Swiss Mutual Fund and ETF Savings Plans Explained

For many years, savings plans had only a niche existence in Switzerland. There were relatively few different offers, most of which had high fees. But things have changed, and now ETF savings plans and mutual fund savings plans are offered by many banks and other financial services providers. New offers are changing the Swiss savings plan landscape.

In this guide, moneyland.ch shows you what to look out for when choosing a savings plan. You will also receive a comprehensive overview of the savings plans offered by Swiss service providers.

1. What is a savings plan?

The basic properties of a savings plan are:

• Regular payments: You pay a fixed amount money into your savings plan at fixed intervals (every month, for example).
• A predefined investment strategy: When you set up your savings plan, you choose the mutual fund or ETF in which your money will be invested. Some service providers let you choose a portfolio instead of a specific mutual fund or ETF.
• Investments happen automatically: The money is automatically invested in the predefined fund or portfolio without you having to do anything.
• Flexibility: You can adjust the amount to be paid in to the savings plan at any time. You also have the option of not making payments for a certain period of time. Most Swiss savings plan providers also allow you to make extra payments into your savings plan.

Swiss savings plans typically combine the following financial services:

• A bank account with an IBAN: This is the account that you make your payments into. The service provider then automatically invests the deposited money into the predefined mutual fund or ETF.
• A custody account: Your fund shares are held in a custody account. A custody account comes as a standard component of many savings plans, meaning you often do not have to open a separate account. 
• ETF or mutual fund: A fund savings plan includes one or multiple ETFs or mutual funds which your money is invested into.

The way that savings plans work is not identical across all service providers. There are substantial differences between different offers.

 

2. Which kinds of savings plans are there?

Savings plans can be roughly divided into three main categories:

• Classic savings plans: A classic savings plan is a stand-alone product. It normally includes just one mutual fund or ETF that you pick from a limited selection of funds. You can use different savings plans to invest in different mutual funds and ETFs. Classic savings plans are most commonly offered by conventional banks. Typically, you get a bank account with an IBAN into which you deposit your regular payments.
• Savings plans from stockbrokers: Stockbrokers often do not offer savings plans as a stand-alone product. Instead, saving with most stockbrokers is done using their regular online trading platforms. Some stockbrokers give you the option of setting up standing buy orders and specifying the intervals at which shares will be purchased. In addition to mutual funds and ETFs, you can also invest in other assets like stocks. The savings plan from Swiss neobank Yuh also falls into this category.  
• Robo advisors: Swiss online asset management services (robo advisors) do not offer savings plans as a separate product. Typically, you can pay any amount of your choice into your investment portfolio at any time. You can set up a standing order to automatically transfer a certain amount of money to your asset management account at regular intervals. That setup is comparable to a classic savings plan. With robo advisors you do not have to choose the mutual fund or ETF yourself. The robo advisor selects an investment portfolio for you. The portfolio normally includes several different ETFs chosen by the service provider. The asset management service provider regularly rebalances your portfolio. Comparable services are also offered by Alpian and Radicant.

 

3. How does paying money into a savings plan work?

Most Swiss savings plans work like this:

• You set up a bank transfer: You instruct your bank to transfer the money. Because the savings plans from most Swiss banks have their own IBAN, you can transfer money to your savings plan from any Swiss bank.
• You create a standing order for the bank transfer: Because paying in regular, identical amounts of money is the essence of a savings plan, setting up a standing order with your bank is the easiest and most convenient solution. You can do this using online banking, for example. At the chosen intervals (every month, for example), the specified amount of money is transferred from your private account to your savings plan.
• The money is invested for you: After the money has been transferred to your savings plan, it is automatically invested in the preselected assets. Some service providers only invest the money once the balance of the savings plan account reaches a certain threshold (100 francs, for example). Depending on the service provider, the intervals on which your money is invested may occur daily, weekly, semi-monthly, or monthly. You can find more information about investment intervals in the detailed PDF overview available via the form at the foot of this article.

