Why do many rely on the 3a account

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It is unlikely that any financial adviser or financial journalist will advise you to place your savings in a level 3a account. Rather, they are in favor of investing money in reserve funds, which are issued by banks as part of 3a savings and are subject to special rules.

This is because component 3a can only be withdrawn five years before retirement age. There are three exceptions to early withdrawals: buying an owner-occupied property, self-employment, or moving abroad.

CHF 90 billion is currently in pillar 3a. But only a third of this amount is invested in securities. The rest, two-thirds, is on account 3a, which has brought almost no interest in recent years.

Why do most Swiss people prefer a 3a account to savings in 3a securities? Six theses:

Thesis 1. Not interesting. Old age is far away. You do not care.

Thesis 2. There is no trust in securities. You don’t know your path and don’t feel like you’re dealing with it.

Thesis 3. Savings 3a are made only for tax reasons: what is transferred to account 3a can be deducted from taxable income. This gives. For people with a pension fund, the maximum possible deduction is currently CHF 7,056; 35,280 francs or a maximum of 20 percent of income for people who do not participate in the pension plan.

Thesis 4. Indirect amortization of mortgage debt. In such cases, you should not bet on securities, as the mortgage loan may mature during a bear market.

Thesis 5. Money is withdrawn in advance, precisely for one of the three possible reasons for early withdrawal.

Thesis 6: In addition to the linked 3a pension plan, you also have other savings that were previously invested in securities. For reasons of risk diversification, no one wants to invest money 3a in stocks and bonds. In addition, the pension funds that can be purchased under Sparen 3a tend to have higher costs than conventional investment funds.

All of these are understandable reasons to refrain from saving in securities under Pillar 3a. Of course, there are good reasons to invest in pension funds for the longer term. However, one should not forget to sell the fund units in advance in case of a boom in the stock market and put money into the 3a account before retirement. See thesis 4.

Source: Blick