Pillar 3a retirement saving accounts have somewhat higher interest rates than regular savings accounts. But it is the potential tax savings which makes the pillar 3a so popular. Eligible residents of Switzerland still have until the end of the year to reduce their taxes for the 2022 tax year by contributing to the pillar 3a. But which account should retirement planners use? Moneyland.ch studied the interest rates and costs of 91 pillar 3a savings accounts.
The interest uptick is also visible in the pillar 3a
“The general uptick in interest rates has also reached the pillar 3a. That means retirement savers can finally benefit from climbing interest rates again,” explains moneyland.ch CEO Benjamin Manz. But many banks are only slowly raising their interest rates. The average annual interest rate across all pillar 3a savings accounts is still just 0.18 percent.
Currently, the recently-launched pillar 3a savings account from digital asset management service True Wealth has the highest annual interest rate (1 percent per annum). It is followed by Bank CIC (0.6 percent), Cornèr Bank, Crédit Agricole Next Bank, and the Berner Kantonalbank (all 0.5 percent), and Tellco, Bank Wir, and Migros Bank (all 0.4 percent).
The big banks have been more conservative with regards to interest rates. Credit Suisse, UBS, and Postfinance all currently pay just 0.05 percent interest. Valiant offers 0.1 percent, and Raiffeisen 0.3 percent (actual rates may vary between individual banks). Sarasin and the Alternative Bank do not pay any interest at all. You can find a full comparison of all 91 accounts on moneyland.ch.
The difference between the highest and lowest offer is a full percentage point. For larger amounts of retirement savings, a discrepancy like that can make a big difference. Example: If you keep 50,000 francs in a pillar 3a savings account which yields 1 percent interest per year, after 10 years you will have 5231 francs more in your account than if you had used an account which does not pay interest.
Pay attention to costs
In addition to interest rates, you should also pay attention to fees and charges. These may apply when you withdraw your money. Making early withdrawals before reaching the eligible age for retirement withdrawals can be particularly expensive.
If you expect to withdraw your pillar 3a savings early for self-employment, home ownership, or when you leave Switzerland, then you should carefully review the withdrawal fees. Depending on which account you use, you can pay as much as 250 francs for self-employment withdrawals, 400 francs for home ownership withdrawals, and up to 950 francs for withdrawals due to living abroad.
Find the best pillar 3a account
A pillar 3a retirement savings account is a good solution for conservative savers who want as little risk as possible. The best pillar 3a savings account is the one which pays the most interest and also has low fees and charges.
If you will only withdraw your pillar 3a savings after at least seven to ten years, then you can consider using a solution which lets you invest your pillar 3a savings in the stock market. Historically, stock investments have yielded much higher returns than savings accounts.
“The main requirement is that you are able to remain calm during periods when the value of your pillar 3a savings goes into the minus,” explains Manz. If you choose to use a pillar 3a investment solution, make sure to choose the cheapest available retirement fund or pillar 3a asset management service which matches your needs.
Opening more than one pillar 3a accounts is beneficial – regardless of whether you use pillar 3a savings accounts, pillar 3a investment solutions (retirement funds, for example), or a combination of both. By holding multiple accounts, you can cash out accounts in different years to keep your tax bracket low.
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