The myth of “pension funds”
I* can clearly remember how funds – especially pension funds – made an impression on me back then during my banking apprenticeship:
- Funds with which you can invest in several securities in one fell swoop. Brilliant, isn’t it?
- And then there were even extra funds for pension provision, but you were only allowed to invest in them if you had a pillar 3a or vested benefits account. Wow, I was thrilled.
- Lastly, these funds were even limited. A maximum of 50% shares. That was another quality attribute for me.
Looking back, I was pretty naive. After all, funds with which you could invest money in the financial markets in a diversified way had not been an innovation for a long time. They had been around for decades.
And the term “pension fund” had also misled me. I thought a pension fund was something special. Just specifically for pension provision. But as we will see, that is too often not the case.
I am also a bit perplexed today regarding the restriction of the share proportion. Then, when you have a lot of time for an investment, the equity ratio should be restricted. In fact, it should be the other way around, that you can’t invest more than 50% in equities with your free assets, because you never really know with free assets whether you might suddenly need the money. Don’t you?
No matter. Today I’m taking a more critical look at the matter and would like to share my thoughts with you in this article. In the first point we look at tax optimization and in the second point we address the cost efficiency of pension funds.
*A report by Philipp Zumbühl, project manager at finpension
1. pension funds must perform better
Yes, you read that correctly. Pension funds must perform better than conventional funds, otherwise it’s a labeling scam. After all, pension funds are tax-free.
Question: You do not have to declare pension assets on your tax return, do you?
Good. Because that’s exactly how it is for the pension fund itself. If it is a proper pension fund that really deserves the name “pension fund”, then it pays less tax on dividends and interest than a fund for free assets does. And those that pay less taxes perform better.
Would you like an example? Gladly. Here you can see the difference using a Credit Suisse Index Fund (CSIF), which is only available to institutional clients via a special fund contract. The annual outperformance of the pension fund compared to the non-retirement fund is 0.33%.
| Fund | ISIN | Categorie | 5 years p.a. |
| CSIF (CH) Equity World ex CH – Pension Fund ZB | CH0032400639 | pension fund | 13.03% |
| CSIF (CH) Equity World ex CH ZB | CH0032400670 | non-pension fund | –12.70% |
| Outperformance Pension Fund per year | +0.33% |
So far so good. But now we want to know in detail. Which pension funds are we accusing of fraudulent labeling? To find out, we did some intensive research. The following table shows the results of our research. You can see whether the pension fund (PF) generates more returns than the non-pension fund (NPF).
There are a few pension funds that actually perform better than the non-retirement fund. However, the better performance of these funds is not due to tax savings, but simply due to a different Total Expense Ratio (TER). Too bad!
Conclusion: Unfortunately, none of the pension funds analyzed is tax-optimized.
| Funds | ISIN PF | ISIN NPF | TER PF | TER NPF | Return PF | Return NPF | Return years | Benefit PF |
|---|---|---|---|---|---|---|---|---|
| AKB Vorsorge 15 CHF | CH0436637448 | CH0436637208 | 0.93% | 0.93% | 2.38% | 2.38% | 1 | 0.00% |
| AKB Vorsorge 30 CHF | CH0436637489 | CH0436637463 | 1.01% | 1.01% | 5.95% | 5.95% | 1 | 0.00% |
| AKB Vorsorge 45 CHF | CH0436637562 | CH0436637521 | 1.09% | 1.09% | 9.18% | 9.18% | 1 | 0.00% |
| BCGE Synchrony LPP Bonds | CH0026517331 | CH0026517331 | 0.90% | 0.90% | -2.61% | -2.60% | 5 | -0.01% |
| BCGE Synchrony LPP 25 | CH0026517513 | CH0026517513 | 1.22% | 1.22% | 21.12% | 21.13% | 5 | -0.01% |
| BCGE Synchrony LPP 40 | CH0026517703 | CH0026517703 | 1.37% | 1.37% | 31.16% | 31.16% | 5 | 0.00% |
| BCGE Synchrony LPP 40 SRI | CH0026517869 | CH0026517869 | 1.58% | 1.58% | 30.80% | 30.84% | 5 | -0.04% |
