0.05%).
However, as explained in this FAQ VIAC article, the latter optimises exchange transactions globally across all its customers’ accounts. As a result: VIAC exchange rate fees are on average less than 0.05% for all strategies.
In short, VIAC and finpension are both the best with their minimalist margins on currency exchange.
VIAC and withholding tax
Again, I am often told that finpension is better than VIAC on this point as well, because finpension emphasises the fact that they invest in funds (and not in ETFs). This means that they don’t have to pay withholding tax in advance and is, therefore, more advantageous for us investors.
But VIAC uses the same index fund (and not ETFs) from Crédit Suisse (as you can see here on the factsheet for VIAC’s Global 100 strategy).
So finpension and VIAC are equal in this aspect, as they are both fully tax-optimised (at least for standard strategies, as for customised strategies, they go through ETFs).
VIAC fee cap
The fee cap of 0.44% is applied first, then an additional allocation is deducted on top.
Let’s take the example of the VIAC Global 100 strategy:
- No fee cap: 99% invested x management fee of 0.52% = effective management fee 0.5044%
- With CHF 50'000 invested, this gives us: 0.5044% x 50'000 = CHF 252.20 basic fee
- Thanks to the fee cap, we must reduce the calculation basis so that the effective management fee corresponds exactly to 0.44%, so: 0.52% x 0.44%/0.52% x 50'000 = CHF 220.00 in fees
- This means that the new calculation basis (thanks to the fee cap) is as if the fees were calculated on 84.6% of shares (and not 99%), because 0.44%/0.52% = 84.6%
- Therefore, the adjusted calculation basis thanks to the fee cap is CHF 42'307 (= CHF 50'000 x 84.6%)
- If, in addition, an allowance is added thanks to the invitation of friends, this calculation basis is further reduced. For example: (CHF 42'307 — CHF 7'500) / 50'000 x 0.52% = 0.36%
- Then you will only pay 0.36% in fees
finpension, the second-best 3a pillar in 2024 ( nearly the same!)
finpension joined the 3rd pillar market later than VIAC.
Indeed, they started their adventure in 2015. But they started with the 1st and 2nd pillars - giving institutions a good kick in the pants too!
Nevertheless, their 3a pillar offer is no worse. Quite the contrary!
Every year, finpension and VIAC battle it out for a first and second place on the podium :)
You can find my detailed review of finpension 3a by following this link.
The finpension promo code below gives you a fee credit of 25 Swiss francs (provided you transfer or deposit at least CHF 1'000 within the first 12 months after creating your finpension account).
===> MUSTBC <===
Finpension security via formal identification
Until recently, finpension offered to carry out your formal identification (the legal KYC process aka “Know Your Customer”) when you withdrew your 3a assets.
As they have the status of a foundation, this was perfectly legal.
Except that it seemed a bit odd to be able to create an account with the name “Donald Duck” and for it to work without any problems… jokes aside, imagine if you had used a typo in your surname or first name… the problems would have come later, when you wanted to withdraw your 3rd pillar!
Finpension finally corrected the situation in April 2023.
So now you can opt for formal identification when you open your 3rd pillar — which I strongly recommend.
And this security element is now identical between finpension and VIAC (i.e. no longer a differentiating element).
VIAC or finpension in 2024, which 3a pillar should I choose?
Reasons for choosing the VIAC 3rd pillar
VIAC is the best 3rd pillar mathematically speaking, with the best return. In other words, it is the 3a that will give you the most cash in your pocket when you withdraw your assets.
And VIAC has other advantages too:
- Attractiveness
VIAC does everything it can to optimise the attractiveness of its products by reinvesting everything for its clients, see point 3 - Free death or disability insurance
“You now receive up to 25% more of your pension assets in the event of disability or death. For every CHF 10'000 of assets invested in securities (calculated based on the previous month), VIAC offers you a free basic cover of CHF 2'500 (max. CHF 250'000) in the event of death or disability (70% – degree of disability).” - Mortgage
And finally, THE feature that makes me love VIAC, even more, is their mortgage! If you’re a VIAC client, you can get a mortgage at a really great rate (SARON especially) with the WIR bank, which agrees to take your pillar 3a invested in a Global 100 strategy as collateral!!!
Reasons for choosing the finpension 3rd pillar
Mathematically speaking, finpension is only 0.05 points (score Handelszeitung) behind VIAC.
In other words, they are basically tied!
The only reason for me to choose finpension instead of VIAC in 2024 is diversification.
I can’t see VIAC or finpension going bankrupt for fraudulent management and losing everything… but you can never be sure of anything, as we saw recently with the bonds issued by Crédit Suisse, which vanished over the span of a weekend…
So, if you have to choose a strategy of opening multiple 3rd pillar accounts (to maximise your tax savings when you withdraw), I’d recommend opening:
- 3x 3a pillars with VIAC
- 2x 3a pillars with finpension
Then you split 3/5 of your maximum annual amount with VIAC, and send the other 2/5 to finpension.
