What are pension apps and how do they work? What providers are there and what costs can be incurred? The comparison service moneyland.ch provides an overview of the various providers of second and third pillar solutions.
Digital pension providers offer their clients simple digital management of pension assets. Depending on the provider, this is done via a smartphone app and/or via a web app with a desktop version. Digital pension providers thus offer an alternative to traditional pension funds in the area of vested benefits (2nd pillar) and pillar 3a. Members thus mostly invest in fund solutions that are somewhat less expensive, such as ETFs and index funds. Advice is usually not available from the providers. However, many pension apps allow users to ask questions via chat or telephone.
Management via the app
After downloading and opening the app, members will usually have to answer a few questions, after which the app suggests an investment strategy to them. They then receive all the necessary information and can deposit the desired amount into the selected account. All management is done via the app.The individual apps offer different functions depending on the provider. For example, you can define and change the investment strategy , manage the pension solutions via the corresponding apps, download confirmations for the tax administration as a PDF and track the development of assets.
These digital providers offer vested benefits solutions
Currently, the following providers offer digital vested benefits solutions:
Descartes Vorsorge, finpension, freeme (Glarner Kantonalbank), Tellco and Viac.
Their offers are aimed at customers who have to deposit their pension fund capital in a vested benefits account because they are currently not affiliated with a pension fund.
These digital providers offer pillar 3a solutions
Pillar 3a is a voluntary, tax-privileged pension plan. The following providers currently offer digital pillar 3a solutions:
Descartes Vorsorge, Everon, finpension, frankly (Zürcher Kantonalbank), Gioia 3a (Graubündner Kantonalbank), Inyova, LibertyGreen, Pando (Swiss Life), Selma Finance, Tellco, True Wealth, Viac, Vontobel Volt and Yapeal Y3A (Vontobel.)
Minimum deposits are rarely needed
A minimum amount is prescribed by very few providers; for some it is 100 francs. This distinguishes these providers from regular digital asset managers, the Robo Advisors.
However, legally defined maximum amounts that can be paid in apply to pillar 3a: in 2023, for example, these are CHF 7,056 (2022: CHF 6,883) for people who have a second pillar solution, and CHF 35,280 (2022: CHF 34,416) for people without a second pillar.
Important are the flat fees and the product costs
Swiss pension apps can incur various costs. These include flat fees, product costs, transaction costs, stock exchange levies, currency costs, spread costs, stamp taxes and balancing costs, as moneyland.ch has compiled. Essential are mainly the flat fees and the product costs. The other costs are either the same or relatively low for the various providers.
The all-in fees usually include custody costs and general administration costs - but mostly no product fees, the so-called Total Expense Ratio (TER). The all-in fees for an equity portfolio vary between 0% and 0.8% per year, depending on the provider. Any product costs must also be taken into account. These mainly include the TER of the funds. The TER fees can be up to 0.78% per year in addition to the flat fee, depending on the offer.
With LibertyGreen, the flat fee for their 3a solution is 0.4% per year, and the product cost per year (TER) is included. Therefore the total cost is 0.4%.
Digital solutions are generally less expensive than traditional pension funds. In addition, it is not uncommon for pension funds to have additional issuing, redemption, and custody fees, which are usually included in the flat fee for digital pension solutions. For example, portfolios with a high proportion of equities are available from digital providers for as little as 0.39% per year (including fund costs). Traditional pension funds with a high proportion of equities are usually only available from 1% per year.
Securities solutions usually yield a better return than an interest-bearing account
Anyone who opens a vested benefits or pillar 3a account can usually choose between an ordinary interest account or a securities solution. With an interest bearing account, they receive an annual interest on the amount paid in, which is still slightly higher on average for pillar 3a than for ordinary savings or vested benefits accounts. However, most pension apps only offer securities solutions. Interest accounts are recommended for people who do not want to take any risks of fluctuations in value, for example, because they want to close their account soon. In the long term, however, equity solutions usually perform significantly better than interest solutions.
Which custodian bank is behind which pension app?
According to moneyland.ch, the various pension providers work with the following custodian banks:
Descartes Vorsorge with Lienhardt & Partner Privatbank, finpension with Credit Suisse, frankly with Zürcher Kantonalbank, Inyova with Hypothekarbank Lenzburg, Selma Finance with VZ Bank, Viac with Credit Suisse, WIR Bank with Vontobel, as well as Volt 3a.
How good is the performance of retirement planning apps?
Most digital pension apps have only been on the market for a short time. Accordingly, a comparison with classic pension funds is difficult. In general, performance depends on the development of the markets, which cannot be predicted. "The decisive factor is to keep costs as low as possible," as Benjamin Manz, founder and CEO of moneyland.ch, explains.