| BCGE Synchrony LPP 80 | CH0358551346 | CH0358551346 | 1.30% | 1.30% | 52.86% | 52.86% | 5 | 0.00% |
| BCV Pension 25 | CH0118631289 | CH0118631214 | 1.09% | 1.09% | 3.23% | 3.23% | 5 | 0.00% |
| BCV Pension 40 | CH0118631784 | CH0118631495 | 1.19% | 1.19% | 5.47% | 5.47% | 5 | 0.00% |
| BCV Pension 70 | CH0118631784 | CH0528270082 | 1.29% | 1.29% | 14.38% | 14.38% | 1 | 0.00% |
| BEKB Strategiefonds Nachhaltig 20 | CH0366022553 | CH0366022520 | 1.05% | 1.05% | 12.58% | 12.58% | 3 | 0.00% |
| BEKB Strategiefonds Nachhaltig 40 | CH0366022702 | CH0366022736 | 1.15% | 1.15% | 23.56% | 23.56% | 3 | 0.00% |
| BEKB Strategiefonds Nachhaltig Schweiz 40 | CH0366023817 | CH0366023825 | 1.15% | 1.15% | 21.18% | 21.18% | 3 | 0.00% |
| BEKB Strategiefonds Nachhaltig 60 | CH0366023528 | CH0366023544 | 1.25% | 1.25% | 36.09% | 36.09% | 3 | 0.00% |
| BEKB Strategiefonds Nachhaltig 90 | CH0566362262 | CH0566362254 | 1.40% | 1.40% | 23.92% | 23.92% | 3 | 0.00% |
| BLKB Next Generation Fund Vorsorge Yield | CH0395929802 | CH0395929794 | 1.29% | 1.29% | 6.20% | 6.20% | 3 | 0.00% |
| BLKB Next Generation Fund Vorsorge Balanced | CH0395929836 | CH0395929828 | 1.35% | 1.35% | 8.22% | 8.22% | 3 | 0.00% |
| BLKB Next Generation Fund Growth | CH0370830843 | CH0370830835 | 1.40% | 1.40% | 11.40% | 11.40% | 3 | 0.00% |
| BKB Anlagelösung - Nachhaltig Einkommen (CHF) | CH0432492483 | CH0369658460 | 1.23% | 1.23% | 13.62% | 13.61% | 3 | 0.01% |
| BKB Anlagelösung - Nachhaltig Ausgewogen (CHF) | CH0432492517 | CH0369658478 | 1.23% | 1.22% | 29.53% | 29.53% | 3 | 0.00% |
| BKB Anlagelösung - Nachhaltig Wachstum (CHF) | CH0432492533 | CH0369658486 | 1.25% | 1.25% | 45.65% | 45.65% | 3 | 0.00% |
| BKB Anlagelösung - Einkommen (CHF) | CH0432492418 | CH0282156592 | 1.22% | 1.22% | 12.62% | 12.61% | 3 | 0.01% |
| BKB Anlagelösung - Ausgewogen (CHF) | CH0432492434 | CH0282156667 | 1.23% | 1.23% | 27.13% | 27.12% | 3 | 0.01% |
| BKB Anlagelösung - Wachstum (CHF) | CH0432492475 | CH0330294387 | 1.25% | 1.25% | 42.86% | 42.85% | 3 | 0.01% |
| BKB Anlagelösung - Regelbasiert (CHF) | CH0438362888 | CH0438362862 | 1.25% | 1.25% | -4.54% | -4.54% | 1 | 0.00% |
| GKB (CH) Strategiefonds Kapitalgewinn ESG | CH0485242306 | CH0485242264 | 0.81% | 0.96% | 20.31% | 20.13% | 1 | 0.18% |
| Migros Bank (CH) Fonds 0 | CH0365696696 | CH0365696621 | 0.97% | 1.12% | 0.11% | -0.51% | 4 | 0.62% |
| Migros Bank (CH) Fonds 25 | CH0023406496 | CH0023406470 | 0.91% | 1.06% | 15.86% | 14.99% | 5 | 0.87% |
| Migros Bank (CH) Fonds 45 | CH0023406520 | CH0023406553 | 0.90% | 1.05% | 9.19% | 9.02% | 1 | 0.17% |
| Migros Bank (CH) Fonds Sustainable 0 | CH0365696852 | CH0365696837 | 1.12% | 1.31% | -1.46% | -2.26% | 4 | 0.80% |
| Migros Bank (CH) Fonds Sustainable 25 | CH0365696902 | CH0365696886 | 1.07% | 1.26% | 9.36% | 8.47% | 4 | 0.89% |
| Migros Bank (CH) Fonds Sustainable 45 | CH0102706105 | CH0102705651 | 1.06% | 1.25% | 28.88% | 27.57% | 5 | 1.31% |
| Mobi-Fonds Select 30 | CH0016757517 | CH0016757517 | 0.93% | 0.92% | 2.60% | 2.70% | 1 | -0.10% |
| Mobi-Fonds Select 60 | CH0211608895 | CH0211608895 | 0.97% | 0.96% | 4.80% | 4.80% | 1 | 0.00% |
| Mobi-Fonds Select 90 | CH0484059214 | CH0484059214 | 1.21% | 1.21% | 7.00% | 7.00% | 1 | 0.00% |
| OLZ Smart Invest 65 ESG | CH0328149510 | CH0366209838 | 0.65% | 1.09% | 13.75% | 12.75% | 3 | 1.00% |
| Raiffeisen Pension Invest Futura Yield | CH0102295414 | CH0009504983 | 1.05% | 1.05% | 2.40% | 2.40% | 5 | 0.00% |
| Raiffeisen Pension Invest Futura Balanced | CH0102295455 | CH0023754440 | 1.10% | 1.10% | 4.70% | 4.70% | 5 | 0.00% |
| Raiffeisen Pension Invest Futura Growth | CH0189322339 | CH0210462187 | 1.21% | 1.21% | 7.10% | 7.10% | 5 | 0.00% |
| Raiffeisen Pension Invest Futura Equity | CH0441199582 | CH0441199574 | 1.27% | 1.27% | 20.40% | 20.40% | 1 | 0.00% |
| SZKB Zinsertrag Plus | CH0286263683 | CH0286263667 | 0.75% | 0.75% | 7.21% | 7.33% | 5 | -0.12% |
| SZKB Einkommen | CH0286264756 | CH0286264723 | 0.90% | 0.90% | 10.97% | 10.97% | 5 | 0.00% |
| SZKB Ausgewogen | CH0286264905 | CH0286264863 | 1.00% | 1.00% | 24.47% | 24.47% | 5 | 0.00% |
| SZKB Wachstum | CH0322902484 | CH0286264970 | 1.10% | 1.10% | 35.95% | 35.95% | 5 | 0.00% |
