Transfer your vested benefits
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Investing a vested benefits account Investing vested benefits
If you want to do more with your 2nd pillar assets, consider a vested benefits custody account instead of a regular account. These are the advantages of investing in securities.
Advantages of investing in securities
Why should I invest my vested benefits in securities?
Investing in securities via a vested benefits custody account can be an alternative to a vested benefits account, and offers attractive potential returns. You invest your pension products in investment products instead of parking them in a vested benefits account solution.
What makes securities better?
The advantage of saving with securities is that your money is not simply left in a vested benefits account, but performs in line with the financial markets. This is because with this solution, your frankly vested benefits consist of collective investments which invest mainly in equities, real estate or bonds depending on your investment strategy. These are broadly diversified in order to protect your retirement savings.
Securities can generate more income over the years, because they allow you to benefit from the opportunities for returns on the financial markets. This is a significantly higher potential return than the interest on a normal vested benefits account.
Investments vs. interest rates – an example:
Background: Felix is 45 years old, and is setting up his own business for the first time.
When he leaves the pension fund belonging to his previous employer, he transfers a total of CHF 400,000 to his vested benefits account. He would like to leave these assets in his vested benefits account until he turns 65. Until then, Felix can either invest these pension assets or save them and gain interest on them.
Scenario 1 – with interest rates:
Felix doesn’t invest them, and receives an interest rate of 0.80%
Expected pension assets at age 65: CHF 433,245
Scenario 2 – with investments:
Felix invests them, and benefits from the opportunities for returns on the market (investment strategy: ambitious)
Expected pension assets at age 65: CHF 809,100
Summary:
The expected return has increased in both cases. However, the potential return through saving in securities is CHF 375,855 higher.
Calculation and risk information
Calculation and risk information
Let's assume, for example: an equity component of 75% and a hypothetical return per year of 4,16% (net after costs).
The future returns and risks presented here are for illustrative purposes only. Securities savings may fluctuate, the hypothetical return cannot be guaranteed and tax effects are not included in this forecast.
Economic models and statistical methods are used for calculation purposes. The forecast corresponds with the most likely performance, and can be predicted for an investment horizon of up to 10 years. In the event of a longer investment horizon the calculations are continued using the same values, whereby no statements can be made about the probability of the calculated results occurring. In the event of very unfavourable market developments, the performance may be lower than the nominal savings value. The calculated values are net of the frankly all-in fee and are based on an interest rate on the vested benefits account of 0.30%. Please note that inflation and the taxes payable when the balance becomes due are not included in this forecast.
But is it really a smart idea to invest in equities?
It’s true that the markets are always fluctuating, and of course prices do fall once in a while like we saw at the start of the pandemic. But vested benefits are not about making a quick profit, but about preserving or building up your assets for your old age over the long term depending on your investment horizon and risk tolerance. This means you can sit tight and wait out any crises.
A glance at history shows that crises are usually followed by longer periods of recovery and upswing. Since it is a long-term investment, securities offer you the prospect of a higher potential return than with a vested benefits account.
OK, so what’s the best investment strategy for me?
At frankly, you don’t have to be a stock exchange specialist. Swisscanto offers you seven different investment products to choose from. Our partner's funds and fund managers regularly win the most coveted Funds Awards. But before you decide, think about what kind of investor you are.
Do you want higher returns, or is security the most important thing to you? frankly offers you four different strategies to follow, from safety-conscious (10% equity component), cautious (20% or 25% equity component), balanced (45% equity component) through to an ambitious investment strategy with a 75% equity component. The mix of asset classes varies depending on the type.
In addition, with four different strategies available (safety-conscious, cautious, balanced and ambitious), you can choose between an actively managed or an indexed solution. In the case of active investment products, the positions are managed by portfolio managers whose goal is to “beat the market” – i.e. to achieve a better investment return than the market average.
Curious about which type of investor you are? Find your personal strategy here by looking at our investment products.
