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 2017.
1. Switzerland – up to 0.7% interest per annum
The World Bank placed the average Swiss deposit rate for 2016 at -0.2%, which means that many investors with assets in Swiss banks actually paid to keep their money in Switzerland. However, only the Alternative Bank has imposed negative interest rates on 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, decent yield rates can still be found if you are willing to tie up your money for a relatively long period of time. The comprehensive savings account comparison on moneyland.ch provides a clear overview of current Swiss interest rates.
The CA Evolution account offered by Crédit Agricole Financements (Suisse) SA has consistently offered one of the highest interest rates, but withdrawals can only be made after 24 months and having a minimum balance of 30,000 francs is required if you want to avoid savings account fees. Other banks, such as Credit Suisse, 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 rates above 0.3%.
Fixed-rate deposits: In Switzerland, 5-year fixed-rate deposits are typically delivered as medium-term notes. These are known as “Kassenobligationen” or “Obligations de caisse”. Cembra Money Bank currently has one of the most attractive rates, as shown by the unbiased medium-term note comparison by moneyland.ch.
2. Germany – up to 1% 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 reasonably attractive.
Savings accounts: Yields offered by German savings accounts are not exactly generous, and even the more attractive savings accounts, such as the MoneYou Tagesgeld (ABN AMRO), do not offer more interest than the best Swiss savings accounts.
Fixed-rate deposits: Here 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% for 5-year fixed deposits. German banks which consistently offer attractive interest on fixed deposits include the Deutsche Pfandbriefbank and IKB Deutsche Industriebank.
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 2.45% 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-rate deposits: Often called “fixed rate bonds” in the UK, British fixed deposits offer interest rates in excess of 2% per annum. Tesco Bank and Vanquis Bank are just two of the UK banks which pay out generous annual interest on 5-year fixed-rate bonds.
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 better than those of Swiss savings accounts, with rates ranging between 0.20% and 0.70% for GBP deposits.
4. United States – up to 2.40% 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, when compared with the interest rates offered by Swiss banks, U.S. interest rates almost seem generous.
Savings accounts: A number of U.S. banks – including Purepoint Financial, CIT Bank and GS Bank – pay out interest in excess of 1%, and rates across all accounts have been trending upward throughout 2017.
Fixed deposits: Certificates of Deposit (CDs), which are the most commonly used fixed deposits in the U.S., continue to offer decent returns on investments. While 5-year CD yields currently average less than 1%, there are many banks and credit unions which offer yield rates of up to 2%. GS Bank, Ever Bank and First National Bank of America are just some of the banks which pay interest in excess of 2% per annum on 5-year CDs.
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 10.50% 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. However, the weakening of the Rand in relation to the Swiss franc in recent years has impacted the relative benefits of South African investments.
Savings accounts: Savings account holders can count on earning interest of 5% per annum or higher at South African banks. While smaller banks like African Bank and Investec consistently offer some of the highest rates – often exceeding 7% per annum – savings accounts from major, internationally active banks like Standard Bank, Absa, Nedbank and First National Bank also pay relatively high interest.
Fixed deposits: South African fixed deposits also offer very high yields compared to those available in many other countries. Annual interest rates of between 8% and 10% for 5-year fixed deposits are not uncommon.
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.
6. Singapore – up to 1% 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. Some accounts offer higher interest rate when a certain amount of card transactions are made using the credit cards or private accounts in a banking package, or when a monthly salary is deposited into the account. Some banks pay out higher interest when no withdrawals are made during a given timeframe. However, the actual standard rates are relatively low.
Savings accounts: The best savings accounts offer around 1% interest per annum without account holders having to meet additional criteria. Banking package users may earn close to 4% interest per annum if they meet all of the requirements.
Fixed deposits: The best fixed deposit offers in Singapore pay out just over 1% 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.
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% interest per annum
Like South Africa, Australia managed relatively well throughout the global financial crisis copared to Europe and the United States. Economic growth has been consistent, and interest rates reflect this. The relative stability of the Australian dollar to Swiss franc exchange rate makes it easy to compare apples with apples.
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 – with the most generous accounts offering close to 2% interest.
Fixed deposits: Known as “term deposits” in Australia, 5-year fixed deposits equivalent to CHF 100,000 earn interest at annual rates as high as 3%. Australian banks which consistently offer attractive interest rates on fixed deposits include ME Bank, the Bank of Melbourne, Bank SA, St.George bank and Bankwest.
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 2017