| SZKB Ethik Einkommen | CH0337623745 | CH0337623737 | 1.00% | 1.00% | 13.04% | 13.03% | 5 | 0.01% |
| SZKB Ethik Ausgewogen | CH0337624586 | CH0337623778 | 1.10% | 1.10% | 27.83% | 27.83% | 5 | 0.00% |
| SZKB Ethik Kapitalgewinn | CH0492416463 | CH0491898448 | 1.30% | 1.30% | 21.08% | 21.08% | 1 | 0.00% |
| SGKB Vorsorge Einkommen | CH0373465324 | CH0334714620 | 0.88% | 1.03% | 4.08% | 3.93% | 3 | 0.15% |
| SGKB Vorsorge Ausgewogen | CH0373465365 | CH0020306186 | 0.98% | 1.53% | 7.77% | 7.19% | 3 | 0.58% |
| SGKB Vorsorge Wachstum | CH0422345246 | CH0422345105 | 1.15% | 1.60% | 10.37% | 9.87% | 3 | 0.50% |
| ZugerKB Fonds – Strategie Konservativ (CHF) | CH0382492327 | CH0276100846 | 1.05% | 1.05% | 5.80% | 5.80% | 3 | 0.00% |
| ZugerKB Fonds – Strategie Ausgewogen (CHF) | CH0382491063 | CH0276101109 | 1.15% | 1.15% | 9.50% | 9.50% | 3 | 0.00% |
| ZugerKB Fonds – Strategie Dynamisch (CHF) | CH0435830614 | CH0439000198 | 1.28% | 1.29% | 11.70% | 11.70% | 3 | 0.00% |
We were unable to make a comparison for the pension funds of the following providers, either because a comparative fund was lacking or the funds have not been on the market for long enough and therefore do not yet show any meaningful performance figures:
- Bâloise
- Credit Suisse
- EFG
- Graubündner Kantonalbank
- J. Safra Sarasin
- Luzerner Kantonalbank
- Pictet
- Postfinance
- Swiss Life
- Swisscanto Invest by ZKB
- UBS
Why are many pension funds not tax optimized?
Let’s take a look at the crucial question: Why are so many pension funds not tax-optimized? The reason is relatively simple: It is costly. And why go to all that trouble if no one cares?
2. Pension funds must not cost too much
Another quality feature for a good pension fund is its costs. Thanks to new innovative providers, it is possible to invest the pillar 3a in securities with less than 0.5% fees per year. Many long-established providers can no longer keep up.
Therefore, they justify their high costs either with the sustainable focus of their funds or with active management.
Sustainability criterias
Of course, people generally want to put their money in the hands of a company that does well and increases the value of the business. But there are also other criteria that can be taken into account, such as how sustainable a company is or how strongly it is committed to gender equality.
In this context, the term ESG is often used. ESG means:
- E = Environment = Environment protection
- S = Social = Occupational safety, health protection, diversity and social commitment
- G = Governance = Good corporate governance (e.g., compliance with laws, no corruption, supervisory structures, risk and reputation management).
Active vs. passive funds
Basically, there are two different types of funds, the active and the passive:
- The active funds are actively managed. The fund pays portfolio managers who decide which securities to buy or sell. The goal of an actively managed fund is to outperform the market average. They want to achieve an “outperformance”, as it is called in the technical language.
- The passive funds are not actively managed. The fund does not have portfolio managers who actively make investment decisions for or against a particular security. Instead, the fund is guided by an index and simply buys all the securities that appear in it. This saves the fund money, which is why the fund fees (TER) are lower than those of actively managed funds.
It is not a question of faith which funds are better. Statistically, the facts are clear. In the long run, actively managed funds do not outperform passive ones. On the contrary. Due to the higher costs, the active funds fall off significantly over time.
Conclusion: Only a fraction of pension funds are sufficiently
Tax-optimized funds with low costs regularly perform better than the other pension funds in the Handelszeitung comparison. Looking at the result of our research, this is no longer surprising.
It is of no use when some fund providers advertise that the funds can be transferred to private assets upon retirement. Because that is precisely the sign that they are not specifically for retirement provision.