Many Swiss are now barely able to fund their accustomed standard of living in retirement with the pensions from OASI and their pension fund. Private pension provision, i.e. Pillar 3, is therefore becoming increasingly important.
Twenty years ago, a conventional savings account would still earn an incredible 5.2 percent in interest. Today the banks pay mostly just 0.2 percent or less. This is a worry for the many who are saving for their pension, and the persistent low interest rate phase is very testing for the pensions funds too. Together with the delayed Pillar 1 and 2 reforms plus higher life expectancy, the figures no longer add up for many people over the long term.
Retirement provision in Switzerland is basically designed so that after retirement, Pillars 1 and 2 should guarantee a pension income of around 60 percent of your last income so that you can maintain your accustomed standard of living in retirement too. But Pillar 2 in particular is contributing less and less, as the interest payable on retirement assets and the conversion rate in the supplementary portion are constantly falling. On the whole, many future retirees will no longer reach the originally planned 60 percent of their final income level for retirement from Pillars 1 and 2.
"In Switzerland, almost one in three is affected by pension gaps", says Lukas Kienast, Head of Product Management Private Pensions at AXA. Alternatives are therefore needed to close these gaps. The tax-efficient private pension, Pillar 3a, in particular is gaining more and more significance, as it offers a relatively easy process for closing a pension gap.
In some cases, paying into a pension fund is also attractive, but in others, Pillar 3a is the better model. Essentially, it depends on the pension fund’s cover ratio and every individual’s asset situation. An AXA study recently showed that Pillar 3a is the most popular way of closing pension gaps.
The interest rate effect also plays a key role in Pillar 3. Despite interest rates being at their lowest, most people rely on a conventional account, which is paying hardly any interest at the moment, with a Pillar 3a pension solution. "Those who can plan their pensions with foresight should invest at least part of their pension savings in shares," says Kienast. "Because from a historical perspective, these are yielding the highest return. On a longer term investment horizon and with broad diversification, the risks are manageable, especially if contributions are made regularly."
“Those who can plan their pensions with foresight should invest at least part of their pension savings in shares.”
The majority of Swiss would like a simple, self-explanatory overview of all three pension pillars. AXA has therefore developed a digital pensions portal for its customers that creates transparency over their personal pension situation. Around 200,000 customers currently use the pensions portal. The portal is being constantly refined and optimized - today it already offers numerous self-services and simulation options for personal pensions.