There are savings plan providers that use different processes. Here are some examples:

• Neon: Swiss neobank Neon lets you set up a savings plan directly in the app. The amount you choose for your recurring payment is automatically deducted from your Neon private account and invested in the preselected ETF.
• Postfinance (ETF savings plan): You have to fund your Postfinance E-Trading account in advance via a transfer from your Postfinance private account. You do not have the option of setting up a standing order. In your E-Trading account, you have the option of setting up a recurring buy order and specify the intervals on which your money will automatically be invested in a certain ETF.
• Swissquote and Yuh: When you place a buy order for an asset, you have the option of making that order a recurring order. You can specify the intervals and the amount to be invested.

4. When does using a savings plan make sense?

Using a fund-based savings plan can be beneficial if:

• You want to invest the same amount of money every month.
• You want to build up wealth over a long period of time.
• You want your money to be invested automatically without effort on your part.
• You do not want to have to constantly be bothered with making each investment manually.
• You want to invest in the stock market without having to research and pick individual stocks.
• You prefer not to spend time and thought on following stock market developments.
• You want to profit from the potentially higher returns that ETFs and mutual funds could deliver over long terms.
• You can handle fluctuations in the value of your savings.

There are some important points that you should pay attention to when considering a savings plan:

• You should keep an emergency reserve in a savings account so that you have ready money for financial emergencies (e.g., medical bills, back taxes, car repairs). While it is theoretically possible to sell your savings plan investments, doing so at the wrong time could result in your losing money
• You should leave your money invested for a long period of time. Only invest money that you will not need to touch for the next 10 years, at least.
• Investing in well-diversified ETFs and mutual funds reduces the risk of loss.
• There is always a chance of losing money. Returns are never guaranteed.

5. How can I find the right Swiss savings plan for my needs?

The fees charged by service providers are an important point to consider. There are substantial differences in the fees charged by different Swiss savings plan providers. The information in this guide and the PDF overview that you can request at the foot of this article can help you compare the fees.

Make sure to compare not only the fees charged by the savings plan provider but also the fees charged by the investment funds used. The fees charged by funds are shown as the total expense ratio (TER). It is also important to choose an investment that suits you. For that reason, you should use a savings plan offer with investment solutions that match your needs.

Other important factors to consider are:

• The minimum initial deposit required when you open the savings plan.
• The user-friendliness of mobile and web-based services.
• How transparent the service provider is about applicable fees and charges.
• The availability and costs of tax statements and electronic tax statements.

6. How do I choose the right mutual fund or ETF for my savings plan?

Because savings plans are used for long term investments, it makes sense to use a broadly diversified investment solution. In other words, the mutual fund, ETF, or investment portfolio that you use for your savings plan should include many different stocks in many different industry sectors, currencies, and countries.

There are a number of approaches to choose from:

• Global indexes: By investing in an ETF that replicates a global index, you are indirectly investing in the stocks of thousands of different companies all over the world. Savings plans based on global stock indexes are popular among smaller investors. The fees of global stock ETFs are generally low.
• Other index ETFs and index funds: You can also choose an ETF or index fund that invests in specific countries or regions – Switzerland or Europe, for example.  
• Passive investment portfolios: Some service providers use customized investment portfolios that may also include other assets in addition stocks, such as bonds, real estate, or commodities. Investment portfolios are used by many robo advisors.  
• Mutual funds: Many savings plan providers use actively managed mutual funds. These investment funds aim to outperform the market as a whole by actively picking, buying, and selling assets of their choice. However, because actively investing generates more costs, many mutual funds do not manage to consistently outperform the market over long terms. Mutual funds – including strategy funds – often have relatively high fees.

Of course, it is also possible to have more than one savings plan, and use a different approach for each. This enables you to create savings plan portfolios based on the core-satellite and 70/30 rule investment strategies, among others.

As a general rule, passively managed funds like index funds and index ETFs are preferable to actively managed mutual funds. There are two reasons for that: Firstly, funds that simply replicate indexes are usually much cheaper. Secondly, the vast majority of fund managers with active investment strategies have not been able to consistently outperform the market as a whole over long investment terms.  

7. What kind of returns can I expect from savings plans?

Returns can vary broadly between mutual funds and ETFs. There is no way to predict the future performance of a mutual fund or ETF in advance.

