The negative interest rates imposed by the Swiss National Bank have been a bitter pill to swallow for Swiss investors. Yields delivered by conventional low-risk investment vehicles like savings accounts and fixed deposits at most Swiss banks have suffered. As a result, many investors are beginning to look for more profitable ways to invest their savings.
But how bad (or good) do Swiss savers actually have it? Here, moneyland.ch compares the rates offered by banks in a selection of countries around the world as per November 2018.
1. Switzerland – up to 0.7% interest per annum
The most recent figures published by the World Bank (2016) placed the average Swiss deposit rate at -0.21%, which means that many investors with assets in Swiss banks actually paid to keep their money in Switzerland. However, negative interest rates are primarily applied to institutional customers. Only the Alternative Bank applies negative interest rates to standard savings accounts (containing 100,000 francs or more in deposits) so far.
Savings accounts: Although many savings accounts in Switzerland currently offer little or no interest on deposits, fair interest can still be earned through regional savings banks, bundled banking packages and medium-term notes.
Regional savings banks have consistently offered some of the highest interest rates. Savings accounts from larger banks (such as Credit Suisse, the Zürcher Kantonalbank and Crédit Agricole Next Bank) offer reasonable interest on savings to customers who open savings accounts as part of paid banking packages. If tying up your money, making a minimum amount of deposits, or paying a bank package fee are not options you would consider, you will have a difficult time finding effective annual interest rates above 0.25%. The comprehensive savings account comparison on moneyland.ch provides a clear overview of current Swiss interest rates.
Fixed deposits: In Switzerland, medium-term notes (German: Kassenobligationen, French: Obligations de caisse) are used in the same way that fixed deposits are used elsewhere, earning interest at fixed rates over fixed terms. Regional banks currently offer the highest interest rates , as shown by the unbiased medium-term note comparison on moneyland.ch.
2. Germany – up to 1.45% interest per annum
The size of the German market and a recent spike in the number of innovative financial services available has kept German investment options moderately attractive.
Savings accounts: Yields offered by German savings accounts are not exactly generous, and even the more attractive savings accounts do not pay higher interest than the best Swiss savings accounts.
Fixed deposits: This is where German banks outshine their Swiss counterparts. A number of German fixed deposits are actually worth a second look, with annual interest rates of up to 1.45% for 5-year fixed deposits.
Options for Swiss investors: Very few German banks allow non-residents to open savings accounts and fixed deposit accounts. However, some bank branch offices in towns near the Swiss border do make savings accounts accessible to Swiss residing in Switzerland. Although average interest rates offered are very similar to those found on Swiss euro accounts, these cross-border accounts could become interesting if Swiss banks were to increase account fees or decrease interest rates in lieu of the SNB’s ongoing negative interest rate policy.
3. United Kingdom – up to 2.7% interest per annum
The United Kingdom remains one of the most competitive banking landscapes in Europe, and this is reflected in the relatively good yield rates offered by UK banks.
Savings accounts: A number of different kinds of savings accounts are available in the UK. Notice savings accounts, which are the closest thing to typical Swiss savings accounts, continue to offer decent yield rates. A number of banks – including RCI Bank and Sainsburys Bank – pay out interest at rates in excess of 1% - with the interest rates of some savings accounts being well above 1%.
Fixed deposits: Often called fixed rate bonds in the United Kingdom, British fixed deposits offer interest rates of up to 2.7% per annum for 5-year fixed terms.
Options for Swiss investors: Most UK banks do not service non-residents. Currently, international accounts are only offered by a few large banks including HSBC, Barclays and Lloyds Bank. Interest yield rates on these international accounts are not significantly higher than those of Swiss savings accounts.
4. United States – up to 4% interest per annum
The days when U.S. deposits earned yields above 10% are long gone, and the average U.S. investor is lucky to earn 1% interest on their hard-earned savings. However, interest rates have been climbing in recent years, and when compared with the interest rates offered by Swiss banks, U.S. banks now seem almost philanthropic.
Savings accounts: Interest rates have been trending upwards, with some U.S. banks now paying annual percentage yields as high as 2.27%.
Fixed deposits: Certificates of Deposit (CDs), which are the most commonly used fixed deposits in the U.S., once again offer decent returns on investments. While 5-year CD yields averaged less than 1% in past years, there are now banks and credit unions which offer interest rates of up to 4%.
