3rd pillar returns: what to expect?
The return on the 3rd pillar is a major concern for every saver. How much does a pillar 3a really yield? The answer varies enormously depending on the type of investment chosen, fees and duration. This guide helps you see clearly.
The two components of 3rd pillar returns
The real return on the 3rd pillar comprises two elements often forgotten:
- Investment return: interest, dividends, capital gains from funds or the savings account.
- Tax return: the tax saving achieved through the tax deduction of pillar 3a. This "return" is immediate and guaranteed.
Example: if you contribute CHF 7 258.- and save CHF 2,200.- in taxes, your immediate tax return is 30%. Even a savings account at 0.5% offers an exceptional total return when the tax advantage is taken into account.
Return by investment type
3a savings account
The 3a savings account offers a fixed interest rate, with no risk of capital loss.
- Current return: between 0.50% and 1.50% per year depending on the bank
- Advantage: guaranteed capital, no management fees
- Disadvantage: return often below inflation, erosion of purchasing power over the long term
- Suited for: persons close to retirement (horizon < 5 years) or very risk-averse
Bond funds
Bond funds invest in government or corporate bonds. They offer moderate returns with limited volatility.
- Historical return: between 1% and 3% per year on average
- Volatility: low to moderate
- Fees (TER): between 0.15% and 0.60%
- Suited for: 5 to 10-year horizon, cautious profile
Mixed funds (equities + bonds)
Mixed funds combine equities and bonds in variable proportions (typically 25% to 50% equities).
- Historical return: between 3% and 5% per year on average
- Volatility: moderate (bonds absorb shocks)
- Fees (TER): between 0.30% and 1.00%
- Suited for: 10 to 20-year horizon, balanced profile
Equity funds
Equity funds invest primarily in Swiss and international stocks (40% to 99% equities).
- Historical return: between 5% and 7% per year on average over the long term
- Volatility: high (temporary drops of 20 to 40% possible)
- Fees (TER): between 0.10% (passive ETFs) and 1.50% (active funds)
- Suited for: 15+ year horizon, dynamic profile
ETFs (index funds)
ETFs passively replicate a stock index. They offer the best fee/performance ratio for the long term.
- Historical return: identical to the tracked index (SPI: ~7%, MSCI World: ~8% over 20 years)
- Volatility: depends on the index
- Fees (TER): between 0.10% and 0.30% -- the lowest on the market
- Advantage: transparency, diversification, minimal fees
30-year comparison: the impact of investment type
Let us take an annual contribution of CHF 7 258.- for 30 years (total contributed: CHF 217 740.-):
| Investment type | Annual return | Capital after 30 years | Capital gain |
|---|---|---|---|
| Savings account | 1.0% | ~CHF 253'000.- | ~CHF 35'000.- |
| Bond funds | 2.0% | ~CHF 296'000.- | ~CHF 78'000.- |
| Mixed funds | 4.0% | ~CHF 407'000.- | ~CHF 189'000.- |
| Equity funds / ETFs | 6.0% | ~CHF 574'000.- | ~CHF 356'000.- |
Estimates based on net-of-fee returns, compounded annually. Actual performance may vary.
The difference between a savings account and equity funds is more than CHF 320,000.- over 30 years. This illustrates the critical importance of the investment choice for your pillar 3a.
The impact of fees on returns
Fees are the only return factor you can truly control. Here is the impact of a fee difference on an investment of CHF 7 258.-/year for 30 years (gross return of 6%):
| TER (annual fees) | Net return | Capital after 30 years | Loss due to fees |
|---|---|---|---|
| 0.20% | 5.80% | ~CHF 558'000.- | Reference |
| 0.50% | 5.50% | ~CHF 532'000.- | ~CHF 26'000.- |
| 1.00% | 5.00% | ~CHF 488'000.- | ~CHF 70'000.- |
| 1.50% | 4.50% | ~CHF 447'000.- | ~CHF 111'000.- |
A TER difference of 1.3% (0.2% vs 1.5%) represents a loss of more than CHF 111,000.- over 30 years. This is why we recommend favouring low-fee ETFs and index funds.
Insurance 3rd pillar returns
The return on the insurance 3rd pillar is generally lower than that of the bank 3rd pillar, for several reasons:
- Part of the premium finances risk coverage (death, disability) and does not generate returns
- Acquisition costs (commissions) are deducted from the first premiums
- Management fees are generally higher
- Investment choice is more restricted
The net return of an insurance 3rd pillar typically ranges between 1% and 3% per year, depending on the contract type (classic vs fund-linked). However, insurance provides guarantees (guaranteed capital, risk protection) that a bank does not offer. Compare with our guide bank or insurance.
Tips for optimising returns
- Choose low fees: favour ETFs and passive funds (TER < 0.5%).
- Invest in equities if your horizon is long: more than 15 years before retirement, equities historically beat all other asset classes.
- Contribute at the beginning of the year: your capital benefits from an additional year of returns.
- Do not sell during downturns: crises are temporary. Markets have always recovered and reached new highs over the long term.
- Compare regularly: offers evolve. A transfer to a better provider can be advantageous.
Also consider spreading your assets across multiple 3a accounts to optimise taxation at withdrawal. Ready to get started? Discover how to open a 3rd pillar, use our calculator to estimate the tax return, or request a personalised quote to compare the best solutions on the market.