If historical data is anything to go by, you can expect a return of between five and nine percent per year, averaged over a very long investment term. Some years the returns can be much higher than that, while in other years they can be much lower. There can also be years with negative performance in which the mutual fund or ETF loses value.

Be aware though, that investing in the stock market always comes with risks. Even if you hold your investments for very long periods of time, returns are never guaranteed and losses can never be ruled out.

8. Are there any Swiss savings plans for children and teenagers?

Yes. Many Swiss banks and other service providers offer savings plans for children and teenagers.

Gift savings plan can be an interesting alternative to gift savings accounts for godparents who want to save for their godchildren, for example.

Many service providers offer special savings plans for children and teenagers, and these often have lower fees than their standard offers for adults.

Tip: Pay attention to the total costs. The deciding factor is the total cost after accounting for possible discounts. It is possible to find standard offers that are cheaper than special offers for children.

The PDF comparison shows you which service providers offer gift savings accounts for children. You can use the form at the foot of this article to request a free copy of the comparison by email.

9. Is there a minimum size for payments into savings plans?

Some service providers have a minimum requirement for the first payment you make when opening your savings plan account. True Wealth has the highest initial deposit requirement, with a minimum of 8500 francs required to open the account. Digifolio requires an initial deposit of 5000 francs or more, Alpian and the True Wealth offer for children and teenagers also require a 2000-franc initial deposit, and opening a Cornèrtrader savings plan requires an initial deposit of at least 1000 francs.

Most service providers let you choose how much you want to pay in. Most do not have a minimum size for the regular payments. But some service providers only invest the money once your savings plan account balance passes a certain threshold (100 francs, for example). 

With most savings plans, your money is only invested in whole mutual fund or ETF shares. In that case, the price of a share dictates the minimum amount that can be invested. Any remaining money that is insufficient to buy a whole share remains in the cash account. It is only invested once your account balance becomes high enough to buy whole shares.

Swissquote and Yuh let you invest in fractional shares. This allows all of the money you place in the savings plan to be invested regardless of the price of a share.

10. Do savings plan providers receive sales commissions from investment funds?

Some fund managers pay out special sales commissions – known as retrocession payments – to banks and other saving plan providers when their funds are used for savings plans. Some banks only use funds that do not have retrocession payments, and some forward any sales commissions to the customer. But there are also financial services providers that keep the sales commissions.

11. Which fees apply to fund savings plans?

Fees charged to you as the customer may include:

• Brokerage fees: You pay these fees every time the savings plan provider buys or sells shares in an ETF or mutual fund. These brokerage fees can be equal to as much as 1.5 percent of the transacted amount, depending on the service provider.
• Custody fees: A custody fee is a recurring fee that you have to pay for the custody account in which your shares are held. Depending on the bank, custody fees may be charged monthly, quarterly, or annually. Depending on the service provider, the custody fee can be up to 1 percent. In some cases, a minimum annual amount is charged, for example, 80 francs.
• Flat fees: Some savings plan providers use flat fees for their savings plans. The flat fee can be as high as 0.9 percent, depending on the savings plan. This flat fee covers costs like brokerage fees and custody fees.
• Fees for tax statements: All Swiss savings plan providers give you an annual tax certificate free of charge. However, having a physical or electronic tax statement makes the process of filling out your tax returns much easier. Many savings plan providers now offer these free of charge. Others charge fees for these statements.
• Closure fees: Although most savings plans can be terminated without special closure fees, there are service providers that charge a 100-franc fee to terminate your savings plan.

Apart from the fees that are charged directly to you as the customer, there are also other indirect fees that are deducted from your savings. These costs detract from your returns.

• Investment product costs: These are the costs incurred by the operators of the investment funds or other investment vehicles used for your savings plan. Costs that fall into this category include costs for the safekeeping of the fund’s assets, and the costs that fund managers incur when buying or selling assets for the fund. These costs collectively make up an investment fund’s fees, which are shown as its TER. There are big differences between in the fees charged by different ETFs and mutual funds, with TERs ranging between 0.03 and 2.55 percent.
• Sales charges and deferred sales charges: A sales charge is a fee charged by a mutual fund for the issuing of new shares every time you buy shares. A deferred sales charge is a fee charged by a mutual fund when you sell your shares back to the fund.

