The financial landscape is rife with predictions by banking economists of an imminent rise in interest rates. But a look at the Swiss banking sector leaves little room for hope of a move away from the current low-interest regime. On the contrary, “banks have been continuously lowering the interest rates of their private accounts, savings accounts and retirement accounts,” observes moneyland.ch CEO Benjamin Manz.
This is the case with banking giant UBS. On June 1, 2019, UBS interest rates will reach new historic lows. The interest cuts will affect the UBS savings account for adults, UBS youth and student private accounts, the UBS youth savings account, the UBS pillar 3a retirement account and the UBS vested benefits account.
UBS accounts are no longer an attractive investment
The most notable change is the lowering of the interest rate of UBS savings accounts for adults. Investing in a UBS savings account now delivers no return whatsoever. Like UBS private accounts, which have paid 0% interest on balances for some time now, UBS savings accounts will now pay 0% interest as well. This sets UBS apart (and not in a good way) from almost all other Swiss banks which pay at least some interest for money invested in their standard, Swiss franc savings accounts. This is clearly visible in the savings account comparison.
By definition, a savings account is an account in which you can invest your savings. “When banks no longer pay interest on invested capital, it is only fair for customers to question whether the account can still be referred to as a savings account,” states moneyland.ch analyst Silvan Wehrli.
UBS states that the 0% interest rate currently also applies to savings account balances above 500,000 francs. This may indicate that UBS is open to the possibility of imposing negative interest rates on savings account balances above 500,000 francs.
Because smaller Swiss banks generally follow the lead of major banks with regards to acceptable interest rates and account fees, the move by UBS towards paying less interest may negatively affect customers of other banks,” says Benjamin Manz.
Saving with Swiss banks? That’s a negative.
On average, the interest rates applicable to savings account balances at other Swiss banks are significantly higher than those used by UBS. But even so, interest rates are at historic lows. The arithmetic mean average interest rate across all Swiss savings accounts for adults is just 0.07%. That of youth savings accounts is 0.55%. The arithmetic mean average for pillar 3a accounts is 0.23% and that of vested benefits accounts is 0.07%.
Details about changes to UBS interest rates as from June 1, 2019.
Savings account: 0% per annum (previously 0.01% per annum).
Generation and Campus private accounts: 0.1% per annum (previously 0.25% per annum).
Youth savings account: 0.25% per annum for the first CHF 20,000, 0% per annum for balance exceeding that amount (previously 0.5% per annum).
Pillar 3a (Fisca account): 0.15% per annum (previously 0.2% per annum).
Vested benefits account: 0.01% per annum (previously 0.05% per annum).