Pillar 3a: save or invest

Together with pillars 1 and 2 of the Swiss retirement system, voluntary private retirement savings are intended to ensure that you maintain your standard of living in retirement and can close any pension gaps. Unlike OASI and the pension fund, where the state and employer make many decisions for you, you have various options in pillar 3. This includes selecting the right pension products – and answering the fundamental question: savings account or custody account?

In principle, pillar 3a gives you two possibilities: your money can be deposited in an account or a custody account.

In a pension account, your assets earn interest in the same way as in a long-term savings account. Each year, you can deposit up to the maximum amount set by law (2024: CHF 7,056 for persons with a pension fund) – whether you choose an account or a custody account.

By holding securities in a custody account, however, you build up your pension assets by investing in a 3a fund. Even with small amounts, you can invest money in a broadly diversified way. This participation in the financial markets carries risks because prices can fluctuate. At the same time, however, you can benefit from higher potential returns in the long term than with a pension account.

How securities work in pillar 3a

You can invest your available pillar 3a assets in a wide choice of actively and passively managed sustainable Vitainvest investment funds. The selection is made according to your personal investment strategy, in which you can take into account recommendations from UBS. After deduction of costs, your invested capital participates in the performance of the financial markets.

If you set up a standing order, your orders will be executed automatically and regularly. This allows you to purchase the fund units at an average price. You can easily change the amount to be invested or add additional funds. You can use the mobile app or E-Banking to manage and review your custody account and open a new custody account in just a few minutes.

The indexed performance represents an investment of CHF 100 at launch. The performance allows you to better compare share classes/investment funds.

Data on 31 December 2022. This information is based on past performance. Past performance is not a reliable indicator of future results. The performance displayed in the graph does not consider any commissions or costs levied on share subscription/redemption.

In addition to the general benefits of saving and investing in pillar 3a, a custody account also offers special advantages.

Depending on what type of investor you are, and the investment period, you can select several fund products for your custody account in pillar 3a. They differ mainly in the type of fund management – active or passive – and in the equity component.

The difference between passively and actively managed investment funds

You can choose between actively or passively managed (also: indexed) funds. Actively managed funds rely primarily on their own, forward-looking data and valuations. UBS also actively exerts influence on companies and works to bring about improvements, including in companies’ sustainability profiles, through active dialogue and voting rights.

In the case of indexed funds, however, the selection is not actively carried out by investment specialists. Rather, they reflect certain indices and thus developments in the respective markets very precisely. This passive management has comparatively low costs, to the benefit of your long-term returns.

Depending on personal preference, you may choose whether to focus on the Swiss or global economy for actively or passively managed funds.

The significance of the investment horizon

If you invest in securities at an early stage, then thanks to the expected higher returns you will have more money available in old age than if you had left the assets in a retirement savings account. The further into the future your retirement is, the more risks you can take beforehand when investing. The risk depends primarily on the more volatile equity component of a fund: the higher this equity component, the higher the risks and potential returns.

If your investment period is shorter, you should reduce the level of risk and keep the equity component correspondingly low.

If you have enough time left before retirement, a pension custody account is an ideal addition to your retirement provision. By investing in funds – possibly with large equity components – you can benefit from the long-term development of the financial markets. This increases your potential returns: you can get more out of your savings than with a low-interest account.