12. How much does using Swiss savings plans cost?

The table below shows typical brokerage fees, custody fees, and flat asset management charged by Swiss service providers.

You can find a comprehensive overview of all fees per provider in the comparison PDF.

13. How much does using a Swiss savings plan cost altogether?

There are big differences between offers, so comparing savings plans is worth it.

moneyland.ch simulated the costs of different Swiss fund-based savings plans. The simplified calculations are based on a payment of 200 francs per month into the savings plan over an investment term of 10 years. moneyland.ch calculated the cheapest and most expensive options for this profile.

The cost simulation shows that the total cost ranges between 200 francs and 4000 francs, depending on which savings plan you use.

The cost simulation provides an indication of how much you can expect to pay in total. The costs can vary strongly depending on your needs and, particularly, on which mutual funds or ETFs you use.

The following chart provides an overview of the total costs for each service provider.

 

14. How many funds can I choose from for mutual fund savings plans?

 

The range of funds available for savings plans varies considerably depending on the service provider: while some service providers offer savings plans with only a few funds, others offer a much wider range. 

Some banks primarily let you choose from their own strategy funds, which are often actively managed and tend to have higher fees.

The comparison PDF provides detailed information about the savings plans of the various providers.

15. How many ETFs can I choose from for ETF savings plans?

Although many banks primarily use actively managed mutual funds for their savings plans, an increasing number are now offering index funds, funds based on indexes, and ETFs.

There are significant differences: some providers do not offer ETF savings plans at all, while others offer a wide range of passive investment products – in some cases with over 100 different ETFs.

The advantage of ETFs and other passive products is their low cost. The TER is usually less than 0.5 percent.

You can find further details on the ETF savings plans in the comparison PDF.

16. Can I set up a withdrawal plan?

Many Swiss savings plans come with the option of creating a withdrawal plan. You can choose to have the money you have saved up over many years paid out to you in an amount of your choice at regular intervals. For example, you can choose to have 500 francs transferred from your savings to your bank account every month after you reach retirement age.

But it is worth noting that you can always withdraw your savings in any available amount at any time.

17. How many different funds can I use for one savings plan?

Many Swiss savings plan providers only let you use a single investment fund for your savings plan. But that does not really limit your overall portfolio because you can usually open many different savings plans with the same service provider.

There are also service providers that let you invest in several dozen or even an unlimited number of mutual funds and ETFs using a single savings plan.

But investing in more than just a handful of different mutual funds or ETFs does not make sense for most small investors.

18. Are there any savings plans based on precious metals?

Yes. The precious metal plan (Edelmetall-Abo) from Philoro is a savings plan through which you can invest in physical gold, silver, platinum, and palladium. Customers have the opportunity to invest in precious metals on a monthly basis. These are physically deposited.

19. What are the advantages of savings plans?

The minimal involvement required is a key advantage of savings plans. You do not need to make each individual investment yourself because the savings plan provider does this for you automatically.

Other advantages are:

• No self-discipline required: Savings plans make it easy to save money even if you lack self-discipline. You do not have constantly motivate yourself to save and invest.
• You can invest small amounts: The regular payments into savings plans do not have to be large, so they are also accessible to people who can only afford to save and invest small amounts at the time.
• Long-term wealth building: Following a savings plan enables you to build up your wealth bit by bit. Fund-based savings plans can potentially yield higher returns than savings accounts.
• Flexibility: You can easily adapt savings plans to match your needs.

20. What are the disadvantages of fund-based savings plans?

Savings plans also have disadvantages, including:

• Value fluctuations and a risk of loss: Unlike the balance a of savings account, the value of a funds-based savings plan fluctuates constantly. The risk of losing money can never be ruled out.
• Costs can be high: Depending on the service provider, the total cost of using a savings plan (including the TER of the fund used) can be high.
• Limited choice of funds: Many savings plan providers only offer a handful of their own actively managed strategy funds with high fees.

You can get around the disadvantages of high costs and a limited choice of funds by choosing a suitable savings plan which offers the ETFs or mutual funds that match your needs.

More on this topic:
Interactive Swiss asset management comparison
Interactive Swiss retirement fund comparison
Interactive Swiss stockbroker comparison