Best 3a pillar summary in 2024 (in one table)
| VIAC | finpension | |
|---|---|---|
| Performance ranking | 1st | 2nd |
| Fees | 0.44% base fee | 0.39% |
| Loyalty program | Yes (up to CHF 7'500 free management credit), reducing fees to 0.36% And you receive an additional 25% of your pension assets in the event of disability or death | Fee credit of CHF 25 per referral |
| Maximum in global equities | 99% | 99% |
| The maximum amount of portfolios | 5 | 5 |
| Formal identification | ✅ | ✅ |
| Fund provider | Swisscanto and Crédit Suisse | Swisscanto and Crédit Suisse |
| Languages supported | FR / DE / IT / EN | FR / DE / EN |
The case of the MP family
Our two 3rd pillars with Mrs. MP are with VIAC.
Initially, we only had Mrs. MP’s 3a pillar with VIAC, as mine was locked into a damned mixed life insurance policy (NEVER MAKE THIS MISTAKE!)
Then, in September 2022, we finally managed to close our mortgage AND my mixed 3a pillar linked to life insurance!
This allowed us to do three things:
- Switch our mortgage to VIAC/WIR bank
- Transfer my pillar 3a to VIAC
- Free up cash to invest in our first rental property in Switzerland
I’m currently in discussions with the WIR bank to see if I can split the maximum amount for pillar 3a between VIAC and finpension. My goal is to be able to test finpension myself with my own cash invested on the stock market.
I’ll keep you informed of the situation in a few months time.
Conclusion
In 2024, VIAC and finpension are still the best 3rd pillars invested 100% in global equities.
🥇 VIAC is 1st place in the Handelszeitung ranking again.
The VIAC promo code below gives you free management of your first CHF 2'000 in pension balance on your 3a pension account – and it's valid for life!
===> 3aMust <===
🥈 And finpension is second in that same ranking (basically tied with VIAC).
The finpension promo code below gives you a fee credit of 25 Swiss francs (provided you transfer or deposit at least CHF 1'000 within the first 12 months after creating your finpension account).
===> MUSTBC <===
These two 3a pillars allow you to invest the full amount of your annual contribution (i.e. CHF 7'056 Swiss francs in 2024).
Also, this is what matters most to us as Mustachians, VIAC, and finpension offer the best returns with their global strategy invested 100% in equities (taking all fees into account).
So whether you choose VIAC or finpension, you can go ahead with your eyes shut, you’ll be making the right choice!
Thanks to these two solutions, you’ll have the most money in your pocket when you withdraw all your 3rd pillars :)
FAQ 3rd pillar
What languages do these 3rd pillars support?
Even if the language of a platform shouldn’t prevent you from choosing the best 3a pillar on the market, I know that this is a barrier for some readers.
(quick reminder: Deepl solves this problem, with incredible translation quality)
So here are the languages supported by each of the five 3rd pillars:
- VIAC: FR / DE / IT / EN
- finpension: FR / DE / EN
- frankly: FR / DE / EN
- Selma: FR / DE / EN
- Descartes Prévoyance: FR / DE
What is the 3rd pillar staggered withdrawal?
Taxation of the 3rd pillar is progressive in percentage terms. This means that the larger the amount you withdraw, the higher your tax rate. That’s why it’s advisable to open 5 3a pillars from the get-go to optimise your tax when you withdraw each of them once a year, five years after reaching retirement.
If you’d like to find out more, I’ve written a detailed tutorial on staggered 3rd pillar withdrawals to help you save as much tax as possible.
Is it safe to invest your 3a pillar in the stock market?
By definition, the stock market is a risky investment.
But I like the way the Handelszeitung journalist summarises it:
Those who invest their 3a retirement savings in a broadly diversified way in the stock markets have a better chance of a return. Admittedly, the risk of a price loss increases with stocks. But those who remain invested for 15 years or more have virtually nothing to fear.
Obviously, the keyword is “practically”, because this isn’t a savings account either ;)
What is the best 3rd pillar if I want to invest less than 100% in stocks?
Personal finance is appropriately named.
It’s personal.
Because depending on your FIRE phase (accumulation upstream, or consumption downstream), you’re potentially going to be less aggressive than me in terms of your asset allocation.
I’m therefore providing you with a screenshot of the various results of the Handelszeitung’s 3a pillar comparison:
Handelszeitung comparison of the best 3a funds with a defensive profile of 10-35% in stocks (source: Handelszeitung)
Handelszeitung comparison of the best 3a funds with a balanced profile of 40-60% in stocks (source: Handelszeitung)
Handelszeitung comparison of the best 3a funds with a dynamic profile of 65-85% in stocks (source: Handelszeitung)
How old do you have to be to start a 3rd pillar?
You have to be over 18 years old to open a 3rd pillar in Switzerland. The law specifies that the earliest a young person can open a Pillar 3a account is 1 January following their 17th birthday.
As with any investment, the earlier you make your first payment into your 3rd pillar, the greater the return you will get over the long term.
What do you think of the 3rd pillar from VZ dear MP?
VZ is a reputable and secure Swiss company. Nevertheless, their Pillar 3a solution does not appear in the Handelszeitung ranking. This indicates that the VZ 3rd pillar is not the one offering the best return — something we look for in the first place as Mustachian.
I recommend what I use myself instead: a 3a pillar from VIAC and one from finpension.