Two years ago, we withdrew our 3a pillars with Mrs MP to buy our home.
We therefore had to re-examine the Mustachians options regarding available 3rd pillars at the end of 2016 in order to continue to benefit from the tax deductions of this financial vehicle.
After several weeks of research, we concluded that the Cantonal Bank of Lucerne (aka LUKB) offered the best option with its 3a pillar based on the Swisscanto BVG 3 Index 45 R fund.
Once such a tedious change is made, I tend to ignore the noise of new stuff coming out every week. This up to a certain point, where the noise becomes too persistent which makes me document myself to know if it is a simple rumor or a real good plan. This was the case for the ETFs-based 3rd pillar proposed by VIAC.
My (former) best 3rd pillar for Mustachians
As a reminder, our current solution with LUKB and the Swisscanto BVG 3 Index 45 R fund looks like this:
- Management yearly
- LUKB custody: 0.25%
- Swisscanto fund TER: 0.36%
- For each transaction
- LUKB transaction fees: 0.40%
- Swisscanto fund issuance costs: 0.22%
- LUKB redemption fees: 0.40%
- Swisscanto redemption fees: 0.02%
- For the 45% of shares: 6%
- For the 55% of bonds: 0.42% ("Yield To Maturity" value aka YTM in the Swisscanto BVG 3 Index 45 R fund factsheet)
- Total = 2.93% (= 6%0.45 + 0.42%0.55)
This third pillar is by far the best on the market, but as you can see, its share of bonds makes it perform really poorly.
What about VIAC.ch then?
VIAC is a startup.
"Well, it's starting well MP... but no thanks, I don't want to invest my third pillar in a startup...
Wait, don't go yet!
So I was saying, VIAC is a startup that provides an ultra-simple pension fund service, usable entirely via a mobile app only. But, because there is a but, all the money you transfer via VIAC is actually stored at the WIR bank — thus benefiting from depositor protection up to CHF 100'000 in the event of bank failure. 1
And the funds purchased are stored in (EDIT 26.05.2018 —
your name) in the name of the Terzo foundation at Credit Suisse.
In short, if VIAC goes bankrupt, you risk nothing with your money, as everything is well separated as it should be. All this is clearly documented in VIAC's FAQ.
OK, fine, I keep reading. But why would it be more interesting than your LUKB/Swisscanto 3rd pillar MP then?
The magic of VIAC works thanks to its low costs, but especially thanks to the yield opportunities.
First, the fees: they are all-inclusive and amount to only 0.53% per year (EDIT 26.05.2018: talking about the total fees of the VIAC Global 100 strategy here, which is the only one interesting for us Mustachians).
Then, and this is the real beauty of their system: VIAC offers the possibility to invest your pillar 3a in shares (via ETFs) up to 97%!
Uh, MP, I thought that legally the BVG had a 50% limit?
That was two years ago. Since then, the law has become more permissive and we have seen interesting products such as PostFinance's pension fund invested with 75% of shares or VZ with its 80% invested into ETFs.
Daniel Peter, CEO of VIAC, explained to me in a very transparent way (and via email directly, the advantage of an accessible startup) how they work: "The restrictions related to BVV2 concern pension funds. As mentioned in Art. 55, the maximum of 50% shares applies to all the assets of a foundation. Thanks to the cooperation with the Terzo Foundation, which only offered 3a accounts before its alliance with VIAC, there is a big margin before the current 50% is reached."
He goes on to explain: "Moreover, it should be known that it is only clients with sufficient risk tolerance and a pre-requisite level of investment knowledge who receive a portfolio suggestion with a large equity allocation. If the foundation were to exceed the 50% limit, it could increase it as defined in Art. 50 Abs.4 (we'd increase the limit to 75% I think). And even if this allocation was to be reached one day, the ultimate ratio (which is already defined in the foundation's regulations) would be a pro rata reduction of each strategy. This model has been approved by the regulator. But before that, we would rather follow a model where we would remove shares and put real estate instead rather than just replace it with cash. In the end, the decision remains in the hands of the Terzo Foundation Board. But basically, it is the general idea that the riskiest profiles remain the same after such a reallocation."
Another question before I sign. Why 97%? How about 100%?
Again, I had the same question. I asked Daniel who replied: "The 3% cushion is mainly used so that we do not exceed the allocation (i.e. more than 100% invested and a negative cash balance; using leverage is not allowed) since we buy index funds that are only traded once a day. With ETFs, the time lag between purchase calculation and execution is much smaller, and could allow us to have a margin much smaller than 3%. However, the second reason for this choice is that we deduct the fees monthly and thanks to this reserve, this does not automatically require a readjustment of the portfolio just to deduct the fees.
Okay, I got my pen out. One last question: how detailed and transparent are the strategies/ETFs used?
Everything is transparent about strategies and selected ETFs.
And I have exclusive information from Daniel: you will be able to build your own ETF portfolio in the coming weeks (by the end of May-early June)!
So, if we summarize what VIAC proposes, it gives us:
- All-inclusive : 0.53% 2
- VIAC management fees included
- ETFs' TER included
- VIAC and ETFs transaction fees included
- VIAC/ETFs redemption fees: 0%
- VIAC/WIR bank closing fees: 0%
- For the 97% of shares: 6%
- For the 3% of cash: 0.30%
- Total = 6% (you won't mind me rounding up)
And regarding advantages compared to the competition, there is no doubt:
- A startup accessible and using clear language
- Total transparency about costs
- All documents (transactions, taxes) are freely available and easily accessible
- Super easy to use (again this is accessory, but here they reach a top level for a 3a pillar!)
VIAC, the new best 3a pillar for Swiss Mustachians?
After long discussions with the CEO of VIAC, and several mornings doing my calculations, I came out with the following table:
The result is convincing: VIAC with its Global 100 portfolio is the big winner. So I talked to Mrs MP about it. After a further calculation, we will close LUKB/Swisscanto for CHF 150 of redemption fees. A number that we will recover in less than 1-2 years if we go for VIAC.
We will therefore transfer our LUKB 3a pillar to VIAC! 3
I am already preparing an article on "How to open a 3a VIAC account and transfer an existing 3rd pillar to it (including exclusive infos)", stay tuned.
Will you also move to VIAC? Or you already did it a long time ago?
As a bonus, your non-invested cash stored at the WIR bank is remunerated with an interest rate of 0.30%. We agree it's nothing, but it's already much better than BCV with its 0.025% or UBS with its 0.01%... It could be worth migrating just for that :) ↩
I had an important point precised by Daniel from VIAC: "Our fees are 0.52% on the assets invested for transactions, custody and most of the indexfunds, the TER of the ETF are seperatly charged, but included in the Total cost on in this overview: https://viac.ch/fr/strategies/. As they are only charged on the assets invested, you could hold 99% cash, receive interest on that without fees and invest just 1% into an indexfund i.e. SMI. So you would be paying only 0.0052% — that’s all (for this fund, as there is no stamp duty on this product and a TER 0% fund). The 0.53% are the total costs for the Global 100 strategy including all costs, our fees and the TERs of the ETF. Calculation: 97% (invested portion) * 0.52% (our fee) + 0.03% Product costs = 0.53% total costs." ↩