Options for Swiss investors: As a rule, bank accounts and CDs in the U.S. are only available to people who have a U.S. Social Security Number and proof of a residential address within the U.S.
5. South Africa – up to 10.75% interest per annum
Interest rates on deposits have been consistently high in the powerhouse of Africa. The World Bank average for South African deposit interest rates was 6.15% in 2015.
Savings accounts: Savings account holders can count on earning interest at a minimum rate of 2.60% and a maximum rate of 7.54% per annum at South African banks. While smaller banks like African Bank and Investec consistently offer some of the highest rates, savings accounts from major, international banks also have decent interest rates. In South Africa, the term notice deposit is sometimes used synonymously with the term savings account, and refers to a savings account which requires notice ahead of withdrawal.
Fixed deposits: South African fixed deposits also offer very high yields compared to those available in many other countries. Smaller banks currently offer interest at rates as high as 10.75% for 5-year fixed deposits. Major, international South African banks are currently in excess of 8% per annum for 5-year fixed deposits.
Options for Swiss investors: Many of the larger South African banks, including Standard Bank, Nedbank and First National Bank, offer special non-resident accounts which allow non-residents to deposit and withdraw money (including interest earned) directly from outside of the country without the money being subjected to currency export regulations. As a non-resident, your deposits are not subject to South African taxes. You will normally have to visit South Africa in person to open a non-resident account, in keeping with know your customer (KYC) regulations, although exceptions may be made. Important: The value of the South African Rand in Swiss francs fluctuates heavily, which should be accounted for by residents of Switzerland looking to hold money in rand investments.
6. Singapore – up to 1.2% interest per annum
Singapore is one of the most stable and developed investment environments in Asia, but the yields offered by banks barely outshine those available in Switzerland. It is interesting to note that Singaporean banks often offer special introductory rates for a certain period of time, when a certain amount of deposits are made, or when savings accounts are opened as part of a banking package.
Savings accounts: The best savings accounts offer just over 1% interest per annum without account holders having to meet additional criteria. Many Singaporean banks pay out higher interest rates on savings (as much as 4% per annum) when account holders also make use of their other services, transact certain amounts of money, deposit certain amounts of money in their savings accounts every month or hold certain amounts of assets at the bank.
Fixed deposits: The current most favorable 5-year fixed deposit offers in Singapore pay out around 1.2% interest per annum. That is generous compared to interest paid out on Swiss medium-term notes, but still nothing to write home about. However, the relative stability of the Singaporean dollar makes fixed term deposits in Singapore an interesting alternative for low-risk investors looking to geographically diversify their investments.
Options for Swiss investors: Although opening an account as a non-resident is not expressly forbidden, banks in Singapore do not normally take on non-resident customers. You may even be asked to provide proof that you hold a job in Singapore. Considering that current interest yields are not a great deal higher than those offered by Swiss banks, getting a Singaporean savings account is scarcely worth the hassle at this point in time.
7. Australia – up to 3.4% interest per annum
The relative stability of the Australian dollar to Swiss franc exchange rate makes it easy to compare apples with apples. Economic growth in Australia has remained steady, and its interest rates reflect this.
Savings accounts: While some Australian banks pay as little as 0.01% interest on savings, there are numerous savings accounts which pay interest of 1% or higher. The highest-yield savings accounts offered in Australia have annual interest rates of 1.5%.
Fixed deposits: Known as term deposits in Australia, 5-year fixed deposits equivalent to CHF 100,000 currently earn interest at annual rates as high as 3.40%.
Options for Swiss investors: Although some Australian banks allow non-residents to open accounts, these are few and far between. The services available to non-residents are generally limited. Interest paid out to non-residents is subject to a withholding tax.
Conclusion: Switzerland, like Singapore, is considered a very low-risk investment opportunity because of its stable political situation and the ongoing strength of the Swiss franc. Conservative interest rates make for poor short-term investments, but long-term financial stability.
While Swiss fixed deposits are hardly a useful tool for smaller investors and savers, a handful of Swiss banks continue to offer competitive interest rates on savings accounts. The unbiased and comprehensive savings account comparison tool from moneyland.ch accounts for all costs and makes finding the best Swiss savings accounts easy.
Last update: November 2018